Superior of panies(US:SGC)2025-03-11 21:05Financial Performance - Net sales for 2024 increased to $565,676 thousand, up from $543,302 thousand in 2023, representing a growth of approximately 4.9%[225] - Net income for 2024 was $12,004 thousand, compared to $8,772 thousand in 2023, reflecting a significant increase of 36.5%[225] - Basic net income per share rose to $0.75 in 2024 from $0.55 in 2023, an increase of 36.4%[225] - Total assets decreased to $415,134 thousand in 2024 from $422,450 thousand in 2023, a decline of about 1.7%[227] - Total liabilities decreased to $216,278 thousand in 2024 from $224,812 thousand in 2023, a reduction of approximately 3.8%[227] - Cash dividends per common share remained stable at $0.56 for both 2024 and 2023[225] - Net cash provided by operating activities decreased to $33,428 thousand in 2024 from $78,929 thousand in 2023, a decline of 57.6%[233] - Shareholders' equity increased slightly to $198,856 thousand in 2024 from $197,638 thousand in 2023, an increase of 0.6%[227] Segment Performance - The Contact Centers segment accounted for approximately 17% of net sales in 2024, up from 16% in 2023[23] - The Branded Products segment generated net sales of $353.314 million in 2024, up from $342.680 million in 2023, reflecting a growth of about 3.5%[283] - The Healthcare Apparel segment's net sales increased to $119.191 million in 2024 from $113.878 million in 2023, marking a growth of approximately 4.6%[283] - The Contact Centers segment achieved net sales of $96.949 million in 2024, compared to $91.500 million in 2023, indicating a growth of around 5.9%[283] - Segment EBITDA for the Company was $34.097 million in 2024, compared to $33.482 million in 2023, showing an increase of approximately 1.8%[282] Acquisitions and Goodwill - The Company acquired Cormark Inc. for a total purchase price of $6.4 million, which includes $4.0 million in cash and $1.5 million in restricted stock[41] - Total goodwill recorded from the acquisition of Cormark Inc. was $2.3 million, assigned to the Branded Products segment[41] - The Company recorded total goodwill of $2.3 million in connection with the acquisition of 3Point, assigned to the Branded Products segment[294] - The estimated fair value of contingent consideration related to the acquisition of Guardian Products, Inc. is $0.8 million, expected to be paid in Q3 2025[296] - The estimated fair value of contingent consideration related to the acquisition of 3Point is $0.9 million, expected to be paid in Q2 2026[297] Risks and Challenges - The Company relies heavily on raw materials sourced from China, which poses a risk of significant disruption if sourcing is interrupted[29][31] - The promotional products industry is price sensitive, and cost increases in raw materials could lead to declining profit margins if not passed on to customers[32] - The company faces risks related to distribution center operations, including potential workplace safety issues and compliance with labor laws, which could harm customer relationships and reputation[54] - Inaccurate demand forecasting may adversely affect operations, leading to inefficient inventory supply or increased costs, impacting overall financial results[55] - Increased volatility in shipping times and production disruptions could result in product shortages or excess inventory, negatively affecting gross margins and brand strength[56] - The company faces pricing pressures in the branded uniforms and healthcare apparel industries, which may adversely affect financial performance[87] - Increased customer demands for allowances and incentives could reduce margins and profitability[88] - Economic slowdowns and changes in employment levels could negatively impact revenue growth rates, emphasizing the need for customer expansion and service diversification[85] - Economic and political conditions, including inflation and geopolitical events, could materially impact the company's business operations[91] Compliance and Legal Matters - Compliance with evolving data privacy laws, such as the GDPR, is critical, as violations could result in significant penalties and negatively impact operations[70] - The Company is subject to periodic litigation that may adversely affect its financial position and results of operations[116] - The Company may incur additional tax liabilities due to challenges from tax authorities, which could materially affect its financial condition[121] Operational Considerations - The company relies on information technology systems for operations, and any disruptions, including cyber-attacks, could adversely affect business operations and financial condition[66] - The Company has a redundant network of suppliers to mitigate risks associated with sourcing and manufacturing disruptions[30] - The Company recognizes revenue from contracts with customers using a five-step model, ensuring compliance with GAAP[242] - The Company analyzes accounts receivable and historical bad debt experience to establish allowances for doubtful accounts, reflecting changes in estimates in the period they become known[248] - The Company maintains no customer with an accounts receivable balance greater than 10% of total accounts receivable as of December 31, 2024, and 2023[266] Financial Position and Debt - The company's total consolidated indebtedness was $86.0 million as of December 31, 2024, which may limit cash flow available for business investments[101] - Total debt as of December 31, 2024, is $86.035 million, down from $93.477 million in 2023, representing a decrease of approximately 8%[289] - The weighted average interest rate on outstanding borrowings under the Credit Facilities was 5.5% as of December 31, 2024[290] - The Company is required to maintain a fixed charge coverage ratio of at least 1.25 to 1.0 and a net leverage ratio not to exceed 4.0 to 1.0, and it was in compliance with these ratios as of December 31, 2024[292] - Contractual principal payments for the term loan are $5.6 million in 2025, $6.6 million in 2026, and $52.5 million in 2027[291] Currency and Interest Rate Exposure - Less than 5% of the Company's sales contracts are denominated in foreign currencies, exposing it to fluctuations in foreign currency exchange rates[201] - The Company experienced a foreign currency translation adjustment loss of $3.4 million for the year ended December 31, 2024, compared to a gain of $0.7 million for the year ended December 31, 2023[202] - The Company reported a foreign currency translation adjustment loss of $3,375 thousand in 2024 compared to a gain of $735 thousand in 2023[225] - The Company reported a hypothetical increase in the secured overnight financing rate (SOFR) of 100 basis points would result in approximately $0.9 million in additional pre-tax interest expense for the year ended December 31, 2024[200]