NOTE 6 – Contingencies and Geographic Supply Concentrations:

Contingencies

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 June 30, 2026 was $1.0 million, of which $0.6 million is expected to be paid in the second quarter of 2027. 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 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, oil price shocks, 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 and during the six months ended June 30, 2026, the Company recorded a consolidated duties receivable of $2.3 million within other current assets through a reduction of inventory and reversal of cost of goods sold of $0.4 million, primarily in its Healthcare Apparel segment of which the majority has been collected.

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 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; subsequently, the U.S. government created a system through which refunds of certain entries could be processed. The Company's accounting policy is to recognize tariff refunds (as a reduction of cost of goods sold) when the refund is probable and recognize corresponding refunds to customers (as a reduction of net sales) where contractually required or an implicit obligation exists. As of June 30, 2026, the Company has recorded a $4.3 million tariff refund, of which $3.1 million has been received in cash and corresponding refunds to customers of $2.7 million. The U.S. government implemented a new 10.0% tariff under Section 122 of the Trade Act of 1974, effective as of February 24, 2026. This tariff terminated on July 24, 2026. The U.S. government implemented new tariffs generally ranging from 10.0% to 12.5% under Section 301 of the Trade Act of 1974, effective as of July 24, 2026.