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,
2019.

Disclosure Regarding Forward Looking Statements





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) the
projected impact of the current coronavirus (COVID-19) on our, our customers',
and our suppliers' businesses, (2) projections of revenue, income, and other
items relating to our financial position and results of operations, (3)
statements of our plans, objectives, strategies, goals and intentions, (4)
statements regarding the capabilities, capacities, market position and expected
development of our business operations, and (5) 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; the effect of uncertainties related to the current coronavirus
(COVID-19) pandemic on the U.S. and global markets, our business, operations,
customers, suppliers and employees, including without limitation the length and
scope of the restrictions imposed by various governments and success of efforts
to find a suitable vaccine, among other factors; general economic conditions,
including employment levels, in the areas of the United States of
America ("United States") in which the Company's customers are located; changes
in the healthcare, retail, hotels, food service, transportation and other
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, 2019. 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.



Business Outlook

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.





COVID-19 Impact



The COVID-19 pandemic continues to affect our operations and financial
performance, and likely will continue to do so for an undetermined period of
time. International, federal, state and local efforts to contain the spread of
COVID-19 has continued to intensify as governments enacted shelter in place
orders, declared states of emergency, enacted safety requirements such as
recommended or mandatory use of face masks and other personal protective
equipment and related products, took steps to restrict travel, enacted temporary
closures of non-essential businesses and took other restrictive measures that
prohibit many employees from going to work. With regard to personal protective
equipment, the COVID-19 pandemic has created significant market demands from new
and existing customers. In responding to the needs of our customers, our
sourcing teams began sourcing much needed personal protective equipment,
including face masks, isolation gowns, sanitizers and gloves, which resulted in
an increase in net sales during the three months ended June 30, 2020 of $49.7
million and $10.3 million for our Promotional Products segment and Uniforms and
Related Products segment, respectively.



                                       19
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The pandemic could have a number of adverse impacts on our business, including,
but not limited to, additional disruption to the economy and our customers'
willingness and/or ability to spend, temporary or permanent closures of
businesses that consume our products and services, additional work restrictions,
and supply chains being interrupted, slowed, or rendered inoperable. Our
employees and the employees and contractors of our suppliers and customers also
could become ill, quarantined, or otherwise unable to work or travel due to
health reasons or governmental restrictions.



The majority of the principal fabrics used in the manufacture of products within
the Uniforms and Related Products segment are sourced in China and the vast
majority of raw materials used in our Promotional Products segment are sourced
from China, either directly by BAMKO or by its suppliers. If we are unable to
continue to obtain affordable raw materials and finished products from China or
if our suppliers are unable to source affordable raw materials from China, it
could significantly disrupt our business. A prolonged pandemic, or the threat
thereof, could significantly disrupt our product sourcing, which in turn, could
significantly disrupt our business.



We have and will continue to monitor and control our expense levels to protect
our profitability. For example, on March 30, 2020, we entered into debt
deferment agreements with Truist Bank (formerly known as Branch Banking and
Trust Company) to: (i) defer contractual principal and interest payments due
between April 1, 2020 and June 1, 2020 under the 2017 Term Loan and 2018 Term
Loan until their respective maturity dates; and (ii) defer contractual interest
payments due between April 1, 2020 and June 1, 2020 under the revolving credit
facility until its maturity date. Additionally, we have proactively taken steps
to increase available cash on hand by targeted reductions in discretionary
operating expenses. Finally, we have and will continue to delay certain capital
expenditures relating to non-essential projects until economic conditions begin
to stabilize.



Prolonged instability in the United States and global economies, and how the
world reacts to them, could have long-term impacts on our business. These
business impacts could negatively affect us in a number of ways, including, but
not limited to, reduced demand for our core products and services, reductions to
our revenue and profitability, costs associated with complying with new or
amended laws and regulations affecting our business, declines in our stock
price, reduced availability and less favorable terms of future borrowings,
valuation of our pension assets and obligations, reduced credit-worthiness of
our customers, and potential impairment of the carrying value of goodwill or
other indefinite-lived intangible assets. The extent to which the COVID-19
pandemic impacts our business, financial condition, results of operations or
cash flows will depend on numerous evolving factors that we are unable to
accurately predict at this time. The length and scope of the restrictions
imposed by various governments and success of efforts to find a suitable
vaccine, among other factors, will determine the ultimate severity of the
COVID-19 impact on our business. However, prolonged periods of difficult market
conditions could have material adverse impacts on our business, financial
condition, results of operations and cash flows.



Uniforms and Related Products



In our Uniforms and Related Products segment, we manufacture and sell a wide
range of uniforms, career apparel and accessories. Our primary products are
service apparel, such as scrubs, lab coats, protective apparel and patient
gowns, provided to workers in the healthcare industry, and service apparel, such
as uniforms, provided to workers employed by our customers in various
industries, including retail, hotels, food service, transportation and other
industries. We sell our brands of healthcare service apparel primarily to
healthcare laundries, dealers, distributors and retailers. As a result of the
COVID-19 pandemic, we have seen increased demand for healthcare service apparel
from laundries, dealers and distributors that service hospitals and other
medical facilities. During the second quarter of 2020, we were able to service
many of our customer needs with available healthcare service apparel inventory
that we had on hand prior to the start of the pandemic. Additionally, we have
implemented certain alternative strategies with our retailers to ensure that our
customers are able to take advantage of the increase in demand from medical
professionals. From a long-term perspective, we expect that demand for our
signature marketing brands, including Fashion Seal Healthcare® and WonderWink®,
will continue to provide opportunities for growth and increased market share.
Sales of uniforms 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 has been significantly impacted by the
COVID-19 pandemic, and as a result, we have seen reduced short-term demand for
uniform apparel in many of our customers' industries, some of which has been
partially offset by demand from customers in certain retail industries, such as
grocery and pharmacy customers, and healthcare. Additionally, we recently began
sourcing much needed personal protective equipment for our customers which has
mitigated some of the declines in sales of uniform apparel to certain customers.
Based on the longer-term fundamentals of our uniforms business, we anticipate
that we will have growth opportunities when market conditions in the United
States stabilize and begin to improve.



                                       20
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Remote Staffing Solutions



This business segment (also known as "The Office Gurus"), which operates in El
Salvador, Belize, Jamaica, and the United States, initially started to support
the Company's back office needs while improving overall efficiencies and
lowering operating costs. After years of consistently improving key performance
indicators, lowering costs and providing exceptional service to our Uniforms and
Related Products segment in areas such as order entry, cash collections, vendor
payables processing, customer service, sales, and others, The Office Gurus
started selling their services to outside companies in 2009. Over the past 10
years, The Office Gurus has become an award-winning global business process
outsourcer offering inbound and outbound voice, email, text, chat and social
media support. The COVID-19 pandemic has generated uncertainties for our
customers and their industries, and has resulted in a short-term slowdown of our
revenue growth rates for this business. With an environment and career path
designed to attract and maintain top talent across all sites, The Office Gurus
is positioned well to continue growth when market conditions begin to
stabilize.



Promotional Products



For more than a decade, we sold promotional products on a limited basis to our
existing Uniforms and Related Products customer base. While there were
substantial opportunities to sell promotional products to those customers, it
was not an area of focus, specialization, or expertise for us. On March 1, 2016,
that changed with our acquisition of substantially all of the assets of BAMKO,
Inc. ("BAMKO"). One of the top firms in the promotional products industry, BAMKO
has a number of strengths, well-developed systems, and time-tested processes
that offer significant competitive advantages. With a robust back-office support
platform operated out of India, direct-to-factory sourcing operations based in
China, and proprietary technological platforms and programming capabilities that
we believe are very competitive, BAMKO is positioned to be a platform for
potential future acquisitions in this industry. We completed two additional
acquisitions in this segment in late 2017 and remain open to additional
acquisitions going forward. In recent years we have seen an increase in customer
orders in our promotional products business and expect growth opportunities for
our core promotional products business to continue once the current market
environment stabilizes. As a result of the COVID-19 pandemic, we have seen
significant short-term opportunities within the personal protective equipment
market. In responding to the needs of our customers, the sourcing team within
the Promotional Products segment began sourcing much needed personal protective
equipment for our customers. These opportunities led to record revenue levels
during the second quarter of 2020, despite the downturn in the branded
merchandise industry that has experienced customer budget cuts and widespread
event cancellations. Additionally, in our core promotional products business we
have not experienced the same downturn that many of our competitors have
experienced as the increase in activities from customers in certain industries,
such as the delivery service industry, has more than offset reduced activities
from customers in other industries, such as the restaurant and entertainment
industries. From a long-term perspective, we believe that this segment's
synergistic fit with our uniforms business will create opportunities to
cross-sell the products of various business segments to new and existing
customers.



Results of Operations

Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 2019

Net Sales (in thousands):


                                    Three Months Ended June 30,
                                     2020                 2019           % Change
Uniforms and Related Products   $        75,842       $      60,745           24.9 %
Remote Staffing Solutions                 9,351               8,993            4.0 %
Promotional Products                     75,456              23,744          217.8 %
Net intersegment eliminations            (1,290 )            (1,212 )          6.4 %
Consolidated Net Sales          $       159,359       $      92,270           72.7 %




Net sales for the Company increased 72.7% from $92.3 million for the three
months ended June 30, 2019 to $159.4 million for the three months ended June 30,
2020. The principal components of this aggregate increase in net sales were as
follows: (1) an increase in the net sales of our Uniforms and Related Products
segment (contributing 16.4%, of which $1.4 million (contributing
1.6%) represented the effect of differences in timing of revenue recognized
under ASC 606 between periods), (2) an increase in the net sales for our
Promotional Products segment (contributing 56.0%), and (3) an increase in net
sales for our Remote Staffing Solutions segment after intersegment eliminations
(contributing 0.3%).



                                       21

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Uniforms and Related Products net sales increased 24.9%, or $15.1 million, for
the three months ended June 30, 2020 compared to the three months ended June 30,
2019. The increase was primarily due to market demand for healthcare service
apparel, which resulted in an increase in net sales of $17.1 million.
Additionally, COVID-19 increased demand from our customers for personal
protective equipment, including face masks, isolation gowns, sanitizers and
gloves, which resulted in an increase in net sales of $8.1 million during the
three months ended June 30, 2020. These increases were partially offset by
decrease in demand for uniform apparel experienced during the current year
period primarily as a result of COVID-19. Shipments by our Uniforms and Related
Products segment increased from $64.3 million to $77.9 million comparing
the three months ended June 30, 2020 with the prior year period. For a
reconciliation of shipments by our Uniforms and Related Products segment, see
"Shipments (Non-GAAP Financial Measure)" below.



Remote Staffing Solutions net sales increased 4.0% before intersegment
eliminations and 3.6% after intersegment eliminations for the three months ended
June 30, 2020 compared to the three months ended June 30, 2019. These increases
were primarily attributed to providing continued services in the current year
period to our customer base that was expanded during 2019. Despite the increase
in net sales, overall growth during the three months ended June 30, 2020 was
negatively impacted by disruptions in April 2020 resulting from COVID-19.



Promotional Products net sales increased 217.8%, or $51.7 million, for the three
months ended June 30, 2020 compared to the three months ended June 30, 2019. The
increase was primarily due to the sale of personal protective equipment,
including face masks, sanitizers and gloves, which resulted in net sales of
$49.7 million during the three months ended June 30, 2020. As a result of the
COVID-19 pandemic, we have seen significant short-term opportunities within the
personal protective equipment market. Additionally, in our core promotional
products business we have not experienced the same downturn that many of our
competitors have experienced as the increase in activities from customers in
certain industries, such as the delivery service industry, has more than offset
reduced activities from customers in other industries, such as the restaurant
and entertainment industries.



Cost of Goods Sold



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 Uniforms and Related
Products segment was 63.2% for the three months ended June 30, 2020 and 64.1%
for the three months ended June 30, 2019. As a percentage of net sales, cost of
goods sold remained relatively flat. The increase in cost of goods sold during
the three months ended June 30, 2020 compared to the three months ended June 30,
2019 was primarily due to the net sales increase explained above.



As a percentage of net sales, cost of goods sold for our Remote Staffing
Solutions segment was 45.3% for the three months ended June 30, 2020 and 42.5%
for the three months ended June 30, 2019. The percentage increase was primarily
driven by disruptions resulting from COVID-19.



As a percentage of net sales, cost of goods sold for our Promotional Products
segment was 68.5% for the three months ended June 30, 2020 and 74.1% for the
three months ended June 30, 2019. The percentage decrease was primarily the
result of personal protective equipment sales during the three months ended June
30, 2020 and differences in the mix of products and customers.

Selling and Administrative Expenses





Selling and administrative expenses increased 35.0%, or $9.4 million, for
the three months ended June 30, 2020 compared to the three months ended June 30,
2019. The increase was primarily due to an increase in bad debt expense of
$3.4 million on outstanding trade accounts receivable and an increase in sales
commissions as a result of record sales levels during the three months ended
June 30, 2020, as discussed above.

As a percentage of net sales, selling and administrative expenses for our Uniforms and Related Products segment was 26.4% for the three months ended June 30, 2020 and 30.9% for the three months ended June 30, 2019. The percentage decrease was primarily due to the increase in net sales explained above.





As a percentage of net sales, selling and administrative expenses for our Remote
Staffing Solutions segment was 37.6% for the three months ended June 30, 2020
and 38.3% for the three months ended June 30, 2019. As a percentage of net
sales, selling and administrative expenses remained relatively flat.



                                       22
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As a percentage of net sales, selling and administrative expenses for our
Promotional Products segment was 18.0% for the three months ended June 30, 2020
and 22.9% for the three months ended June 30, 2019. The percentage decrease was
primarily related to the net sales increase explained above.



Interest Expense



Interest expense decreased to $0.4 million for the three months ended June 30,
2020 from $1.3 million for the three months ended June 30, 2019. This decrease
was primarily due to a decrease in LIBOR rates on our outstanding borrowings and
a significant reduction in outstanding borrowings.



Income Taxes



The effective income tax rate was 19.6% and 23.8% for the three months ended
June 30, 2020 and 2019, respectively. The decrease in the effective tax rate was
primarily driven by foreign taxes and foreign tax credit decreases of 7.7%,
partially offset by increases of 1.9% for compensation related items, 0.6% for
changes in uncertain tax positions and 0.3% for state income taxes. 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.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net Sales (in thousands):




                                  Six Months Ended June 30,
                                    2020               2019         % Change
Uniforms and Related Products   $     135,944       $  119,424           13.8 %
Remote Staffing Solutions              18,551           17,592            5.5 %
Promotional Products                  101,634           44,103          130.4 %
Net intersegment eliminations          (2,525 )         (2,297 )          9.9 %
Consolidated Net Sales          $     253,604       $  178,822           41.8 %




Net sales for the Company increased 41.8% from $178.8 million for the six months
ended June 30, 2019 to $253.6 million for the six months ended June 30, 2020.
The principal components of this aggregate increase in net sales were as
follows: (1) an increase in the net sales of our Uniforms and Related Products
segment (contributing 9.2%, of which $3.4 million (contributing 1.9%)
represented the effect of differences in timing of revenue recognized under ASC
606 between periods), (2) an increase in the net sales for our Promotional
Products segment (contributing 32.2%), and (3) an increase in net sales for our
Remote Staffing Solutions segment after intersegment eliminations (contributing
0.4%).



Uniforms and Related Products net sales increased 13.8%, or $16.5 million, for
the six months ended June 30, 2020 compared to the six months ended June 30,
2019. The increase was primarily due to market demand for healthcare service
apparel, which resulted in an increase in net sales of $17.7 million.
Additionally, COVID-19 increased demand from our customers for personal
protective equipment, including face masks, isolation gowns, sanitizers and
gloves, which resulted in an increase in net sales of $8.1 million during the
six months ended June 30, 2020. These increases were partially offset by
decrease in demand for uniform apparel experienced during the current year
period primarily as a result of COVID-19. Shipments by our Uniforms and Related
Products segment increased from $124.7 million to $137.7 million comparing
the six months ended June 30, 2020 with the prior year period. For a
reconciliation of shipments by our Uniforms and Related Products segment, see
"Shipments (Non-GAAP Financial Measure)" below.



Remote Staffing Solutions net sales increased 5.5% before intersegment
eliminations and 4.8% after intersegment eliminations for the six months ended
June 30, 2020 compared to the six months ended June 30, 2019. These increases
were primarily attributed to providing continued services in the current year
period to our customer base that was expanded during 2019. Despite the increase
in net sales, overall growth during the six months ended June 30, 2020 was
negatively impacted by disruptions in March 2020 and April 2020 resulting from
COVID-19.



                                       23

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Promotional Products net sales increased 130.4%, or $57.5 million, for the six
months ended June 30, 2020 compared to the six months ended June 30, 2019. The
increase was primarily due to the sale of personal protective equipment,
including face masks, sanitizers and gloves, which resulted in net sales of
$49.7 million during the six months ended June 30, 2020. As a result of the
COVID-19 pandemic, we have seen significant short-term opportunities within the
personal protective equipment market. Additionally, continued product sales to
our expanded customer base during the current year period also contributed to
the net sales increase. In our core promotional products business we have not
experienced the same downturn that many of our competitors have experienced as
the increase in activities from customers in certain industries, such as the
delivery service industry, has more than offset reduced activities from
customers in other industries, such as the restaurant and entertainment
industries.



Cost of Goods Sold



As a percentage of net sales, cost of goods sold for our Uniforms and Related
Products segment was 63.7% for the six months ended June 30, 2020 and 64.7% for
the six months ended June 30, 2019. As a percentage of net sales, cost of goods
sold remained relatively flat. The increase in cost of goods sold during the six
months ended June 30, 2020 compared to the six months ended June 30, 2019 was
primarily due to the net sales increase explained above.



As a percentage of net sales, cost of goods sold for our Remote Staffing
Solutions segment was 44.3% for the six months ended June 30, 2020 and 42.0% for
the six months ended June 30, 2019. The percentage increase was primarily driven
by disruptions resulting from COVID-19.



As a percentage of net sales, cost of goods sold for our Promotional Products
segment was 69.2% for the six months ended June 30, 2020 and 73.3% for the six
months ended June 30, 2019. The percentage decrease was primarily the result
of personal protective equipment sales during the six months ended June 30, 2020
and differences in the mix of products and customers.

Selling and Administrative Expenses





Selling and administrative expenses increased 20.9%, or $11.1 million, for
the six months ended June 30, 2020 compared to the six months ended June 30,
2019. The increase was primarily due to an increase in bad debt expense of
$4.2 million on outstanding trade accounts receivable and an increase in sales
commissions as a result of record sales levels during the six months ended June
30, 2020, as discussed above.

As a percentage of net sales, selling and administrative expenses for our Uniforms and Related Products segment was 28.1% for the six months ended June 30, 2020 and 30.9% for the six months ended June 30, 2019. The percentage decrease was primarily due to the increase in net sales explained above.

As a percentage of net sales, selling and administrative expenses for our Remote Staffing Solutions segment was 37.3% for the six months ended June 30, 2020 and 37.3% for the six months ended June 30, 2019.





As a percentage of net sales, selling and administrative expenses for our
Promotional Products segment was 19.9% for the six months ended June 30, 2020
and 24.3% for the six months ended June 30, 2019. The percentage decrease was
primarily related to the net sales increase explained above.



Interest Expense



Interest expense decreased to $1.5 million for the six months ended June 30,
2020 from $2.4 million for the six months ended June 30, 2019. This decrease was
primarily due to a decrease in LIBOR rates on our outstanding borrowings and a
significant reduction in outstanding borrowings.



                                       24
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Income Taxes



The effective income tax rate was 21.1% and 22.2% for the six months ended June
30, 2020 and 2019, respectively. The decrease in the effective tax rate was
primarily driven by foreign taxes and foreign tax credit decreases of 5.0%,
partially offset by increases of 1.8% for compensation related items, 0.9% for
state income taxes and 0.3% for changes in uncertain tax positions. 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.

Liquidity and Capital Resources

Overview



Management uses a number of standards in measuring the Company's liquidity, such
as: working capital, profitability ratios, cash flows from operating activities,
and activity ratios. The strength of the Company's balance sheet generally
provides the ability to pursue acquisitions, invest in new product lines and
technologies and invest in additional working capital as necessary.

The Company's primary source of liquidity has been its net income and the use of
credit facilities and term loans as described further below. In the future, the
Company may continue to use credit facilities and other secured and unsecured
borrowings as a source of liquidity. Management currently believes that cash
flows provided by operating activities and availability under the revolving
credit facility will be sufficient to satisfy the Company's anticipated working
capital requirements for the next twelve months. The Company has proactively
taken steps to increase available cash on hand by targeted reductions in
discretionary cash outflows. The Company may also begin relying on the issuance
of equity or debt securities. There can be no assurance that any such financings
would be available to us on reasonable terms. Any future issuances of equity
securities or debt securities with equity features may be dilutive to our
shareholders. Additionally, the cost of the Company's future sources of
liquidity may differ from the costs of the Company's sources of liquidity to
date.

Working Capital

Cash and cash equivalents decreased by $3.9 million to $5.1 million as of June
30, 2020 from $9.0 million on December 31, 2019. Excess cash generated from
operating activities during the six months ended June 30, 2020 was used to repay
outstanding borrowings under the revolving credit facility. Working capital
decreased to $120.9 million at June 30, 2020 from $142.4 million at December 31,
2019. The decrease in working capital was primarily due to an increase in other
current liabilities and a decrease in contract assets, partially offset by an
increase in trade accounts receivable. The increase in other current liabilities
was primarily driven by new activities in the current year period relating to
the increased sale of personal protective equipment within our Promotional
Products and Uniforms and Related Products segments as a result of COVID-19,
including an increase in contract liabilities and increases in other liabilities
correlated with such customer contracts. The decrease in contract assets was
primarily related to the timing of shipments to customers and receipts from
suppliers for finished goods with no alternative use within our Promotional
Products and Uniforms and Related Products segments. The increase in trade
accounts receivable was primarily due to increased net sales of personal
protective equipment within our Promotional Products segment and healthcare
service apparel within our Uniforms and Related Products segment.



                                       25
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Cash Flows



Our cash flows from operating, investing and financing activities, as reflected
in the statements of cash flows, are summarized in the following table (in
thousands):



                                                         Six Months Ended June 30,
                                                            2020              2019
Net cash provided by (used in):
Operating activities                                   $       39,762       $   6,751
Investing activities                                           (4,893 )        (4,976 )
Financing activities                                          (38,280 )         1,089
Effect of exchange rates on cash                                 (525 )

41

Net increase (decrease) in cash and cash equivalents $ (3,936 ) $ 2,905






Operating Activities. The increase in net cash provided by operating activities
during the six months ended June 30, 2020 compared to the six months ended June
30, 2019 was primarily attributable to the receipt of payments from new customer
contracts for the sourcing of personal protective equipment needed in response
to COVID-19 within the Promotional Products and Uniforms and Related Products
segments. Working capital cash changes during the six months ended June 30, 2020
included an increase of $21.0 million in accounts payable and other current
liabilities and an increase of $12.3 million in trade accounts receivable.
Working capital cash changes during the six months ended June 30, 2019 included
an increase of $7.2 million in trade accounts receivable.

Investing Activities. Net cash used in investing activities during the six
months ended June 30, 2020 compared to the six months ended June 30,
2019 remained relatively flat. From a long-term perspective, the Company expects
to continue its ongoing capital expenditure program designed to improve the
effectiveness and capabilities of its facilities and technology. The Company at
all times evaluates its capital expenditure program in light of prevailing
economic conditions. In the near term, the Company expects to delay certain
capital expenditures relating to non-essential projects until economic
conditions begin to stabilize.

Financing Activities. The increase in net cash used in financing activities
during the six months ended June 30, 2020 compared to the six months ended June
30, 2019 was primarily attributable to an increase in net repayments of
$34.3 million in debt during the current year period compared to net borrowings
of $5.8 million in the prior year period. Excess cash generated from operating
activities during the six months ended June 30, 2020 was used to
repay outstanding borrowings under the revolving credit facility.



Credit Facilities (See   Note 3   to the Financial Statements)



As of June 30, 2020, the Company had approximately $85.5 million in outstanding
borrowings under its amended and restated credit agreement (the "Credit
Agreement") with Truist Bank, consisting of $7.3 million outstanding under the
revolving credit facility expiring in May 2023, $24.0 million outstanding under
a term loan maturing in February 2024 ("2017 Term Loan"), and $54.2 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) (1.03% at June 30, 2020). 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) (0.86% at June 30, 2020). The
available balance under the revolving credit facility is reduced by outstanding
letters of credit. At June 30, 2020, the Company had undrawn capacity of
$67.7 million under the revolving credit facility.



On March 30, 2020, the Company entered into debt deferment agreements with
Truist Bank to: (i) defer contractual principal and interest payments due
between April 1, 2020 and June 1, 2020 under the 2017 Term Loan and 2018 Term
Loan until their respective maturity dates; and (ii) defer contractual interest
payments due between April 1, 2020 and June 1, 2020 under the revolving credit
facility until its maturity date. Contractual principal payments for the 2017
Term Loan are as follows: remainder of 2020 - $3.0 million; 2021 through 2023 -
$6.0 million per year; and 2024 - $3.0 million. Contractual principal payments
for the 2018 Term Loan are as follows: remainder of 2020 - $4.6 million; 2021
through 2025 - $9.3 million per year; and 2026 - $3.1 million. The term loans do
not contain pre-payment penalties.



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The 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 Credit Agreement also requires the Company to maintain a fixed charge
coverage ratio (as defined in the Credit Agreement) of at least 1.25:1 and a
funded debt to EBITDA ratio (as defined in the Credit Agreement) not to exceed
5.0:1. As of June 30, 2020, 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 Credit Agreement.

Dividends and Share Repurchase Program



During the six months ended June 30, 2020 and 2019, the Company paid cash
dividends of $1.5 million and $3.0 million, respectively. Due to the anticipated
continuing impact of the COVID-19 pandemic on the Company's business, financial
condition, results of operations and cash flows, the Company has elected to
suspend its regular quarterly dividend until we have clearer visibility on
improved macro conditions.

On May 2, 2019, the Company's Board of Directors approved a stock repurchase
program of up to 750,000 shares of Company's outstanding common stock. There is
no expiration date or other restriction governing the period over which the
Company can make share repurchases under the program. All purchases under this
program will be open market transactions. Under this program the Company
reacquired and retired 43,458 shares of its common stock during the six months
ended June 30, 2020. At June 30, 2020, the Company's remaining repurchase
capacity under its common stock repurchase program was 657,451 shares. Shares
purchased under the common stock repurchase program are constructively retired
and returned to unissued status. The Company considers several factors in
determining when to make share repurchases, including among other things, the
cost of equity, the after-tax cost of borrowing, the debt to total
capitalization targets and the expected future cash needs.

Shipments (Non-GAAP Financial Measure)





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 ("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 uniforms 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.



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The following tables reconcile net sales to shipments of our Uniforms and Related Products segment (in thousands):

RECONCILIATION OF UNIFORMS AND RELATED PRODUCTS SEGMENT GAAP SALES TO SHIPMENTS




                                               Three Months Ended June 30,           Six Months Ended June 30,
                                                2020                 2019              2020               2019
Uniforms and Related Products net sales,
as reported                                $       75,842       $       60,745     $     135,944       $  119,424
Adjustment: Recognition of revenue based
on the timing of shipments for finished
goods with no alternative use for
Uniforms and Related Products net sales             2,074                3,516             1,778            5,227

Uniforms and Related Products shipments $ 77,916 $ 64,261 $ 137,722 $ 124,651

Off-Balance Sheet Arrangements

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.

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