UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

X		QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019

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: 001-05869

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.:
Florida	11-1385670

Address of principal executive offices:
10055 Seminole Boulevard
Seminole, Florida 33772-2539

Registrant’s telephone number, including area code:
727-397-9611

Former name, former address and former fiscal year, if changed since last report: ___________________

Securities registered pursuant to Section 12(b) of the Act:

	Trading
Title of each class	Symbol(s)	Name of each exchange on which registered
Common Stock $0.001 par value per share	SGC	NASDAQ

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, if any, 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, 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 ☐		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 Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐

No ☒

As of October 17, 2019, the registrant had 15,255,994 shares of common stock outstanding, which is the registrant’s only class of common stock.

	September 30,			December 31,
	2019			2018

ASSETS
Current assets:
Cash and cash equivalents	$	5,452		$	5,362
Accounts receivable, less allowance for doubtful accounts of $2,259 and $2,042, respectively		75,597			64,017
Accounts receivable - other		1,262			1,744
Inventories*		66,076			67,301
Contract assets		38,030			49,236
Prepaid expenses and other current assets		16,481			9,552
Total current assets		202,898			197,212

Property, plant and equipment, net		31,725			28,769
Operating lease right-of-use assets		4,576			-
Intangible assets, net		63,491			66,312
Goodwill		36,252			33,961
Other assets		10,443			8,832
Total assets	$	349,385		$	335,086

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	30,768		$	24,685
Other current liabilities		16,110			14,767
Current portion of long-term debt		15,286			6,000
Current portion of acquisition-related contingent liabilities		1,374			941
Total current liabilities		63,538			46,393

Long-term debt		103,812			111,522
Long-term pension liability		8,422			8,705
Long-term acquisition-related contingent liabilities		3,753			5,422
Long-term operating lease liabilities		2,590			-
Deferred tax liability		6,620			8,475
Other long-term liabilities		4,230			3,648
Commitments and contingencies (Note 5)
Shareholders' equity:
Preferred stock, $.001 par value - authorized 300,000 shares (none issued)		-			-
Common stock, $.001 par value - authorized 50,000,000 shares, issued and outstanding 15,240,317 and 15,202,387 shares, respectively.		15			15
Additional paid-in capital		57,077			55,859
Retained earnings		106,426			103,032
Accumulated other comprehensive income (loss), net of tax:
Pensions		(6,475	)		(7,673	)
Cash flow hedges		97			113
Foreign currency translation adjustment		(720	)		(425	)
Total shareholders’ equity		156,420			150,921
Total liabilities and shareholders’ equity	$	349,385		$	335,086

												Accumulated
												Other
						Additional						Comprehensive			Total
	Common			Common		Paid-In			Retained			(Loss) Income,			Shareholders’
	Shares			Stock		Capital			Earnings			net of tax			Equity
Balance, July 1, 2018		15,311,541		$	15	$	54,998		$	97,664		$	(7,093	)	$	145,584
Common shares issued upon exercise of options, net		2,000					27									27
Share-based compensation expense							378									378
Cash dividends declared ($0.10 per share)										(1,508	)					(1,508	)
Tax benefit from vesting of acquisition related restricted stock							340									340
Shares reacquired and retired		(14,334	)				(51	)		(216	)					(267	)
Comprehensive income (loss):
Net earnings										6,122						6,122
Cash flow hedges, net of taxes of $1													(3	)		(3	)
Pensions, net of taxes of $68													216			216
Change in currency translation adjustment, net of taxes of $55													(180	)		(180	)
Balance, September 30, 2018		15,299,207		$	15	$	55,692		$	102,062		$	(7,060	)	$	150,709

Balance, July 1, 2019		15,255,694		$	15	$	57,166			104,165		$	(7,226	)	$	154,120
Common shares issued upon exercise of options		300					3									3
Share-based compensation expense							(35	)								(35	)
Cash dividends declared ($0.10 per share)										(1,510	)					(1,510	)
Common stock reacquired and retired		(15,677	)				(57	)		(150	)					(207	)
Comprehensive income (loss):
Net earnings										3,921						3,921
Cash flow hedges, net of taxes of $1													(5	)		(5	)
Pensions, net of taxes of $141													449			449
Change in currency translation adjustment, net of taxes of $100													(316	)		(316	)
Balance, September 30, 2019		15,240,317		$	15	$	57,077		$	106,426		$	(7,098	)	$	156,420

												Accumulated
												Other
						Additional						Comprehensive			Total
	Common			Common		Paid-In			Retained			(Loss) Income,			Shareholders’
	Shares			Stock		Capital			Earnings			net of tax			Equity
Balance, January 1, 2018		15,081,947		$	15	$	49,103		$	83,129		$	(7,279	)	$	124,968
ASC 606 adjustment to opening retained earnings										11,245						11,245
Common shares issued upon exercise of options, net		53,164					581			(150	)					431
Restricted shares issued		24,908														-
Restricted shares issued in acquisition		150,094					3,763									3,763
Common shares issued upon exercise of Stock Appreciation Rights (SARs)		3,428														-
Share-based compensation expense							1,868									1,868
Tax withheld on exercise of Stock Appreciation Rights (SARs)							(17	)								(17	)
Tax benefit from vesting of acquisition related restricted stock							445									445
Cash dividends declared ($0.29 per share)										(4,335	)					(4,335	)
Shares reacquired and retired		(14,334	)				(51	)		(216	)					(267	)
Comprehensive income (loss):
Net earnings										12,389						12,389
Cash flow hedges, net of taxes of $69													209			209
Pensions, net of taxes of $203													647			647
Change in currency translation adjustment, net of taxes of $224													(637	)		(637	)
Balance, September 30, 2018		15,299,207		$	15	$	55,692		$	102,062		$	(7,060	)	$	150,709

Balance, January 1, 2019		15,202,387		$	15	$	55,859		$	103,032		$	(7,985	)	$	150,921
Common shares issued upon exercise of options		62,994					460			(177	)					283
Restricted shares issued		48,829														-
Share-based compensation expense							997									997
Tax benefit from vesting of acquisition related restricted stock							30									30
Cash dividends declared ($0.30 per share)										(4,533	)					(4,533	)
Common stock reacquired and retired		(73,893	)				(269	)		(974	)					(1,243	)
Comprehensive income (loss):
Net earnings										9,078						9,078
Cash flow hedges, net of taxes of $3													(16	)		(16	)
Pensions, net of taxes of $376													1,198			1,198
Change in currency translation adjustment, net of taxes of $93													(295	)		(295	)
Balance, September 30, 2019		15,240,317		$	15	$	57,077		$	106,426		$	(7,098	)	$	156,420

	2019			2018

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	9,078		$	12,389
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		6,339			5,745
Provision for bad debts - accounts receivable		719			409
Share-based compensation expense		997			1,867
Deferred income tax benefit		(2,136	)		(278	)
Gain on sale of property, plant and equipment		(5	)		-
Change in fair value of acquisition-related contingent liabilities		(272	)		(1,212	)
Changes in assets and liabilities, net of acquisition of business:
Accounts receivable - trade		(12,251	)		(5,542	)
Accounts receivable - other		481			(401	)
Contract assets		11,206			(3,779	)
Inventories		(595	)		5,742
Prepaid expenses and other current assets		(7,051	)		(226	)
Other assets		(2,233	)		(2,343	)
Accounts payable and other current liabilities		5,523			(1,077	)
Long-term pension liability		1,292			292
Other long-term liabilities		750			(283	)
Net cash provided by operating activities		11,842			11,303

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment		(6,424	)		(3,881	)
Proceeds from disposals of property, plant and equipment		5			-
Acquisition of businesses, net of acquired cash		-			(85,597	)
Net cash used in investing activities		(6,419	)		(89,478	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings of debt		125,121			170,713
Repayment of debt		(123,600	)		(91,423	)
Payment of cash dividends		(4,533	)		(4,335	)
Payment of acquisition-related contingent liability		(961	)		(3,032	)
Proceeds received on exercise of stock options		283			432
Tax benefit from vesting of acquisition-related restricted stock		30			445
Tax withholding on exercise of stock rights		-			(17	)
Common stock reacquired and retired		(1,243	)		(268	)
Net cash provided by (used in) financing activities		(4,903	)		72,515

Effect of currency exchange rates on cash		(430	)		(174	)
Net increase (decrease) in cash and cash equivalents		90			(5,834	)
Cash and cash equivalents balance, beginning of year		5,362			8,130
Cash and cash equivalents balance, end of period	$	5,452		$	2,296

NOTE 1 – Basis of Presentation:

a) 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 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”, or “us”. Effective on May 3, 2018, Superior Uniform Group, Inc. changed its name to Superior Group of Companies, Inc.

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, 2018, and filed with the Securities and Exchange Commission. The interim financial information contained herein is not certified or audited; it reflects all adjustments (consisting of only normal recurring accruals) which are, in the opinion of management, necessary for a fair statement of the operating results for the periods presented, stated on a basis consistent with that of the audited financial statements. 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 stockholders’ equity”, and “statements of cash flows” herein.

b) 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 February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842) and July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases and ASU 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 onto 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 on 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 liabilities ($1.0 million in other current liabilities and $3.1 million in long-term operating lease liabilities) which represented 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 expenses and other current assets and other assets on the accompanying balance sheet prior to adoption. Refer to Note 10 for the impact to the financial statements as of September 30, 2019.

In February 2018, the FASB issued ASU 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 allows entities to elect to reclassify the income tax effects resulting from the Tax Cuts and Jobs Act (Tax Act) on items within accumulated other comprehensive income to retained earnings and requires additional related disclosures. This standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company elected not to reclassify the income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings. The Company’s adoption of this standard on January 1, 2019 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. 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 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 is not expected to 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. The Company’s adoption of this standard is not expected to have a material impact on its financial statements.

NOTE 2 - Long-Term Debt:

	September 30,		December 31,
(In thousands)	2019		2018
BB&T Credit Facilities:
Revolving credit facility due May 2023	$	33,857	$	1,193
Term loan due February 2024 (“2017 Term Loan”)		27,000		31,500
Term loan due January 2026 (“2018 Term Loan”)		58,810		85,000
	$	119,667	$	117,693
Less:
Payments due within one year included in current liabilities		15,286		6,000
Debt issuance costs		569		171
Long-term debt less current maturities	$	103,812	$	111,522

Effective on February 28, 2017, the Company entered into a credit agreement with Branch Banking and Trust Company (“BB&T”) (the “Credit Agreement”) that provided a revolving credit facility of $35 million maturing on February 25, 2022 and a term loan of $42 million maturing on February 26, 2024 (“2017 Term Loan”).

Effective on May 2, 2018, and concurrently with the closing of the CID Resources acquisition, the Company entered into an Amended and Restated Credit Agreement (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 due May 2020 (“2018 Term Loan”). The term of the revolving credit facility was extended until May 2023.

On January 22, 2019, the Company entered into a First Amendment to the Amended and Restated Credit Agreement pursuant to which the existing 2018 Term Loan was restructured. The Company used $20 million borrowed under its existing revolving credit facility to reduce the principal amount to $65 million. The maturity date of the 2018 Term Loan was extended to January 22, 2026.

On September 27, 2019, the Company entered into a Second Amendment to the Amended and Restated Credit Agreement, which (i) increased the Company’s maximum permitted funded debt to EBITDA ratio under the Amended and Restated Credit Agreement from 4.0:1 to 5.0:1 and (ii) applied a tiered interest rate structure to the Company’s existing loans in the event that its funded debt to EBITDA ratio exceeds 4.0:1. The interest rate on such loans will equal LIBOR plus a margin that adjusts quarterly and is based on the Company’s funded debt to EBITDA ratio.

Contractual principal payments for the 2017 Term Loan are as follows: 2019 through 2023 - $6.0 million per year; and 2024 - $1.5 million. Contractual principal payments for the 2018 Term Loan are as follows: 2019 - $8.5 million, 2020 through 2025 - $9.3 million per year; and 2026 - $0.8 million. The term loans do not contain pre-payment penalties.

The revolving credit facility, 2017 Term Loan and 2018 Term Loan are collectively referred to as the “Credit Facilities”.

The Amended and Restated 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 Amended and Restated Credit Agreement also requires the Company to maintain a fixed charge coverage ratio (as defined in the Amended and Restated Credit Agreement) of at least 1.25:1 and a funded debt to EBITDA ratio (as defined in the Amended and Restated Credit Agreement) not to exceed 5.0:1. As of September 30, 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.

Effective on 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, at that time, 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 were recorded in other comprehensive income, 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 on 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 September 30, 2019, the negative fair value of the amended swap was $0.3 million and was included in other current liabilities.

NOTE 3 – 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						Nine Months
	Ended September 30,						Ended September 30,
	2019			2018			2019			2018
Service cost - benefits earned during the period	$	29		$	27		$	87		$	81
Interest cost on projected benefit obligation		271			242			813			727
Expected return on plan assets		(385	)		(429	)		(1,106	)		(1,288	)
Recognized actuarial loss		310			284			959			850
Settlement loss		280			-			616			-
Net periodic pension cost	$	505		$	124		$	1,369		$	370

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.

There were $0.1 million and $0.1 million in contributions made to the Company’s defined benefit plans during the nine months ended September 30, 2019 and 2018, respectively.

NOTE 4 – Net Sales:

On January 1, 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. The Company recorded a net increase to retained earnings of $11.2 million as of January 1, 2018 due to the cumulative impact 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, revenue is recognized over time 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 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. 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. Revenue for our Remote Staffing segment is recognized as services are delivered. Revenue is measured as the amount of consideration we expect to receive in exchange for the goods or services. Sales taxes, sales discounts and customer rebates are also excluded from revenue. Refer to Note 9 for the disaggregation of revenues by operating segment.

Contract Assets

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

	September 30,		December 31,
	2019		2018
Accounts receivable - trade	$	75,597	$	64,017
Current contract assets		38,030		49,236
Current contract liabilities		1,372		437

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 decrease in contract assets during the nine months ended September 30, 2019 was primarily related to the timing of shipments to customers and receipts from suppliers for finished goods with no alternative use within the Uniforms and Related Products segment. The majority of the amounts included in contract assets on December 31, 2018 were transferred to accounts receivable during the nine months ended September 30, 2019. 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.

NOTE 6 – Share-Based Compensation:

In May 2013, 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, stock appreciation rights (“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 previous plan) have been reserved for issuance under the 2013 Plan. All options and SARs 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 September 30, 2019, the Company had 3,320,743 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 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,
	2019			2018		2019		2018
Stock options and SARs	$	108		$	16	$	286	$	960
Restricted stock		215			140		612		404
Performance shares(1)		(358	)		221		99		503
Total share-based compensation expense	$	(35	)	$	377	$	997	$	1,867

Related income tax benefit	$	67		$	44	$	192	$	229

(1)	During the three and nine months ended September 30, 2019, the Company reversed $0.5 million of previously recognized expense for certain performance awards after determining that the performance conditions are not expected to be met.

Stock options and 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 two years after the grant date. Employee awards expire five years after the grant date, and those issued to directors expire ten 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, 2019 follows:

						Weighted Average
	No. of			Weighted Average		Remaining Life		Aggregate
	Shares			Exercise Price		(in years)		Intrinsic Value
Outstanding, January 1, 2019		676,846		$	15.70		2.99	$	2,230
Granted(1)		184,994			17.22
Exercised		(75,444	)		6.71
Cancelled		(80,005	)		17.71
Outstanding, September 30, 2019		706,391		$	16.83		3.20	$	984
Options exercisable, September 30, 2019		497,993		$	16.56		2.58	$	967

(1)	The weighted average grant date fair value of stock options granted was $3.96 per share.

As of September 30, 2019, the Company had $0.4 million in unrecognized compensation related to nonvested stock options to be recognized over the remaining weighted average vesting period of 1.3 years.

A summary of stock-settled SARs transactions during the nine months ended September 30, 2019 follows:

						Weighted Average
	No. of			Weighted Average		Remaining Life		Aggregate
	Shares			Exercise Price		(in years)		Intrinsic Value
Outstanding, January 1, 2019		182,894		$	18.99		2.61	$	89
Granted(1)		42,841			17.77
Exercised		-			-
Cancelled		(19,035	)		19.67
Outstanding, September 30, 2019		206,700		$	18.67		2.29	$	-
Options exercisable, September 30, 2019		168,478		$	18.88		1.82	$	-

(1)	The weighted average grant date fair value of SARs granted was $3.97 per share.

As of September 30, 2019, the Company had $0.1 million in unrecognized compensation related to nonvested SARs to be recognized over the remaining weighted average vesting period of 1.3 years.

Restricted Stock

The Company has granted restricted stock to directors and certain employees under the terms of the 2013 Plan which vest at a specified future date, generally after three years, or when certain conditions are met. The shares are subject to accelerated vesting under certain circumstances as outlined in 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, 2019 follows:

			Weighted Average
	No. of		Grant Date
	Shares		Fair Value
Outstanding, January 1, 2019		92,032	$	19.46
Granted		48,829		17.41
Vested		-		-
Cancelled		-		-
Outstanding, September 30, 2019		140,861	$	18.75

As of September 30, 2019, the Company had $1.3 million of unrecognized compensation cost related to nonvested restricted stock grants expected to be recognized over the remaining weighted average vesting period of 1.6 years.

Performance Shares

Under the terms of the grants, certain employees received service-based or service-based and performance-based shares, to which we collectively refer to as performance shares. The service-based awards vest after the service period is met, which is generally three to five years. Expense for these grants is based on the fair value on the date of the grant and is being recognized on a straight-line basis over the respective service period. The performance-based shares generally vest after five years if the performance and service targets are met. The Company evaluates the performance conditions associated with these grants each reporting period to determine the expected number of shares to be issued. During the three and nine months ended September 30, 2019, the Company reversed $0.5 million of previously recognized expense for certain awards after determining that the performance conditions are not expected to be met. Expenses for grants of performance shares are recognized on a straight-line basis over the respective service period based on the grant date fair value and expected number of shares to be issued. The awards are subject to accelerated vesting under certain circumstances as outlined in the 2013 Plan.

A summary of performance share transactions during the nine months ended September 30, 2019 follows:

				Weighted Average
	No. of			Grant Date
	Shares			Fair Value
Outstanding, January 1, 2019		194,378		$	20.08
Granted		14,068			17.77
Vested		-			-
Cancelled		(14,434	)		22.03
Outstanding, September 30, 2019		194,012		$	19.77

As of September 30, 2019, the Company had $1.5 million of unrecognized compensation cost related to nonvested performance share grants expected to be recognized over the remaining weighted average service period of 2.1 years.

NOTE 7 – Income Taxes:

The Company calculates its interim income tax provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, the Company makes its best estimate of the annual expected effective tax rate and applies that rate to its ordinary year-to-date income or loss. The tax expense or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.

In addition, the effect of changes in enacted tax laws or rates, tax status, or judgment on the attainment of beginning-of-the-year deferred taxes in future years is recognized in the interim period in which the change occurs.

The computation of the annual expected effective tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year and permanent and temporary differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is acquired, additional information is obtained or the tax environment changes. To the extent that the estimated annual effective tax rate changes during a quarter, the effect of the change on prior quarters is included in tax expense for the current quarter.

For the three months ended September 30, 2019, the Company recorded a provision for income taxes of $0.7 million, which represents an effective tax rate of 15.3%. For the three months ended September 30, 2018, the Company recorded a provision for income taxes of $1.2 million, which represents an effective tax rate of 15.9%. For the nine months ended September 30, 2019, the Company recorded a provision for income taxes of $2.2 million, which represents an effective tax rate of 19.4%. For the nine months ended September 30, 2018, the Company recorded a provision for income taxes of $3.3 million, which represents an effective tax rate of 21.1%. The decreases in the effective tax rates were primarily due to a reduction in non-deductible acquisition expense and a decrease in the Global Intangible Low Tax Income (“GILTI”) tax, partially offset by the impact of lower contingent liability adjustments.

The difference between the statutory Federal income tax rate and the actual effective income tax rate is accounted for as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Statutory Federal income tax rate		21.0	%		21.0	%		21.0	%		21.0	%
State and local income taxes, net of Federal income tax benefit		4.0	%		3.8	%		4.0	%		4.1	%
Taxes attributable to foreign income		(8.6	%)		(6.8	%)		(6.0	%)		(5.8	%)
GILTI tax		2.9	%		3.7	%		2.2	%		3.7	%
Contingent liability adjustments		(1.9	%)		(2.7	%)		(0.8	%)		(1.9	%)
Compensation related		0.3	%		1.6	%		0.2	%		1.4	%
Non-deductible acquisition expense		-			1.9	%		-			1.8	%
Federal tax credits		(0.7	%)		-			(0.7	%)		(0.5	%)
Other		(1.7	%)		(6.6	%)		(0.5	%)		(2.7	%)
Effective income tax rate		15.3	%		15.9	%		19.4	%		21.1	%

NOTE 8 – Net Income Per Share:

The Company’s basic net income per share is computed based on the weighted average number of shares of common stock outstanding for the period. Diluted net income per share includes the effect of the Company’s outstanding stock options, stock appreciation rights, unvested shares of restricted stock and unvested performance shares, if the inclusion of these items is dilutive.

The following table presents a reconciliation of basic and diluted net income per share for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net income used in the computation of basic and diluted net income per share (in thousands)	$	3,921	$	6,122	$	9,078	$	12,389

Weighted average shares outstanding - basic		14,947,552		15,010,660		14,942,565		14,929,513
Dilutive common stock equivalents		319,298		489,234		329,722		576,129
Weighted average shares outstanding - diluted		15,266,850		15,499,894		15,272,287		15,505,642
Net income per share:
Basic	$	0.26	$	0.41	$	0.61	$	0.83
Diluted	$	0.26	$	0.39	$	0.59	$	0.80

Awards to purchase approximately 568,471 and 192,000 shares of common stock with weighted average exercise prices of $19.02 and $23.17 per share were outstanding during the three months ended September 30, 2019 and 2018, respectively, but were not included in the computation of diluted EPS because the awards’ exercise prices were greater than the average market price of the common shares.

Awards to purchase approximately 408,854 and 192,000 shares of common stock with weighted average exercise prices of $20.07 and $23.17 per share were outstanding during the nine months ended September 30, 2019 and 2018, respectively, but were not included in the computation of diluted EPS because the awards’ exercise prices were greater than the average market price of the common shares.

NOTE 9 – Operating Segment Information:

The Company classifies its businesses into three operating segments based on the types of products and services provided. The Uniforms and Related Products segment consists of sales to customers of uniforms and related items. The Remote Staffing Solutions segment consists of sales of staffing solutions. The Promotional Products segment consists of sales to customers of promotional products and other branded merchandise.

The Company evaluates the performance of each operating segment based on several factors of which the primary financial measures are net sales and income before taxes on income. Amounts for corporate expenses are included in the totals for the Uniforms and Related Products segment. To better reflect the way in which management now reviews the Company’s operating results, in the third quarter of 2019, the Company changed the composition of total assets for each reportable segment to exclude intercompany balances. This change has been made to all periods presented within this Quarterly Report on Form 10-Q.

The following tables set forth financial information related to the Company's operating segments (in thousands):

As of and For the Three Months Ended September 30, 2019	Uniforms and Related Products		Remote Staffing Solutions		Promotional Products		Intersegment Eliminations			Total
Net sales	$	54,979	$	9,305	$	26,460	$	(1,278	)	$	89,466
Cost of goods sold		35,263		3,542		19,627		(417	)		58,015
Gross margin		19,716		5,763		6,833		(861	)		31,451
Selling and administrative expenses		17,688		3,488		4,945		(861	)		25,260
Other periodic pension cost		476		-		-		-			476
Interest expense		768		-		317		-			1,085
Income before taxes on income	$	784	$	2,275	$	1,571	$	-		$	4,630

Depreciation and amortization	$	1,537	$	240	$	351	$	-		$	2,128
Capital expenditures	$	1,038	$	276	$	131	$	-		$	1,445
Total assets	$	254,053	$	22,289	$	73,043	$	-		$	349,385

As of and For the Three Months Ended September 30, 2018	Uniforms and Related Products		Remote Staffing Solutions		Promotional Products		Intersegment Eliminations			Total
Net sales	$	69,776	$	7,934	$	19,186	$	(1,026	)	$	95,870
Cost of goods sold		45,225		3,346		13,859		(360	)		62,070
Gross margin		24,551		4,588		5,327		(666	)		33,800
Selling and administrative expenses		18,731		2,856		4,561		(666	)		25,482
Other periodic pension cost		96		-		-		-			96
Interest expense		593		-		347		-			940
Income before taxes on income	$	5,131	$	1,732	$	419	$	-		$	7,282

Depreciation and amortization	$	1,510	$	241	$	348	$	-		$	2,099
Capital expenditures	$	885	$	445	$	137	$	-		$	1,467
Total assets(1)	$	259,700	$	18,414	$	56,916	$	-		$	335,030

(1)	Intercompany balances that were previously included in total assets for each reportable segment have been excluded.

As of and For the Nine Months Ended September 30, 2019	Uniforms and Related Products		Remote Staffing Solutions		Promotional Products		Intersegment Eliminations			Total
Net sales	$	174,403	$	26,897	$	70,563	$	(3,575	)	$	268,288
Cost of goods sold		112,561		10,926		51,960		(1,221	)		174,226
Gross margin		61,842		15,971		18,603		(2,354	)		94,062
Selling and administrative expenses		54,644		10,055		15,663		(2,354	)		78,008
Other periodic pension cost		1,282		-		-		-			1,282
Interest expense		2,609		-		905		-			3,514
Income before taxes on income	$	3,307	$	5,916	$	2,035	$	-		$	11,258

Depreciation and amortization	$	4,607	$	745	$	987	$	-		$	6,339
Capital expenditures	$	5,193	$	881	$	350	$	-		$	6,424
Total assets	$	254,053	$	22,289	$	73,043	$	-		$	349,385

As of and For the Nine Months Ended September 30, 2018	Uniforms and Related Products		Remote Staffing Solutions		Promotional Products		Intersegment Eliminations			Total
Net sales	$	174,304	$	23,234	$	56,876	$	(3,065	)	$	251,349
Cost of goods sold		113,036		9,839		41,579		(1,058	)		163,396
Gross margin		61,268		13,395		15,297		(2,007	)		87,953
Selling and administrative expenses		50,269		8,146		13,583		(2,007	)		69,991
Other periodic pension cost		289		-		-		-			289
Interest expense		1,147		-		827		-			1,974
Income before taxes on income	$	9,563	$	5,249	$	887	$	-		$	15,699

Depreciation and amortization	$	4,024	$	731	$	990	$	-		$	5,745
Capital expenditures	$	2,278	$	1,264	$	339	$	-		$	3,881
Total assets(1)	$	259,700	$	18,414	$	56,916	$	-		$	335,030

(1)	Intercompany balances that were previously included in total assets for each reportable segment have been excluded.

NOTE 10 – Leases:

The Company primarily leases factories, warehouses, call centers, office space and equipment for various terms under long-term, non-cancelable operating lease agreements. A right-of-use asset represents the Company’s right to use an underlying asset for the lease term and a lease liability represents the Company’s obligation to make lease payments arising from the lease. These leases generally have expected lease terms of one to eight years. In the normal course of business, it is expected that these leases will be renewed or replaced by leases on other properties. Options to renew lease terms are included in determining the right-of-use asset and lease liability when it is reasonably certain that the Company will exercise that option. Certain of the lease agreements include rental payments adjusted periodically for inflation and generally require the Company to pay real estate taxes, insurance, and repairs. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants. As of September 30, 2019, the Company had recognized $4.0 million of operating lease obligation ($1.4 million in other current liabilities and $2.6 million in long-term operating lease liabilities), which represents the present value of the remaining lease payments, and $4.6 million of operating lease right-of-use assets, which represents the lease liability of $4.0 million adjusted for prepaid rent of $0.6 million. The depreciable-life of right-of-use assets is generally limited by the expected lease term. The Company does not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement.

The components of lease cost were as follows (in thousands):

	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease costs	$	380	$	1,103
Short-term lease costs		51		255
Total lease costs, included in selling and administrative expenses	$	431	$	1,358

Cash flow and noncash information related to our operating leases were as follows (in thousands):

	Nine Months Ended September 30, 2019
Operating cash flows – cash paid for operating lease liabilities	$	958
Non-cash – Operating lease ROU assets obtained in exchange for new lease liabilities	$	729

Other supplemental information related to our operating leases was as follows:

	September 30,
	2019
Weighted-average remaining lease term (in years)		3.6
Weighted average discount rate		5.67	%

Maturities of operating lease liabilities as of September 30, 2019 were as follows (in thousands):

	Operating
	Leases
Remainder of 2019	$	356
2020		1,377
2021		1,054
2022		859
2023		632
Thereafter		120
Total lease payments		4,398
Less imputed interest		425
Present value of lease liabilities	$	3,973

NOTE 11 – Acquisition of Businesses:

CID Resources

On May 2, 2018, the Company acquired CID Resources, Inc., a Delaware corporation (“CID”), which manufactures medical uniforms, lab coats, and layers, and sells its products to specialty uniform retailers, ecommerce medical uniform retailers, and other 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 the cash and working capital adjustment.

Fair Value of Consideration Transferred

A Summary of the purchase price is as follows (in thousands):

Cash consideration at closing	$	84,430
Superior common stock issued		3,763
Cash and working capital adjustment		2,521
Total Consideration	$	90,714

Assets Acquired and Liabilities Assumed

The total purchase price was allocated to the tangible and intangible assets and liabilities of CID based on their estimated fair values as of May 2, 2018. The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was allocated to goodwill.

The following table presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and liabilities of CID based on their estimated fair values as of the effective date of the transaction (in thousands):

Cash	$	1,360
Accounts receivable		9,657
Prepaid expenses and other current assets		1,248
Inventories		28,895
Property, plant and equipment		1,134
Contract assets		2,535
Identifiable intangible assets		41,020
Goodwill		20,323
Total assets	$	106,172
Accounts payables		5,030
Deferred tax liability		9,461
Other current liabilities		967
Total liabilities	$	15,458

The amounts in the table above are reflective of measurement period adjustments made during the second quarter of 2019, which included an increase of $2.4 million to goodwill, a decrease of $1.8 million to inventory, and an increase of $0.6 million to accounts payable. The measurement period adjustments did not have a significant impact on the Company’s statements of operations or cash flows. The Company finalized the purchase price allocation of CID during the second quarter of 2019.

The Company recorded $41.0 million in identifiable intangibles at fair value, consisting of $26.0 million in acquired customer relationships, $0.8 million for a non-compete agreement and $14.2 million for the brand name. The intangible assets associated with the customer relationships are being amortized for fifteen years beginning on May 2, 2018 and the non-compete agreement is being amortized for five years. The trade name is considered an indefinite-life asset and as such is not being amortized. The Company recognized amortization expense on these acquired intangible assets of $0.5 million for each of the three months ended September 30, 2019 and 2018. The Company recognized amortization expense on these acquired intangible assets of $1.4 million and $0.8 million for the nine months ended September 30, 2019 and 2018, respectively.

Goodwill was calculated as the difference between the fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. This goodwill will not be deductible for tax purposes.

On a pro forma basis as if the results of this acquisition had been included in our consolidated results for the nine months ended September 30, 2018, net sales would have increased by approximately $22.3 million and net income would have increased by approximately $2.6 million, or $0.17 per share.

Other Acquisitions of Businesses

BAMKO. On March 8, 2016, the Company closed on the acquisition of substantially all of the assets of BAMKO, Inc. The transaction had an effective date of March 1, 2016. The transaction also included the acquisition of BAMKO, Inc.’s subsidiaries in Hong Kong, China, Brazil and England as well as an affiliate in India. BAMKO is a promotional products, merchandise, and packaging company that serves the world’s most prominent brands. The purchase price included a potential future payment of approximately $5.5 million in additional contingent consideration through 2021. The estimated fair value for acquisition-related contingent consideration payable was $3.1 million as of September 30, 2019. The current portion of $1.1 million is expected to be paid in the second quarter of 2020. The Company will continue to evaluate this liability for remeasurement at the end of each reporting period and any change will be recorded in the Company’s statements of comprehensive income.

Public Identity. On August 21, 2017, BAMKO acquired substantially all of the assets and assumed certain liabilities of PublicIdentity, Inc. (“Public Identity”) of Los Angeles, CA. Public Identity is a promotional products and branded merchandise agency that provides innovative, high quality merchandise and promotional products to corporate clients and universities across the country. The purchase price included future payments of approximately $0.4 million in additional consideration through 2020. The estimated fair value for acquisition-related consideration payable was $0.1 million as of September 30, 2019.

Tangerine Promotions. On November 30, 2017, BAMKO acquired 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, and is one of the leading providers of Point-of-Purchase (POP) and Point-of-Sale (POS) merchandise in the country. The purchase price included potential future payments of approximately $3.2 million in additional contingent consideration through 2021. The estimated fair value for acquisition-related contingent consideration payable was $2.0 million as of September 30, 2019. The current portion of $0.3 million is expected to be paid in the second quarter of 2020. The Company will continue to evaluate this liability for remeasurement at the end of each reporting period and any change will be recorded in the Company’s statements of comprehensive income.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and the notes thereto included in the Condensed Consolidated Financial Statements in Part I, Item 1 (“Financial Statements”) of this report and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018.

Certain matters discussed in this Form 10-Q are “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”, or “plan” or the negative of these words or other variations on these words or comparable terminology. Forward-looking statements in this Quarterly Report on Form 10-Q may include, without limitation: (1) projections of revenue, income, and other items relating to our financial position and results of operations, (2) statements of our plans, objectives, strategies, goals and intentions, (3) statements regarding the capabilities, capacities, market position and expected development of our business operations, and (4) 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; general economic conditions, including employment levels, in the areas of the United States in which the Company’s customers are located; changes in the healthcare, industrial, commercial, leisure and public safety 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 business during the diligence process; the price and availability of cotton and other manufacturing materials; attracting and retaining senior management and key personnel and other factors described in the Company’s filings with the Securities and Exchange Commission, including those described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. 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-Q and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law.

On May 2, 2018, the Company acquired CID Resources, Inc., a Delaware corporation (“CID”) that manufactures uniforms, lab coats, and layers, and sells its products to specialty uniform retailers, ecommerce medical uniform retailers, and other 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 the cash and working capital adjustment.

Superior Group of Companies, Inc. (together with its subsidiaries, “the Company”, “Superior”, “we”, “our”, or “us”) is comprised of three reportable business segments: (1) Uniforms and Related Products, (2) Remote Staffing Solutions, and (3) Promotional Products.

Historically, we have manufactured and sold a wide range of uniforms, career apparel and accessories, which comprises our Uniforms and Related Products segment. Our primary products are provided to workers employed by our customers and, as a result, our business prospects are dependent upon levels of employment and overall economic conditions, among other factors. Our revenues are impacted by our customers’ opening and closing of locations and reductions, increases, and turnover of employees. The current economic environment in the United States is continuing to see improvement in the employment environment. We also continue to see an increase in the demand for employees in the healthcare sector and our acquisition of CID provides us with opportunities to expand the markets that we serve within this sector. These factors are expected to have positive impacts on future net sales growth.

This business segment, which operates in El Salvador, Belize, Jamaica, and the United States, was initially started to provide remote staffing services for the Company at a lower cost structure in order to improve our own operating results. It has in fact enabled us to reduce our operating expenses in our Uniforms and Related Products segment and to more effectively service our customers’ needs in that segment. We began selling remote staffing services to other companies at the end of 2009. We have grown this business from approximately $1.0 million in net sales to outside customers in 2010 to $27.3 million in net sales to outside customers in 2018. We have spent significant effort over the last several years improving the depth of our management infrastructure and expanding our facilities in this segment to support significant growth. Net sales to outside customers increased by approximately 15.6% for the nine months ended September 30, 2019 compared to the same period last year.

We have been involved in the sale of promotional products, on a limited basis, to our Uniforms and Related Products customers for over a decade. However, we lacked the scale and expertise needed to be a recognized name in this market prior to our acquisition of substantially all of the assets of BAMKO effective on March 1, 2016. BAMKO has been operating in the promotional products industry for more than 16 years and we believe that BAMKO’s strong back office and support systems located in India, China and Hong Kong, as well as their “direct to factory” sourcing operations provide us with a competitive advantage. We believe that BAMKO has well developed systems and processes that can serve as a platform for additional acquisitions that may complete in this highly fragmented market. We completed two additional acquisitions in this segment in late 2017. We believe promotional products are a synergistic fit with our uniform business that allow us opportunities to cross-sell our products to new and existing customers.

Net sales for the Company decreased 6.7% from $95.9 million for the three months ended September 30, 2018 to $89.5 million for the three months ended September 30, 2019. The principal components of this aggregate decrease in net sales were as follows: (1) a decrease in the net sales of our Uniform and Related Products segment (contributing (15.4%), of which $9.1 million (contributing (9.5)%)) represented the effect of differences in timing of revenues recognized under ASC 606 between periods), (2) an increase in the net sales for our Promotional Products segment (contributing 7.6%), and (3) an increase in net sales for our Remote Staffing Solutions segment after intersegment eliminations (contributing 1.1%).

Uniforms and Related Products net sales decreased 21.2%, or $14.8 million for the three months ended September 30, 2019 compared to the three months ended September 30, 2018. The decrease was primarily due to the timing of finished goods receipts for inventory items with no alternative use. The timing of such receipts was partially affected by an increased focus by management on cash flows from working capital during the current year period. The revenue decrease was also partially attributable to the timing of new uniform rollout programs for certain customers and temporary shipping delays during the current year period. Shipments by our Uniform and Related Products segment decreased from $66.6 million to $60.9 million comparing the three months ended September 30, 2019 with the prior year period. For a reconciliation of shipments by our Uniform and Related Products segment, see “Shipments (Non-GAAP Financial Measure)” below.

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 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 Remote Staffing Solutions segment was 38.1% for the three months ended September 30, 2019 and 42.2% for the three months ended September 30, 2018. The percentage decrease was driven by an increase in the proportion of revenue coming from the offshore portion of revenue which has higher gross margins.

As a percentage of net sales, selling and administrative expenses for our Uniforms and Related Products segment was 32.2% for the three months ended September 30, 2019 and 26.8% for the three months ended September 30, 2018. The percentage increase was primarily due to the decrease in revenue, including a decrease of $9.1 million in revenue represented by the effect of differences in timing of revenues recognized under ASC 606 between periods. Selling and administrative expenses during the three months ended September 30, 2019 included a reversal of $0.5 million of previously recognized expense for certain performance awards after determining that the performance conditions are not expected to be met.

As a percentage of net sales, selling and administrative expenses for our Remote Staffing Solutions segment was 37.5% for the three months ended September 30, 2019 and 36.0% for the three months ended September 30, 2018. The percentage increase was primarily attributed to increased investment in organizational infrastructure, including facilities and personnel, to support future growth of this business.

As a percentage of net sales, selling and administrative expenses for our Promotional Products segment was 18.7% for the three months ended September 30, 2019 and 23.8% for the three months ended September 30, 2018. The percentage decrease was primarily related to the net sales increase explained above. Selling and administrative expenses included fair market value adjustments on acquisition related contingent liabilities that reduced selling and administrative expenses by $0.9 million and $0.8 million for the three months ended September 30, 2019 and 2018, respectively.

During the three months ended September 30, 2019, the Company recorded $0.3 million in pension settlement losses that 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 effective income tax rate was 15.3% and 15.9% in the three months ended September 30, 2019 and 2018, respectively. The 0.6% decrease in the effective tax rate was primarily due to a reduction in non-deductible acquisition expense (contributing (1.9%)). 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 other items.

Net sales for the Company increased 6.7% from $251.3 million for the nine months ended September 30, 2018 to $268.3 million for the nine months ended September 30, 2019. The principal components of this aggregate increase in net sales were as follows: (1) the effect of the acquisition of CID on May 2, 2018 (contributing 7.9%), (2) a decrease in the net sales of our Uniform and Related Products segment exclusive of CID (contributing (7.8)%, of which $13.4 million (contributing (5.3)%)) represented the effect of differences in timing of revenues recognized under ASC 606 between periods), (3) an increase in the net sales for our Promotional Products segment (contributing 5.4%), and (4) an increase in net sales for our Remote Staffing Solutions segment after intersegment eliminations (contributing 1.2%).

Uniforms and Related Products net sales remained relatively flat during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. The increase in revenue resulting from the CID acquisition was offset by the timing of finished goods receipts for inventory items with no alternative use and the timing of new uniform rollout programs for certain customers during the current year period. The timing of finished goods receipts was partially affected by an increased focus by management on cash flows from working capital during the current year period. Shipments by our Uniform and Related Products segment without the effect of CID decreased from $143.4 million to $137.1 million comparing the nine months ended September 30, 2019 with the prior year period. For a reconciliation of shipments by our Uniform and Related Products segment without the effect of CID, see “Shipments (Non-GAAP Financial Measure)” below.

Remote Staffing Solutions net sales increased 15.8% before intersegment eliminations and 15.6% after intersegment eliminations for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. These increases were attributed to continued market penetration in 2019, with respect to both new and existing customers.

As a percentage of net sales, cost of goods sold for our Remote Staffing Solutions segment was 40.6% for the nine months ended September 30, 2019 and 42.3% for the nine months ended September 30, 2018. The percentage decrease was driven by an increase in the proportion of revenue coming from the offshore portion of revenue which has higher gross margins.

As a percentage of net sales, selling and administrative expenses for our Uniforms and Related Products segment was 31.3% for the nine months ended September 30, 2019 and 28.8% for the nine months ended September 30, 2018. The percentage increase was primarily due to the effect of differences in timing of revenues recognized under ASC 606 between periods and the CID acquisition in May 2018.

As a percentage of net sales, selling and administrative expenses for our Remote Staffing Solutions segment was 37.4% for the nine months ended September 30, 2019 and 35.1% for the nine months ended September 30, 2018. The percentage increase was primarily attributed to increased investment in organizational infrastructure, including facilities and personnel, to support future growth of this business.

As a percentage of net sales, selling and administrative expenses for our Promotional Products segment was 22.2% for the nine months ended September 30, 2019 and 23.9% for the nine months ended September 30, 2018. The percentage decrease was primarily related to the net sales increase explained above. Selling and administrative expenses included fair market value adjustments on acquisition related contingent liabilities that reduced selling and administrative expenses by $0.9 million and $1.9 million during the nine months ended September 30, 2019 and 2018, respectively.

During the nine months ended September 30, 2019, the Company recorded $0.6 million in pension settlement losses that 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 effective income tax rate was 19.4% and 21.1% in the nine months ended September 30, 2019 and 2018, respectively. The 1.7% decrease in the effective tax rate was primarily due a reduction in non-deductible acquisition expense (contributing (1.8%)) and a decrease in the Global Intangible Low Tax Income (“GILTI”) tax (contributing (1.5%)), partially offset by the impact of lower contingent liability adjustments (contributing 1.1%). 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 other items.

Accounts receivable - trade increased 18.1% from $64.0 million on December 31, 2018 to $75.6 million on September 30, 2019. The increase was primarily driven by an increase in revenue and the timing of billings within the Promotional Products segment.

Inventories decreased 1.8% from $67.3 million on December 31, 2018 to $66.1 million as of September 30, 2019. The decrease was primarily related to a decrease in inventory resulting from the timing of receipts from vendors within the Uniforms and Related Products segment, partially offset by an increase in activity within the Promotional Products segment and measurement period adjustments relating to the CID acquisition that reduced inventory by $1.8 million. The timing of receipts within the Uniforms and Related Products segment was partially affected by an increased focus by management on cash flows from working capital during the current year period.

Contract assets decreased 22.8% from $49.2 million on December 31, 2018 to $38.0 million on September 30, 2019. The decrease was primarily related to the timing of shipments to customers and receipts from suppliers for finished goods with no alternative use within the Uniforms and Related Products segment. The majority of the amounts included in contract assets on December 31, 2018 were transferred to accounts receivable during the nine months ended September 30, 2019. The contract assets balance as of September 30, 2019 relates 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.

Prepaid expenses and other current assets increased by 72.5% from $9.6 million on December 31, 2018 to $16.5 million as of September 30, 2019. The increase was primarily related to an increase in supplier advances within the Promotional Products segment driven by an increase in orders during the current year period.

Operating lease right-of-use assets of $4.6 million as of September 30, 2019 resulted from the new lease standard that the Company adopted on January 1, 2019. Additionally as a result of the new lease standard, the Company recorded $4.0 million of operating lease obligation ($1.4 million in other current liabilities and $2.6 million in long-term operating lease liabilities) as of September 30, 2019. See Note 10 to the Financial Statements for more detail.

Accounts payable increased by 24.6% from $24.7 million on December 31, 2018 to $30.8 million as of September 30, 2019. The increase was primarily related to the timing of payments to suppliers and increased activities within the Promotional Products segment.

Long-term debt decreased 6.9% from $111.5 million on December 31, 2018 to $103.8 million on September 30, 2019. The decrease was primarily due to the reclassification of scheduled repayments on the Amended and Restated Credit Agreement, as amended, from long term to current liabilities as a result of its restructuring on January 22, 2019. This was partially offset by net borrowings of debt during the nine months ended September 30, 2019. Total borrowings under banking arrangements were $119.7 million and $117.7 million as of September 30, 2019 and December 31, 2018, respectively.

Cash and cash equivalents increased by $0.1 million from $5.4 million on December 31, 2018 to $5.5 million as of September 30, 2019. During the nine months ended September 30, 2019, the Company provided cash of $11.8 million from operating activities, used cash of $6.4 million for investing activities to fund capital expenditures; and used cash of $4.9 million in financing activities, principally in cash used to pay of dividends and reacquire the Company’s common stock, partially offset by net borrowings of debt of $1.5 million. During the nine months ended September 30, 2018, the Company used cash of $85.6 million obtained from borrowings of debt for the acquisition of CID.

In the foreseeable future, the Company expects to continue its ongoing capital expenditure program designed to improve the effectiveness and expand the capabilities of its facilities, and update its technology and infrastructure to support its growth. The Company at all times evaluates its capital expenditure program in light of prevailing economic conditions.

As of September 30, 2019, the Company had approximately $119.7 million in outstanding borrowings under its an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”), consisting of $33.9 million outstanding under the revolving credit facility expiring in May 2023, $27.0 million outstanding under a term loan maturing in February 2024 (“2017 Term Loan”), and $58.8 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) (2.89% at September 30, 2019). 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) (2.72% at September 30, 2019). The available balance under the revolving credit facility is reduced by outstanding letters of credit. At September 30, 2019, the Company had undrawn capacity of $41.1 million under the revolving credit facility.

The Amended and Restated 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 Amended and Restated Credit Agreement also requires the Company to maintain a fixed charge coverage ratio (as defined in the Amended and Restated Credit Agreement) of at least 1.25:1 and a funded debt to EBITDA ratio (as defined in the Amended and Restated Credit Agreement) not to exceed 5.0:1. As of September 30, 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.

For further details on the Amended and Restated Credit Agreement, and disclosure on the Company’s interest rate swap agreement, please refer to Note 2 to the Financial Statements, which details and disclosure are incorporated herein by reference.

In this management’s discussion and analysis, we use a supplemental measure of our performance, which is derived from our financial information, but which is not presented in our financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). This non-GAAP financial measure is “shipments”, and represents a primary metric by which our management evaluates customer demand.

We define shipments as net sales excluding, if applicable, sales recorded with respect to contracts with customers in which there is an enforceable right to the payment for goods with no alternative use in advance of the transfer of these goods to our customers. As recognized in accordance with ASC 606, net sales generated from such contracts are recorded as of the time at which we receive the goods from our suppliers rather than at the time we transfer them to our customers. For customers to which we sell goods that have an alternative use, or customers with whom we do not have an enforceable right to payment with no alternative use, shipments and net sales are identical performance measures.

We believe that sales recorded under ASC 606 are affected by changes in the Company’s purchasing patterns that may not be directly aligned with customer demand. We believe that shipments, as a supplemental performance measure, tracks customer demand more closely.

Shipments is not a measure determined in accordance with GAAP, and should not be considered in isolation or as a substitute for sales determined in accordance with GAAP. Shipments is used as a measurement of customer demand and we believe it to be a helpful measure for those evaluating performance of a company operating in the uniform and related products business. However, there are limitations to the use of this non-GAAP financial measure. Our non-GAAP financial measure may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

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

We are subject to market risk exposure related to changes in interest rates on our debt. Interest on our Credit 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. Excluding the effect of the interest rate swap agreement, a hypothetical increase in the LIBOR rate of 100 basis points as of January 1, 2019 would have resulted in approximately $0.9 million in additional pre-tax interest expense for the nine months ended September 30, 2019. See Note 2 to the Financial Statements.

Sales to customers outside of the United States are subject to fluctuations in foreign currency exchange rates, which may negatively impact gross margin realized on our sales. Less than 5% of our sales are outside of the United States. 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 September 30, 2019, we had no foreign currency exchange hedging contracts. There can be no assurance that our strategies will adequately protect our operating results from the effect of exchange rate fluctuations.

Financial 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 Indian rupee, and the Brazilian real. Changes in exchange rates for intercompany payables and receivables not considered to be long-term are reported as foreign currency gains (losses) within selling and administrative expenses in our statements of comprehensive income. During the nine months ended September 30, 2019, foreign currency losses were not significant.

The Company conducted an evaluation, under supervision and with the participation of the Company’s principal executive officer, Michael Benstock, and the Company’s principal financial officer, Michael Attinella, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report (the “Evaluation Date”). Based on such evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to ensure that information the Company is required to disclose in its filings with the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.

We are exposed to certain risks and uncertainties that could have a material adverse impact on our business, financial condition and operating results. There have been no material changes to the Risk Factors described in Part I, Item 1A-Risk Factors in our annual report on Form 10-K for the year ended December 31, 2018.

There were no unregistered sales of equity securities during the quarter ended September 30, 2019, that were not previously reported in a current report on Form 8-K.

The table below sets forth the information with respect to purchases made by or on behalf of Superior Group of Companies, Inc. or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our shares of common stock during the three months ended September 30, 2019.

Under our Amended and Restated Credit Agreement, as amended, with Branch Banking and Trust Company, 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 such agreement.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	2019			2018

Net sales	$	89,466		$	95,870

Costs and expenses:
Cost of goods sold		58,015			62,070
Selling and administrative expenses		25,260			25,482
Other periodic pension costs		476			96
Interest expense		1,085			940
		84,836			88,588
Income before taxes on income		4,630			7,282
Income tax expense		709			1,160
Net income	$	3,921		$	6,122

Net income per share:
Basic	$	0.26		$	0.41
Diluted	$	0.26		$	0.39

Weighted average number of shares outstanding during the period
Basic		14,947,552			15,010,660
Diluted		15,266,850			15,499,894

Other comprehensive income, net of tax:
Defined benefit pension plans:
Recognition of net losses included in net periodic pension costs	$	236		$	216
Recognition of settlement loss included in net periodic pension costs		213			-
Gain on cash flow hedging activities		(5	)		(3	)
Foreign currency translation adjustment		(316	)		(180	)
Other comprehensive income		128			33
Comprehensive income	$	4,049		$	6,155

Cash dividends per common share	$	0.10		$	0.10

	2019			2018

Net sales	$	268,288		$	251,349

Costs and expenses:
Cost of goods sold		174,226			163,396
Selling and administrative expenses		78,008			69,991
Other periodic pension costs		1,282			289
Interest expense		3,514			1,974
		257,030			235,650
Income before taxes on income		11,258			15,699
Income tax expense		2,180			3,310
Net income	$	9,078		$	12,389

Net income per share:
Basic	$	0.61		$	0.83
Diluted	$	0.59		$	0.80

Weighted average number of shares outstanding during the period
Basic		14,942,565			14,929,513
Diluted		15,272,287			15,505,642

Other comprehensive income, net of tax:
Defined benefit pension plans:
Recognition of net losses included in net periodic pension costs	$	739		$	647
Recognition of settlement loss included in net periodic pension costs		459			-
Loss (gain) on cash flow hedging activities		(16	)		209
Foreign currency translation adjustment		(295	)		(637	)
Other comprehensive income		887			219
Comprehensive income	$	9,965		$	12,608

Cash dividends per common share	$	0.30		$	0.29

SUPERIOR GROUP OF COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share and par value data)

	September 30,		December 31,
	2019		2018
Finished goods	$	57,413	$	58,196
Work in process		730		650
Raw materials		7,933		8,455
Inventories	$	66,076	$	67,301

	Three Months Ended September 30,
	2019		2018
Uniform and Related Product net sales, as reported	$	54,979	$	69,776
Adjustment: Recognition of revenue based on the timing of shipments for finished goods with no alternative use for Uniform and Related Product net sales		5,912		(3,166	)
Uniform and Related Product shipments	$	60,891	$	66,610

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
July 1, 2019 to July 31, 2019	-	-	-
August 1, 2019 to August 31, 2019	15,677	$13.23	15,677
September 1, 2019 to September 30, 2019	-	-	-
Total	15,677	$13.23	15,677	734,323

Exhibit No.		Description
10.1		Second Amendment to Amended and Restated Credit Agreement, dated as of September 27, 2019, filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on October 3, 2019 and incorporated herein by reference.
31.1*		Certification by the Chief Executive Officer (Principal Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification by the Chief Financial Officer (Principal Financial Officer and Accounting Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**		Certification by the Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

Date: October 23, 2019	SUPERIOR GROUP OF COMPANIES, INC.

	By	/s/ Michael Benstock
		Michael Benstock
		Chief Executive Officer
		(Principal Executive Officer)


Date: October 23, 2019
	By	/s/ Michael Attinella
		Michael Attinella
		Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)