Item 1A. Risk Factors
Our business, operations and financial condition are subject to various risks, and many of those risks are driven by factors that we cannot control or predict. The following discussion addresses those risks that management believes are the most significant. You should take these risks into account in evaluating or making any investment decision involving the Company. Additional risks and uncertainties not presently known or that we currently believe to be less significant may also adversely affect us.
Risks Relating to Our Business and Operations
Shortages of sourced goods or raw materials from suppliers, interruptions in our manufacturing, and local conditions in the countries in which we operate could adversely affect our results of operations.
An interruption in any of our supply sources or facilities could adversely affect our results of operations until alternate sources or facilities can be secured. Principal raw materials used to manufacture the Company’s products include cotton, polyester, spandex, cotton-synthetic, poly-synthetic blends, textiles, plastic, glass, fabric and metal.
The majority of such raw materials are sourced in China, either directly by us or our suppliers. If we are unable to source our raw materials and finished products from China or if our suppliers are unable to source raw materials from China, it could significantly disrupt our business. Even if we or our suppliers are able to source raw materials from China, we or they may face increased import duties as a result of changes in U.S. trade policy. See “Risks Relating to Our Industries - Changes to trade regulation, quotas, duties, tariffs or other restrictions caused by the changing U.S. and geopolitical environments or otherwise, such as those with respect to China, which may materially harm our revenue and results of operations, such as by increasing our costs and/or limiting the amount of products that we can import.”
Furthermore, the Company and the Company’s suppliers generally source or manufacture finished goods in parts of the world that have been and may be in the future affected by economic uncertainty, political unrest, logistical challenges (such as port strikes and embargos), foreign currency fluctuations, labor disputes, health emergencies, natural disasters, or the imposition of duties, tariffs or other import regulations by the United States or other countries, any of which could result in additional cost or limit our supply of necessary goods and raw materials.
See also “ Risks Relating to Our Industries - Increases in the price of finished goods, raw materials and labor used to manufacture our products could materially increase our costs and decrease our profitability. ”
Our success depends upon the continued protection of our trade names, trademarks and other intellectual property rights and we may be forced to incur substantial costs to maintain, defend, protect and enforce our intellectual property rights.
Our owned intellectual property and certain of our licensed intellectual property have significant value and are instrumental to our ability to market our products. Our most significant trade names are BAMKO® and HPI® within the Branded Products segment, CID Resources within the Healthcare Apparel segment and The Office Gurus® within the Contact Centers segment. Our most significant trademarks, which are critically important to the marketing and operation of our Healthcare Apparel segment, are Fashion Seal Healthcare® and Wink®.
We cannot assure that our owned or licensed intellectual property or the operation of our business does not infringe on or otherwise violate the intellectual property rights of others. It is possible that third parties will assert claims against us on such basis, and if they do we cannot assure that we will be able to successfully resolve such claims. In addition, although we seek international protection of our intellectual property, the laws of some foreign countries do not allow us to protect, defend or enforce our intellectual property rights to the same extent as the laws of the United States. We could also incur substantial costs to defend legal actions relating to the use of our intellectual property or prosecute legal actions against others using our intellectual property, either of which could have a material adverse effect on our business, results of operations or financial condition. There is no guarantee that we will be able to negotiate and conclude extensions of existing license agreements on similar economic terms or at all.
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Our customers may cancel or decrease the quantity of their orders, which could negatively impact our operating results.
Sales to many of our customers are on an order-by-order basis. If we cannot fill customers’ orders on time, orders may be cancelled and relationships with customers may suffer, which could have an adverse effect on us, especially if the relationship is with a major customer. Furthermore, if any of our customers experience a significant downturn in their business, or fail to remain committed to our programs or brands, such customers may reduce or discontinue purchases from us, which has happened. The reduction in the amount of our products purchased by customers could have a material adverse effect on our business, results of operations or financial condition.
In addition, some of our customers have, from time to time, experienced significant changes and difficulties, including changes in ownership, increased centralization of buying decisions, buyer turnover, restructurings, bankruptcies and liquidations. A significant adverse change in a customer relationship or in a customer’s financial position could cause us to limit or discontinue business with that customer, require us to assume more credit risk relating to that customer’s receivables or limit our ability to collect amounts related to previous purchases by that customer, all of which could have a material adverse effect on our business, results of operations or financial condition.
If we experience problems with our distribution systems, our ability to meet customer expectations, manage inventory and complete sales may be harmed.
Our products are distributed through third-party logistics centers or our own distribution centers, or are shipped directly from our vendors to our customers. Our distribution centers and storage locations, as well as those operated by third parties, include computer-controlled and automated equipment and rely on warehouse management systems to manage supply chain fulfillment operations, which means these operations are complicated, require coordination between distribution centers and storage locations and are subject to a number of risks related to cybersecurity, the proper operation of software and hardware, including connections between software and/or hardware, electronic or power interruptions and other system failures. We maintain business interruption insurance, but it may not adequately protect us from the adverse effects that could result from significant disruptions to our distribution systems, such as the long-term loss of customers or an erosion of our brand image. Moreover, if we are unable to adequately staff our distribution centers to meet demand or if the cost of such staffing is higher than historical or projected costs, our results of operations could be harmed. Our third party logistics providers face similar risks, which translates into downstream risk for us.
Operating a distribution center comes with additional potential risks, such as workplace safety issues and employment claims for the failure or alleged failure to comply with labor laws or laws respecting union organizing activities. If we encounter problems with our distribution systems, our ability to meet customer expectations, manage inventory and fulfillment capacity, complete sales and fulfill orders in a timely manner could be harmed, which could also harm our reputation and our relationship with our customers.
If we are unable to accurately forecast customer demand, manage our inventory and plan for future expenses, our results of operations could be adversely affected.
We base our current and future inventory needs and expense levels on our operating forecasts and estimates of future demand. To ensure adequate inventory supply, we must be able to forecast inventory needs and expenses and place orders sufficiently in advance with our suppliers and manufacturers, based on our estimates of future demand for particular products. Our ability to forecast demand for our products has from time to time been and will continue to be affected by various factors, including unanticipated changes in general market conditions, economic conditions, or consumer confidence in future economic conditions. Failure to accurately forecast demand may result in inefficient inventory supply or increased costs.
In addition, if we experience increased volatility in shipping times from our suppliers and manufacturers and/or production disruptions, we may experience a shortage of products available for sale. Alternatively, if we advance the timing of inventory shipments to mitigate perceived freight transit time volatility or experience sales below our expectations, we may experience excess inventory levels. Inventory levels in excess of customer demand may also result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would cause our gross margin to suffer and could impair the strength and premium nature of our brands.
Further, lower than forecasted demand could result in excess manufacturing capacity, reduced manufacturing efficiencies and/or excess inventories purchased from third parties, which could result in lower margins. Conversely, if we underestimate customer demand, our suppliers and manufacturers may not be able to deliver products to meet our requirements or we may be subject to higher production or shipping costs in order to secure the necessary production. An inability to meet customer demand or delays in the delivery of our products to our customers could result in reputational harm and damaged customer relationships and have an adverse effect on our business, financial condition and results of operations.
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We pursue acquisitions from time-to-time to expand our business, which may pose risks to our business.
We selectively pursue acquisitions from time-to-time as part of our growth strategy. We compete with other companies for suitable acquisition candidates, and this competition may increase the price of acquisitions and reduce the number of acquisition candidates available to us. As a result, acquisition candidates may not be available to us in the future on favorable terms.
Acquisition valuations require us to make certain estimates and assumptions to determine the fair value of the acquired entities (including the underlying assets and liabilities). If our estimates or assumptions on the valuation of the acquired assets and liabilities are not accurate, we may be exposed to losses, and/or unexpected usage of cash flow to fund the operations of the acquired businesses that may be material.
Even if we are able to acquire businesses on favorable terms, managing growth through acquisitions is a difficult process that includes integration and training of personnel, combining facility and operating procedures, and taking additional actions related to the integration of acquired businesses within our existing organization.
Unanticipated issues related to integration may result in additional expense and disruption to our operations, and may require a disproportionate amount of our management’s attention, any of which could negatively impact our ability to achieve anticipated benefits, such as revenue and cost synergies.
Growth of our business through acquisitions generally increases our operating complexity and the level of responsibility for both existing and new management personnel. Managing and sustaining our growth and expansion may require substantial enhancements to our operational and financial systems and controls, as well as additional administrative, operational and financial resources. We may be required to invest in additional support personnel, facilities and systems to address the increased complexities associated with business or segment expansion. These investments could result in higher overall operating costs and lower operating profits for the business as a whole. There can be no assurance that we will be successful in integrating acquired businesses or managing our expanding operations.
In addition, although we conduct due diligence investigations prior to each acquisition, there can be no assurance that we will discover or adequately protect against all material liabilities of an acquired business for which we may be responsible as a successor owner or operator.
The failure to identify suitable acquisitions, discover liabilities associated with such businesses in the diligence process, successfully integrate these acquired businesses, or successfully manage our expanding operations, could adversely affect our business, results of operations or financial condition.
In order to finance such acquisitions, we may need to obtain additional funds either through public or private financings, including bank and other secured and unsecured borrowings and/or the issuance of equity or debt securities. There can be no assurance that such financings will be available to us on reasonable terms. Any future issuances of equity securities or convertible debt securities may be dilutive to our shareholders.
If our information technology systems suffer interruptions or failures, including as a result of cyber-attacks, our business operations could be disrupted and our reputation , results of operations and/or financial condition could suffer.
We rely on information technology systems to process transactions, communicate with customers, manage our business and process and maintain information. The measures we have in place to monitor and protect our information technology systems might not provide sufficient protection from catastrophic events, power surges, viruses, malicious software (including ransomware), attempts to gain unauthorized access to data or other types of cyber-based attacks. Cyber-attacks are becoming more frequent, sophisticated, damaging and difficult to predict. Any such event or attack could negatively impact our business operations, such as through product disruptions that result in an unexpected delay in operations, interruptions in our ability to deliver products and services to our customers, loss of confidential or otherwise protected information, corruption of data and expenses related to the repair or replacement of our information technology systems, including payments made in ransomware attacks. Compromising and/or loss of information could result in loss of sales or legal or regulatory claims which could adversely affect our revenues and profits or damage our reputation.
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Failure to comply with data privacy and security laws and regulations could adversely affect our operating results and business.
In the ordinary course of our business, we might collect and store in our internal and external data centers, cloud services and networks sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personal information of our customers, employees and others. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. The number and sophistication of attempted attacks and intrusions that companies have experienced from third parties has increased over the past few years. Despite our security measures, it is impossible for us to eliminate this risk.
Many U.S. states have enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, financial information and other sensitive personal information. For example, all 50 states and several U.S. territories now have data breach laws that require timely notification to affected individuals, and at times regulators, credit reporting agencies and other bodies, if a company has experienced the unauthorized access or acquisition of certain personal information. We will continue to monitor and assess the impact of these laws, and any new ones enacted, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business.
Data protection laws enacted outside of the U.S., such as the EU General Data Protection Regulation (the “GDPR”), also might apply to some of our operations or business partners. Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data/information continue to evolve. The GDPR imposes, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data/information, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations. Other governmental authorities around the world have enacted or are considering similar types of legislative and regulatory proposals concerning data protection.
The interpretation and enforcement of the laws and regulations described above are uncertain and subject to change, and may require substantial costs to monitor and implement and maintain adequate compliance programs. Failure to comply with U.S. and non-U.S. data protection laws and regulations could result in government enforcement actions (which could include substantial civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.
Our business may be impacted by unforeseen or catastrophic events, including the emergence of pandemics or other widespread health emergencies, extreme weather events or other natural disasters, terrorist attacks, and other unpredicted events.
The occurrence of unforeseen or catastrophic events, such as the emergence of pandemics or other widespread health emergencies (or concerns over the possibility of such pandemics or emergencies), extreme weather events or other natural disasters, terrorist attacks, or other unpredicted events, could create economic and financial disruptions, and could lead to operational difficulties that could impair our ability to source and supply products and services and manage our businesses, and could negatively impact our customers’ ability or willingness to purchase our products and services.
Some of our locations, as well as those of our suppliers, are in locations where they are exposed to hurricanes, earthquakes, floods and other extreme weather events. For example, our corporate headquarters is located in Florida and we have a manufacturing facility located in Haiti. Extreme weather and geologic events could make it difficult or impossible to manufacture or deliver products to our customers (including by affecting the ability of our workers to perform at full capacity for a period of time), receive production materials from our suppliers, or perform critical functions, which could adversely affect our business globally or in certain regions. While we multi-source many of our programs on many of our materials, which we believe better enables us to respond to these types of events, we cannot be sure that our plans will fully protect us from all such disruptions.
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We are subject to international, federal, national, regional, state, local and other laws and regulations, and failure to comply with them may expose us to potential liability.
We are subject to international, federal, national, regional, state, local and other laws and regulations affecting our business, including but not limited to those promulgated under the Occupational Safety and Health Act, the Consumer Product Safety Act, the Flammable Fabrics Act, the Textile Fiber Product Identification Act, the rules and regulations of the Consumer Products Safety Commission, the Food, Drug, and Cosmetic Act, the rules and regulations of the Food and Drug Administration (FDA), various anti-corruption and anti-bribery laws, various securities laws and regulations including but not limited to the Exchange Act, the Securities Act of 1933, and the rules of the Nasdaq Stock Market on which our common stock is traded, various labor, workplace and related laws, and environmental laws and regulations. There also are multiple climate change-related laws and regulations in the United States and internationally that either have gone into effect or could go into effect. The cost to comply with such laws and regulations could be significant and have an adverse effect on our results of operations. Failure to comply with such laws and regulations may expose us to potential liability and have an adverse effect on our results of operations.
Our business may be impacted by the non-performance of manufacturers to whom we made advance payments.
We have entered into agreements with manufacturers in which we make payments for raw materials and services in advance of the shipment and delivery of finished products. In the event that advance payments are made to manufacturers that do not have the ability to satisfy their contractual obligations due to their financial instability, geopolitical unrest or other factors, we may incur unrecoverable losses which could have a material adverse effect on our business, results of operations and financial condition.
Implementation of technology initiatives could disrupt our operations in the near term and fail to provide the anticipated benefits.
As our business grows, we continue to make significant investments in our technology, including in the areas of warehouse management, enterprise risk management and product design. The costs, potential problems and interruptions associated with the implementation of technology initiatives could disrupt or reduce the efficiency of our operations in the near term. They may also require us to divert resources from our core business to ensure that implementation is successful. In addition, new or upgraded technology might not provide the anticipated benefits, might take longer than expected to realize the anticipated benefits, might fail or might cost more than anticipated.
Failure to preserve positive labor relationships with our employees could adversely affect our results of operations.
Our operations rely heavily on our employees, and any labor shortage, disruption or stoppage caused by poor relations with our employees could reduce our operating margins and income. While we believe that our employee relations are good, and very few of our employees are currently subject to collective bargaining agreements, unions have traditionally been active in the U.S. apparel industry. Our workforce has been subject to union organization efforts from time to time, and we could be subject to future unionization efforts as our operations expand or change. Unionization of our workforce could increase our operating costs or constrain our operating flexibility.
Risks Relating to Our Industries
Increases in the price of finished goods, raw materials and labor used to manufacture our products could materially increase our costs and decrease our profitability.
Principal raw materials used to manufacture the Company’s finished goods include cotton, polyester, spandex, cotton-synthetic, poly-synthetic blends, textiles, plastic, glass, fabric and metal. The prices we pay for these fabrics and components are dependent on the market price for the raw materials used to produce them, including cotton and chemical components of synthetic fabrics including such raw materials as chemicals and dyestuffs, in addition to any import duties imposed on those fabrics and components that are imported.
Finished goods and raw materials are subject to price volatility caused by weather, supply conditions, government regulations, economic and political climate, currency exchange rates, labor costs, and other unpredictable factors. Fluctuations in petroleum prices may also influence the prices of related items such as chemicals, dyestuffs and polyester yarn.
An increase in raw material prices would likely increase our cost of sales and decrease our profitability unless we are able to pass the costs on to our customers in the form of higher prices. In addition, if one or more of our competitors is able to reduce their production costs by taking advantage of any reductions in raw material prices or favorable sourcing agreements, we may face pricing pressures from those competitors and may be forced to reduce our prices or face a decline in revenues, either of which could have a material adverse effect on our business, results of operations and financial condition.
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We face intense competition within our industries and our revenue and/or profits may decrease if we are not able to respond to this competition effectively.
Customers in the uniform and corporate identity apparel, promotional products, and business process outsourcing industries choose suppliers primarily based upon the quality, price and breadth of products and services offered. We encounter competition from a number of companies in the geographic areas we serve.
Major competitors for our Branded Products segment include companies such as BDA, Inc., HALO Branded Solutions, Inc., Staples, Inc., Cimpress PLC, HH Global Group Limited, Lands’ End, Inc. and Workwear Outfitters, LLC.
Major competitors for our Healthcare Apparel segment include companies such as Medline Industries, Inc., Careismatic Brands, Barco Uniforms, Inc., FIGS, Inc., Encompass Medical and Standard Textile Co., Inc.
Major competitors for our Contact Centers segment include companies such as TaskUs, Inc., Transparent BPO, Concentrix + Webhelp, Focus Services LLC, Ubiquity, CCI and RDI.
We also compete with a multitude of foreign, regional and local competitors that vary by market. If our existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices, which would adversely affect our operating results. Similarly, if customers or potential customers perceive the products or services offered by our existing or future competitors to be of higher quality than ours or part of a broader product mix, our revenues may decline, which would adversely affect our operating results.
Global, national or regional economic slowdowns, high unemployment levels, fewer jobs, changes in tax laws or cost increases might have an adverse effect on our operating results.
Many of our products are used by workers and, as a result, our business prospects are dependent upon levels of employment and overall economic conditions on a global, national and regional level, among other factors. Our revenues are impacted by our customers’ opening and closing of locations and reductions and increases in headcount, including from voluntary turnover and increased automation. If we are unable to offset these effects, such as through the addition of new customers or the expansion of relationships with existing customers through a broader mix of product and service offerings, our revenue growth rates will be negatively impacted. Likewise, increases in tax rates or other changes in tax laws or other regulations can negatively affect our profitability.
While we do not believe that our exposure is greater than that of our competitors, we could be adversely affected by increases in the prices of fabric, natural gas, gasoline, wages, employee benefits, insurance costs and other components of product cost unless we can recover such increases through proportional increases in the prices for our products and services. Competitive and general economic conditions might limit our ability and that of our competitors to increase prices to cover any increases in our product cost.
The branded uniforms, healthcare apparel and promotional products industries are subject to pricing pressures that may cause us to lower the prices we charge for our products and adversely affect our financial performance.
Many of our competitors also source their product requirements from developing countries to achieve a lower cost operating environment, possibly with lower costs than our offshore facilities, and those manufacturers may use these cost savings to reduce prices. Some of our competitors have more purchasing power than we do, which may enable them to obtain products at lower costs. To remain competitive, we may adjust our prices and margins from time-to-time in response to these industry-wide pricing pressures.
Additionally, increased customer demands for allowances, incentives and other forms of economic support could reduce our margins and affect our profitability.
Our financial performance will be negatively affected by these pricing pressures if we are forced to reduce our prices and we cannot reduce our product costs proportionally or if our product costs increase and we cannot increase our prices proportionally.
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Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers’ businesses and levels of business activity.
Economic and political events in recent years have altered the landscape in which we and other U.S. companies operate in a variety of ways. Inflation and interest rates remain high despite recent abatements.
World events, such as the Russian invasion of Ukraine and the resulting economic sanctions, have impacted the global economy, including by exacerbating inflationary and other pressures. In addition, the joint U.S.-Israeli strikes on Iran in February 2026, as well as other conflicts in the Middle East, could lead to higher oil prices, create supply imbalances in the global markets for oil and natural gas, and have other adverse effects on the global economy. Both of these crises have potentially far-reaching impacts on energy and food markets and global trade.
Conflicts in the Middle East, prolonged inflationary conditions, supply imbalances of oil and natural gas, high and/or increased interest rates, additional sanctions or retaliatory measures related to the Russia-Ukraine crisis or the U.S.-Israeli - Iran crisis, or other situations, could further negatively affect U.S. and international commerce and exacerbate or prolong the period of high energy prices. At this time, the extent and duration of these economic and political events and their effects on the economy and the Company are impossible to predict, but the impact on the Company’s business could be material.
Our manufacturing facilities and warehouses in Haiti are at risk of damage or disruption from civil unrest and other occurrences.
Our Healthcare Apparel segment relies on our manufacturing facilities and warehouses in Haiti for the manufacturing and storage of finished goods. Our manufacturing facilities and warehouses may be damaged or our ability to use or access them may be disrupted as a result of civil unrest or other occurrences in Haiti. Such events may interfere with our manufacturing processes, information systems, telecommunication services, and product delivery for sustained periods and may also make it difficult or impossible for employees to reach our business locations. Damage or destruction that interrupts our manufacturing facilities could adversely affect our reputation, our relationships with our customers, our leadership team’s ability to administer and supervise our business, and/or cause us to incur substantial additional expenditures to repair or replace damaged equipment or facilities or commence production at alternate locations. While we currently have commercial liability insurance, our insurance coverage may not be sufficient. Prolonged disruption of our manufacturing processes in Haiti also may entitle some of our customers to amend or terminate their contracts with us. Worsening conditions in Haiti may also result in the displacement of native Haitians looking for refuge in neighboring Dominican Republic, which may result in the closure of roads and port access which may limit or restrict our normal and recurring business in Haiti. Any of the above factors may adversely affect our business, results of operations and financial condition.
Changes to trade agreements, regulations, tariffs, duties, quotas or other restrictions caused by the changing U.S. and geopolitical environments or otherwise, may materially harm our business, results of operations, financial position and/or cash flows. such as by increasing our costs and/or limiting the amount of products that we can import.
Our operations are subject to various international trade agreements, regulations and preferences, such as the Dominican Republic–Central America Free Trade Agreement (CAFTA-DR), Caribbean Basin Trade Partnership Act (CBTPA), Haitian Hemispheric Opportunity through Partnership Encouragement Act, as amended (HOPE), the Food Conservation and Energy Act of 2008 (HOPE II), the Haiti Economic Lift Program of 2010 (HELP), the African Growth and Opportunity Act (AGOA), the Middle East Free Trade Area Initiative (MEFTA) and the activities and regulations of the World Trade Organization (WTO). Generally, these trade agreements, regulations and preferences benefit our business, but trade agreements and regulations can also impose requirements that have a material adverse effect on our business, revenue and results of operations, such as limiting the countries from which we can purchase raw materials, limiting the products that qualify as duty free, and setting quotas, duties and/or tariffs on products that may be imported into the United States from a particular country.
To the extent trade agreements benefit our business, we can give no assurances that these benefits will continue to the same extent or at all. The African Growth and Opportunity Act (AGOA), Haitian Hemispheric Opportunity through Partnership Encouragement Act (HOPE) and Haiti Economic Lift Program of 2010 (HELP) expired on September 30, 2025 and in February 2026 were retroactively extended until December 31, 2026. If these or other agreements and/or preferences with respect to countries in which we operate are not renewed and/or extended, if these or other agreements and/or preferences are changed, or if limits or restrictions under such agreements or regulations are expanded, the cost of continuing to do business in these countries could materially and adversely impact our results of operations, financial position and cash flows.
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In addition, beginning in the second quarter of 2025, significant new and expanded tariffs, reciprocal tariffs and other trade restrictions were imposed by the United States, with selective tariff exemptions, impacting global trade. We purchase or manufacture our products largely in Haiti, China, Madagascar, Vietnam, Pakistan and Bangladesh. The introduction, expansion or continuation of U.S. tariffs on countries from which we source and/or manufacture products, such as China and Vietnam, could have a material adverse impact on our results of operations, financial position and cash flows. In response, in part, to tariffs levied on products imported from China we have shifted some production, and may seek to shift additional production, out of China, which may result in additional costs and disruption to our operations.
Furthermore, certain inbound products in our Branded Products and Healthcare Apparel segments are subject to tariffs assessed on the manufactured cost of goods at the time of import. As a result, we have increased our prices for certain products and may be required to raise those prices further, or raise our prices on other products, which may result in the loss of customers and harm our operating performance.
More generally, if the imposition of or change in tariffs, duties, quotas, regulations or other restrictions, or if the expiration or change of trade agreements or preferences, involving the United States and countries in which our products are manufactured or into which they are imported, increases our costs, and we are unable to share the cost increases with our suppliers or third-party manufacturers or pass along the remaining cost increases to our customers, our results of operations, financial position and/or cash flows may be materially adversely affected. As a result, we may decide to move sourcing and/or manufacturing from the affected countries to countries with more favorable cost structures, which such a move may result in material costs and disrupt our operations.
The apparel industry, including branded uniforms and healthcare, is subject to changing fashion trends and if we misjudge consumer preferences, the image of one or more of our brands may suffer and the demand for our products may decrease.
The apparel industry, including branded uniforms and healthcare, is subject to shifting customer demands and evolving fashion trends and our success is also dependent upon our ability to anticipate and promptly respond to these changes. Failure to anticipate, identify or promptly react to changing trends or styles may result in decreased demand for our products, as well as excess inventories and markdowns, which could result in inventory write-downs or write-offs which may have a material adverse effect on our business, results of operations and financial condition. In addition, if we misjudge consumer preferences, our brand image may be impaired. We believe our products are, in general, less subject to fashion trends compared to many other apparel manufacturers because the majority of what we manufacture and sell are branded uniforms, scrubs and other accessories.
Our Contact Centers business is dependent on the trend toward outsourcing.
Our Contact Centers business and growth within that segment depend in large part on the industry trend toward outsourced customer contact management services. There can be no assurance that this trend will continue, as organizations may elect to perform such services themselves. A significant change in this trend could have a material adverse effect on our business, financial condition and results of operations. We also compete with companies that utilize emerging technologies and assets, such as artificial intelligence and chatbots. These competitors may offer products and services that may, among other things, provide automated alternatives to the services that we provide in the marketplace or otherwise change the way that contact centers engage so as to make our outsourced customer contract management solution less attractive to existing and potential customers or less profitable. We may face increased competition from these competitors as they mature and expand their capabilities.
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Risks Relating to Our Indebtedness and Retirement Plan Obligations
Our indebtedness may limit cash flow available to invest in the ongoing needs of our business.
As of December 31, 2025, our total consolidated indebtedness was $93.7 million. Our outstanding indebtedness may have negative consequences on our business, such as requiring us to dedicate a sizable portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividends, stock buybacks and other general corporate purposes, and increasing our vulnerability to adverse economic or industry conditions.
Our credit agreement contains restrictions that limit our flexibility in operating our business.
Our senior secured credit agreement contains various covenants that limit our ability to engage in specified types of transactions. These covenants limit our and our restricted subsidiaries’ ability to, among other things:
• incur additional indebtedness or issue certain preferred shares;
• pay dividends on, repurchase or make distributions in respect of our capital stock, or make other restricted payments;
• make certain investments;
• sell certain assets;
• acquire other businesses;
• create liens;
• consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
• enter into certain transactions with our affiliates.
Substantially all of the operating assets of the Company are pledged as collateral under our credit agreement. Our credit agreement requires compliance with certain financial ratios and covenants and satisfaction of specified financial tests. Failure to meet any financial ratios, covenants or financial tests could result in an event of default under our credit agreement. If an event of default occurs, our lenders could increase our borrowing costs, restrict our ability to obtain additional borrowings under our line of credit, accelerate all amounts outstanding or enforce its interest against collateral pledged under the credit agreement.
We have significant obligations under our unfunded supplemental executive retirement plan, and our available cash flow may be adversely affected in the event that payments become due under it .
The Company is the sponsor of an unfunded supplemental executive retirement plan (“SERP”). In the event that payments become due under the SERP, we will have to use cash flow from operations or other sources to fund our obligations. As of December 31, 2025, we had $15.4 million in unfunded obligations related to the SERP.
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Risks Relating to Our Common Stock
Certain existing shareholders have significant control.
At December 31, 2025, our executive officers and directors, and certain of their family members collectively owned approximately 29.6% of our outstanding common stock. As a result, our executive officers and directors, and certain of their family members, have significant influence over the election of our Board of Directors (the "Board" or "Board of Directors"), the approval or disapproval of any other matters requiring shareholder approval, and the affairs and policies of our company.
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Our share price may change significantly, and our shareholders may not be able to resell shares of our common stock at or above the price they paid or at all, and they could lose all or part of their investment as a result.
The trading price of our common stock, as reported on the Nasdaq Stock Market, fluctuates due to a number of factors such as those listed in “Risks Relating to Our Business” which may include, but not be limited to, the following, some of which are beyond our control:
• quarterly variations in our results of operations;
• results of operations that vary from the expectations of securities analysts and investors;
• results of operations that vary from those of our competitors;
• changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;
• announcements by us, our competitors or our vendors of significant contracts, acquisitions, divestitures, joint marketing relationships, joint ventures or capital commitments;
• announcements by third parties of significant claims or proceedings against us; and
• general domestic and international economic conditions.
Furthermore, the stock market has experienced volatility that, in some cases, has been unrelated or disproportionate to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.
In the past, following periods of market volatility, shareholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.
There can be no assurance that we will continue to pay dividends on our common stock, and our indebtedness could limit our ability to pay dividends on our common stock.
Payment of cash dividends on our common stock is subject to our compliance with applicable law and depends on, among other things, our results of operations, financial condition, level of indebtedness, capital requirements, contractual restrictions, business prospects and other factors that our Board may deem relevant. Our credit agreement contains, and the terms of any future indebtedness we incur may contain, limitations on our ability to pay dividends. Although we have paid cash dividends in the past, there can be no assurance that we will continue to pay any dividend in the future.
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General Risk Factors
We are subject to periodic litigation in both domestic and international jurisdictions that may adversely affect our financial position and results of operations.
From time-to-time we may be involved in legal or regulatory actions regarding product liability, employment practices, intellectual property infringement, bankruptcies, telemarketing compliance, consumer protections and other litigation or enforcement matters. These proceedings may be in jurisdictions with reputations for aggressive application of laws and procedures against corporate defendants.
We are impacted by trends in litigation, including class-action allegations brought under various consumer protection and employment laws. Due to the inherent uncertainties of litigation in both domestic and foreign jurisdictions, we cannot accurately predict the ultimate outcome of any such proceedings. These proceedings could cause us to incur costs and may require us to devote resources to defend against these claims and could ultimately result in a loss or other remedies, such as product recalls, which could adversely affect our financial position and results of operations.
Volatility in the global financial markets could adversely affect results.
In the past, global financial markets have experienced extreme disruption, including, among other things, volatility in securities prices, diminished liquidity and credit availability, rating downgrades of certain investments and declining valuations of others. There might be further changes or volatility, which could lead to challenges in our business and negatively impact our financial results. Any future tightening of credit in financial markets could adversely affect the ability of our customers and suppliers to obtain financing for significant purchases and operations and could result in a decrease in orders and spending for our products and services. We are unable to predict the likely duration and severity of any disruption in financial markets and adverse economic conditions and the effects they may have on our business and financial condition.
Furthermore, increased inflation could have an adverse impact on our operating and general and administrative expenses. Please see “Risks Related to Our Industries - Our results of operations could be adversely affected by economic and political conditions globally and the effects of these conditions on our customers ’ businesses and levels of business activity ” above for a description of recent inflationary pressure. During inflationary periods, these costs could increase at a rate higher than our ability to offset them via customer-facing pricing adjustments, alternative supply sources or other measures. Inflation could also have an adverse effect on consumer spending, which could adversely impact demand for our products and services. If our operating and other expenses increase faster than anticipated due to inflation, our financial condition, results of operations and cash flow could be materially adversely affected.
Inability to attract and retain key management or other personnel could adversely impact our business and financial condition.
Our success is largely dependent on the skills, experience and efforts of our senior management and other key personnel. If, for any reason, one or more senior executive or key personnel was not to remain active in our company, or if we were unable to attract and retain senior management or key personnel or our costs to do so increased significantly, our results of operations could be adversely affected.
If we are unable to accurately predict our future tax liabilities, become subject to increased levels of taxation or our tax contingencies are unfavorably resolved, our results of operations and financial condition could be adversely affected.
Changes in tax laws or regulations in the jurisdictions in which we do business, including the United States, or changes in how the tax laws are interpreted, could impact our effective tax rate, restrict our ability to repatriate undistributed offshore earnings, or impose new restrictions, costs or prohibitions on our current practices and reduce our net income and adversely affect our cash flows. For example, recent tax legislation and regulation, including provisions of the 2025 One Big Beautiful Bill Act (“OBBBA”) and potential increases in taxes, make significant changes to the U.S. tax regime and could materially impact how our earnings are taxed.
We are also subject to tax audits in the United States and other jurisdictions and our tax positions may be challenged by tax authorities. Although we believe that our current tax provisions are reasonable and appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposures. Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, results of operations and financial condition.
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We may identify a material weakness in internal control in the future, which could result in us not preventing or detecting on a timely basis a material misstatement of the Company’s financial statements.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
If any material weaknesses or significant deficiencies in our internal control over financial reporting are discovered or occur in the future, or our disclosure controls and procedures are determined to be ineffective, we may not be able to prevent or identify irregularities or ensure the fair and accurate presentation of our financial statements included in our periodic reports filed with the U.S. Securities and Exchange Commission. Additionally, the occurrence of, or failure to remediate, a material weakness and any future material weaknesses in our internal control over financial reporting or determination that our disclosure controls and procedures are ineffective may have other consequences that could materially and adversely affect our business, including an adverse impact on the market price of our common stock, potential actions or investigations by the U.S. Securities and Exchange Commission or other regulatory authorities, shareholder lawsuits, a loss of investor confidence and damage to our reputation.
We have recognized, and may recognize in the future, impairment charges, which could materially adversely affect our financial condition and results of operations.
We assess our intangible assets, long-lived assets and goodwill for impairment when required by generally accepted accounting principles in the United States (“GAAP”). These accounting principles require that we record an impairment charge if circumstances indicate that the asset carrying values exceed their estimated fair values.
The estimated fair value of our intangible assets and long-lived assets is impacted by general economic conditions in the locations in which we operate. Deterioration in these general economic conditions may result in:
• declining revenue, which can lead to excess capacity and declining operating cash flow;
• reductions in management’s estimates for future revenue and operating cash flow growth;
• increases in borrowing rates and other deterioration in factors that impact our weighted average cost of capital; and
• deteriorating real estate values.
If our assessment of intangible assets, long-lived assets or goodwill indicates an impairment of the carrying value for which we recognize an impairment charge, this may adversely affect our financial condition and results of operations, potentially materially so.
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