SUPERIOR GROUP OF COMPANIES, INC. Commitments Disclosure

NOTE 7 – Commitments and Contingencies:

 

The purchase price to acquire substantially all of the assets of Guardian Products, Inc. (“Guardian”) in  May 2022 included contingent consideration based on varying levels of Guardian’s EBITDA in each measurement period through  April 2025. In the third quarter of 2025 the final contingent consideration payment was made totaling $1.0 million for the measurement period ended in April 2025.

 

The purchase price to acquire substantially all of the assets of 3Point in December 2024 included contingent consideration based on varying levels of the acquired company’s EBITDA in each measurement period through December 2027. The estimated fair value of the acquired company's acquisition-related contingent consideration payable as of December 31, 2025 was $0.8 million. The total payments related to this contingent consideration payable is capped at $0.9 million per year and $2.6 million over the three-year measurement period. The Company will continue to evaluate the acquired company's liability for remeasurement at the end of each reporting period and any changes will be recorded in the Company’s statements of comprehensive income. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be different from the estimated value of the liability.

 

The Company is involved in various legal actions and claims arising from the normal course of business. 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.

 

Geographic Concentrations in the Available Supply of Materials and Product

 

The principal fabrics used in the manufacture of finished apparel goods for Superior’s Branded Products and Healthcare Apparel segments are cotton, polyester, spandex, cotton-synthetic and poly-synthetic blends. The majority of such fabrics are sourced, directly or indirectly, from China. 

 

The Company does not have a concentration of suppliers of finished apparel in any single country or region of the world, however, it does contract to manufacture or source the majority of its apparel in the following countries: Haiti, China, Madagascar, Vietnam, Pakistan, Bangladesh, and the United States. Additionally, we generally source or manufacture apparel in parts of the world that may be affected by economic uncertainty, political unrest, labor disputes, health emergencies, natural disasters or the imposition of duties, tariffs or other import regulations by the United States. 

 

The Branded Products segment also relies on the supply of other types of finished products including hard goods such as drinkware and injection molded plastics along with raw materials that are principally sourced from China, either directly or indirectly. 

 

The geography from which we source materials and products is affected by duties and tariffs. During 2025, the U.S. government imposed higher tariffs and/or new tariffs which impacted certain sources of the Company’s materials and production. Additionally, the U.S.'s trade agreements and/or preferences with certain countries in Africa, through the African Growth and Opportunity Act (AGOA), and with Haiti, through the Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE) and the Haiti Economic Lift Program of 2010 (HELP), expired on September 30, 2025. In February 2026, these agreements were retroactively extended until December 2026. The process and timing for receiving a refund of duties paid in the interim period between expiration and when retroactivity was granted has yet to be determined.

 

Additionally in February 2026, the United States Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, effectively invalidating the tariffs imposed via that method.  These IEEPA tariffs stopped being collected at 12:00 a.m. on February 24, 2026.  The Supreme Court’s ruling left open the questions of whether, how, and when payors of the tariffs might receive refunds.  A determination of these, and other questions, could take a significant amount of time to resolve.  Soon after the Supreme Court’s decision, President Trump announced his intention to impose tariffs using different legal bases.  Already, a new 10% tariff has been implemented under Section 122 of the Trade Act of 1974, effective as of February 24, 2026.  The Supreme Court’s ruling and President Trump’s response add new uncertainty to global trade, including the Company’s exposure to tariffs.