Good afternoon, everyone, and welcome to the Superior Group of Companies 2020 Third Quarter Earnings Conference Call. Speaking first today on behalf of the company is Michael Benstock, the company's Chief Executive Officer. This call is being recorded, and your participation implies that you agree to us. If you do not, then simply drop off the line. Now I will turn the call over to Hala Elsherbini, Senior Managing Director of Three Part Advisors, who will read the safe harbor statement. Please go ahead.

Thank you. This conference call may contain forward-looking statements about Superior Group of Companies within the meaning of the Securities Act of 1933, the Securities Exchange Act of 1934 and Private Securities Litigation Reform Act of 1995 and all rules and regulations issued thereunder. Such statements are based upon management's current expectations, projections, estimates and assumptions. Words such as will, expect, believe, anticipate, think, outlook, hope and variations of such words and similar expressions identify such forward-looking statements, which includes statements on the impact of COVID-19 on the company's business, including inventory, supply chain manufacturing capacity at the company's own and contract manufacturing facilities, service capacity and customer demand. Forward-looking statements involve known and unknown risks and uncertainties that may cause future results to differ materially from those suggested by the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following: the effect of the COVID-19 crisis on the U.S. and global markets, our business, operations, customers, suppliers and employees; general economic conditions in the areas of the United States in which the company's customers are located; changes in the markets where uniforms are worn, where promotional products are sold and where call center services are used; the impact of competition; the company's ability to successfully integrate operations following confirmation of acquisitions; and the availability of manufacturing materials as well as the risks and uncertainties disclosed in the company's periodic filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the year ended December 31, 2019, the quarterly report on Form 10-Q for the quarter ended September 30, 2020, and the 8-K filed recently. Shareholders and 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 company does not undertake to update the forward-looking statements contained herein to conform to actual results or changes in the company's expectations, whether as a result of new information, future events or otherwise, except as required by law. Please note that all growth comparisons that management makes today will relate to the corresponding period in 2019, unless otherwise noted. With that, I'll turn the call over to Michael.

Thank you, Hala, for that very short safe harbor statement. Good afternoon, everyone, and thank you for joining us to discuss our Q3 2020 results. Before I begin, you'll note that Andy Demott is not able to join our call today. And in his place, I'm accompanied by Jake Himelstein, BAMKO's Chief Financial and Chief Operating Officer; and Jeff Hoefler, SGC Corporate Controller and VP of Accounting, who both have a wealth of experience and do a great job supporting Andy in many of the operational and financial aspects of our business. Jake will give the financial commentary today, and they will both be available to answer questions after our prepared remarks. First and foremost, we hope that everyone continues to remain healthy and safe. We continue to provide critical supplies to those frontline workers and essential businesses managing through the pandemic. It is an honor to provide quality protection to those confronting this virus every day. And we thank them and our 4,500 associates supporting them for their steadfast dedication. As anticipated, our third quarter results continued a strong trajectory, posting a 42.8% increase in consolidated net sales and a 142.3% increase in diluted earnings per share. I will cover our outstanding segment performance and operational highlights, and then Jake will follow with financial highlights. I'll have some closing remarks before we open the call for your questions. Our Uniforms and Related Products segment performed very well and continues to respond to surging demand in our healthcare and essential retail business sectors, while nonessential businesses are starting to show small signs of near-term recovery. We expect to see sustained strength in the recession-resilient sectors of our client base, which comprise greater than 80% of our uniform business, as we told you on the last earnings call. Fashion Seal Healthcare and CID are experiencing greater-than-expected demand across our diverse PPE product offerings and our traditional healthcare uniform brand portfolio. The collaborative synergies between our healthcare divisions are creating new opportunities, capturing long-term business wins and elevating brand awareness and digital customer engagement. Marketing programs at CID are also expanding to include a pull-through approach, creating opportunities for brand partnerships to reach a broader target consumer. We are seeing robust activity coming from all CID sales channels with some surpassing pre-COVID levels. Additionally, while our CID international footprint is small, we are beginning to build a stronger international presence. And we are implementing strategies as part of our long-term plan to expand further into the European healthcare apparel market. Our teams have unlocked synergies across customers, markets, and products as channels converge to deliver healthcare products from scrubs to reusable protective apparel, or RPA as we refer to it. RPA is the economical, sustainable option to disposable protective apparel. Within this tremendous demand environment, we have also tapped into our supply chain to secure additional multimillion-dollar inventory positions of RPA products, including reusable barrier coats and isolation gowns as well as scrub apparel to service our spectrum of customers in both acute and non-acute markets. We expect an increasing shift to reusable products as the healthcare industry continues to seek ways to lessen biohazardous waste and as the environmental impact of disposable apparel products becomes more widely understood. As anticipated, our first productions of our WonderWink INDY line were very well received. We've spoken about that on prior calls. Nearly every one of our major healthcare laundry system customers is currently conducting in-house wash and wear testing. As noted last quarter, we took long positions in this truly differentiated fashion scrub that can withstand the rigor of the healthcare laundry process. On the employee ID side, essential business activity has increased, and HPI is responding to RFPs to existing and new customers that include both PPE and traditional uniform sales. We increasingly see a blur between our product offerings as PPE has become a standard part of any branded uniform program. We expect this will continue beyond the duration of the pandemic. Nonessential business activity continues to largely idle, as I said earlier, though some companies are starting to reemerge. As the pandemic and recession subside, history tells us we will likely see a flourish of activity as businesses rebrand and refresh to engage with their customers, eagerly putting long-dormant marketing budgets to work. With the flexibility of our business, we are prepared to leverage these opportunities as industries recover. We are always looking for ways to leverage our shared resources business model. At the end of Q3, we reorganized our entire uniform product development, merchandising, and design teams under the dynamic leadership of two of our strongest product-centric executives. We have formed two collaborative teams: one focused on ideation, planning, and merchandising; the second on execution. Under this structure, we have and will be adding additional capacity and more creative capabilities to increase our success and take further market share. In the promotional products segment of our company, yet again BAMKO delivered. BAMKO continued to provide much-needed PPE for companies and healthcare facilities across the country, while seeing increased traditional promotional product activity at a pace that accelerated over the course of the quarter. Notably, BAMKO's PPE pivot is paying dividends, with about 30% of new PPE customers being converted into traditional promotional product customers. Similar to what we're seeing at HPI, the preponderance of BAMKO's corporate PPE programs are being structured as larger, longer-term opportunities to meet sustained PPE needs alongside traditional branded merchandise. Currently, activity is still robust. In addition to nearly $19 million in BAMKO's quarter-end PPE backlog, with additional opportunities still being worked on, we're even more pleased to report an even stronger traditional promotional products backlog. Jake will provide additional details about our product numbers. Now turning to the Office Gurus segment, our Remote Staffing Solutions. Our pandemic-resistant business model has been a game changer for us and our customers. We now have more flexibility. And as a result of our new work-from-home capabilities, our long-term growth is now not bound by in-office capacity constraints. We are scaling our growth profitably and customizing programs to customer preferences. During the quarter, TOG added 130 billable seats to support new account engagements, including those that came back online after a brief pause at the onset of the pandemic. The team ended the quarter with nearly 1,600 billable seats and expects to finish out the year at nearly 1,750 agents. Overall, we added over 350 agents since the beginning of the year. Although we are still primarily operating in a work-from-home model, we currently have approximately 10% of our agents safely working on-site in both our Belize and El Salvador locations combined and expect to have about 30% on-site by year-end. Now that I've covered the segment highlights, I'll review key operational updates. Our Georgia and Arkansas warehouse consolidation is approximately 90% complete and should be fully complete over the coming weeks. We're actively marketing the Georgia warehouse property and seeing promising interest. We also will be relocating our administrative Georgia employees into a smaller office for product development and administrative offices in the nearby facility in Dunwoody, Georgia. Full modernization of our facilities is one of the keys to harnessing the full potential of our shared resources business model. As we have spoken about this in prior calls, our continued investments in state-of-the-art automation at our Arkansas centralized distribution center continues to progress. However, we have had some construction delays due to weather. Additionally, our software vendor is delayed due to setbacks related to COVID-19, shifting our expected go live to the third quarter of 2021. Additionally, implementation of our new robotic picking system in our Dallas-based CID facility is scheduled during Q1 2021 and is expected to yield significant savings and improved service levels to customers as well as position us to handle expected divisional growth. CODEVI 2, our second location in Haiti, exclusively serving CID continues to ramp up operations, with nearly 700 employees. Once the factory is fully staffed with over 800 employees during the first half of next year and the employees are fully trained, which should be by Q3 2021, it will generate approximately 20% of CID's total production volume. As a reminder to what we have said on prior calls, these products will be brought into the U.S. Duty-Free, generating improved gross margin and will result in faster customer delivery. Turning to the global macro environment, very dynamic as we all know, and we are all navigating the unique challenges presented by the global health crisis as well as other geopolitical events. We're approaching another wave of COVID-19 as cases spike globally. We're also seeing rapidly rising fabric prices from China due to shortages created by the extended shutdowns of fabric mills in India. We believe the impact on our gross margins will be temporary, with the fall off in price pressures expected once INDY is back online. We're well versed in managing through pricing pressures and are well-prepared to mitigate the increases needed as we have in the past. As we've stated before, we continuously conduct strategic planning for a wide range of operating scenarios and remain focused as we adapt and continue to optimize our business to deliver sustainable long-term results for our stakeholders. I will now turn the call over to Jake. And then I'll return with my closing remarks. Jake?

Thank you, Michael, and good afternoon, everyone. I appreciate the opportunity to join our quarterly earnings call and happy to help fill in for Andy. As noted earlier, we filed our Form 10-Q for the third quarter ended September 30, 2020 earlier this morning. As Michael indicated, we continued our strong momentum into the third quarter and built upon our impressive year-to-date performance. We continued to improve our liquidity and debt leverage position, with our debt-to-EBITDA ratio down from 4x at December 31, 2018 to 1.9x at June 30, 2020 to 1.5x at September 30, 2020. Importantly, this is the second consecutive quarter in which we are in line with our desired range of 1x to 2x debt to EBITDA and well under our covenant limit. During the third quarter, we reduced outstanding debt by another $8.2 million. Year-to-date, we have reduced outstanding debt by approximately $42.5 million. Through targeted company-wide expense controls, we continued to improve our cash position. Third quarter net sales were $127.8 million, an impressive 42.8% increase compared to last year's third quarter. End of Q3 PPE backlog with BAMKO and the Uniform segment stood at just over $60 million, of which 90% is expected to ship over the next two quarters. Gross margin, which we define as gross profit as a percentage of sales, for the third quarter increased to 37.1% from 35.2% in the third quarter of 2019. This margin increase is attributable to higher-margin sales based on product and customer mix. As a percentage of net sales, consolidated SG&A expenses for the third quarter decreased to 27.3% versus 28.2% last year. That decrease is a reflection of our ability to leverage higher volume sales across all business segments combined with continued cost mitigating actions to control operating expenses. This decrease in SG&A as a percentage of sales is even more impressive when taking into consideration the increase in our provisions for bad debt to $1.6 million in the third quarter of 2020 compared to $0.4 million in the same period last year. This increase is largely due to uncertainty around collections from customers severely impacted by the pandemic. While we continue to believe that many of our customers in nonessential business will be able to pay us as the economy recovers, we are maintaining a conservative approach as it relates to inventory and accounts receivable reserves from these customers. Income from operations more than doubled from Q3 2019 to Q3 2020 to $12.5 million. And operating margins climbed from 6.9% to 9.8% over the same period. Our effective tax rate for the quarter was 17.7% compared to 15.3% a year ago. The change in rate was principally the result of increases in compensation-related items and the effect of foreign, state, and local taxes between the comparable periods. Overall, third quarter net income increased 153.6% from $3.90 to $10 million, resulting in $0.63 per diluted share for the third quarter of 2020. We continue to prudently manage our cash flow. And at September 30, we had cash and cash equivalents of $5.7 million. Through the nine-month period ended September 30, CapEx was $5.7 million and is tracking below our original plan of $12 million. Our best estimate for full year 2020 CapEx is approximately $8 million. This decrease from plan is primarily due to delays in our Arkansas expansion, as mentioned earlier. This shortfall will carry over to next year's CapEx. As noted during our second quarter earnings call, our Board of Directors reinstituted our regular quarterly dividend of $0.10 per share. We also paid a special dividend of $0.10 per share in the third quarter. This puts quarterly dividends back on track at $0.30 per share for the nine-month period or $4.6 million in cash dividends. Moving to a review of our segments. I'll provide a breakdown between core product offerings and PPE sales across our segments. However, as Michael noted, it is becoming increasingly difficult to separate PPE sales from traditional uniform or promotional product sales, as many customers are placing orders that include PPE items along with promotional products and uniforms. We believe that the provision of PPE items to our customers' employees may become the new normal, and thus a large part of our recurring business with key customers, particularly in the retail space. For the third quarter, uniforms and related products net sales increased 33.2% to $73.2 million. $13.9 million of that was PPE versus $800,000 in Q3 last year. I'm pleased to report that we had another remarkable quarter at BAMKO, with sales up 67% to $44.2 million in the third quarter compared to the prior year period. Those results were driven by a mix of traditional branded merchandise as well as continued demand for PPE that helped contribute $19.4 million to that third quarter total. BAMKO's third quarter operating margins were 15.7%, yet another testament to BAMKO's ability to optimize its operating margins through scale. We are seeing PPE product starting to slow somewhat, while traditional promotional product orders are gradually returning. Further evidence of this is that the percentage of BAMKO's backlog comprising traditional promotional products was less than 40% at the end of Q2 versus greater than 60% at the end of Q3. BAMKO's results for the third quarter are all the more impressive against the backdrop of the promotional products industry. It was estimated that the industry experienced a downturn that was greater than 35% so far this year. The Office Gurus returned to high double-digit growth and reported a net sales increase from third parties of 28.7% to $10.3 million. A combination of strong sales activity with our existing customers and the onboarding of new customers helped accelerate growth during the quarter. I'll now turn the call back to Michael for his closing remarks and a general outlook for the remainder of the year.

Thank you, Jake. I'm very pleased with our teams' performance. We're demonstrating strong commitment and teamwork, looking for ways to maintain our high standards of customer service while also supporting our communities. We have definitely surpassed expectations so far this year. We have become even more disciplined, responsive, and dynamic than ever. We are well-prepared to continue operating efficiently in this changing environment. Earlier this year, we decided to update our guidance to offer more clarity for our stakeholders during these unusual times. We'll be sharing a lot of information, including guidance that you may not have seen before. This year, we expect to report over $500 million in sales, with more than $100 million coming from PPE sales. I want to note that this depends on orders not being delayed and the steady flow of incoming orders we have seen in the last couple of months, but we are relatively confident. Before COVID, we had anticipated 2020 net sales to be just over $400 million. To reiterate, during our budgeting in November and December last year, we projected 2020 sales to be $400 million, and now we expect it to exceed $500 million. For 2021, on a consolidated basis and excluding unexpected events like another wave of COVID, we anticipate net sales to be around $450 million. This assumes a decline in PPE sales across all divisions. Looking ahead to 2021 and beyond, we expect our four-year compound annual growth rate, from 2021 to 2025, to exceed 12.5%. The expected CAGR for our segments includes over 12% for Uniforms, over 18% for The Office Gurus, and over 12% for BAMKO, our promotional products and branded merchandise division. By 2025, we expect our operating margins to surpass 10%. This guidance does not account for any potential acquisition opportunities. We are witnessing a strong market with several acquisition prospects in uniforms and promotional products. We are actively examining the landscape for quality companies that align with our culture and brand, are easy to integrate, and would contribute positively to our finances quickly. We have many financing options available, including resources on our existing revolver and other capital-raising avenues. We are considering all options to wisely manage our debt and position ourselves effectively to capitalize on the right opportunities. We are very optimistic about our future as we enhance our resources to serve the company as a whole. Through creativity and resilience, we have navigated many challenges, maintaining a position of strength and exceptional execution. We remain committed to our strategic growth plans, striving for excellence in operations, investing in earnings growth, and fulfilling our promise to our stakeholders. Now, we would like to open the call for your questions.

And our first question today will come from Kevin Steinke with Barrington Research.

I wanted to start off by discussing the long-term outlook. You provided a 4-year CAGR from 2021 to 2024. Is the goal around 12.5%? It seems the segment that has changed the most significantly from your previous expectations is the uniform segment at 12%, which is nearly double what you were targeting earlier. I would like to understand what is driving this positive change in the outlook.

I’m not sure if I misspoke or if you misunderstood, but the CAGR from 2021 to 2025 is indeed a 4-year CAGR comparison. You were correct in catching that quickly. Our uniform business outlook has changed significantly, which is the main driver behind this. The employee ID segment has not changed much, and we typically do not report them separately. However, the uniform HPI aligns closely with our previous expectations. The Healthcare and CID segments are key contributors to the increase to 12%. There is extensive opportunity in healthcare, particularly in personal protective apparel, and these are existing products. We are noticing a shift towards more demand for reusable products rather than disposables. Outpatient centers are equipping their staff differently, with isolation gowns becoming more common. I recently visited a dentist and saw staff wearing masks, shields, barrier gowns, and barrier coats, reflecting the new norm and guidance from the American Dental Association. This trend is spreading nationwide and we believe it will persist, which we view positively. Additionally, we have exciting developments at CID with new channels, including e-tailers and brick-and-mortar stores, especially internationally. We’re focusing on Europe soon, but we’re already conducting business in Australia and the Middle East. We have secured significant inventory for Fashion Seal Healthcare products, with shipments arriving over the next few months, ensuring we are better prepared than we were during the initial COVID phase. Last time, we sold some products at levels 50 to 100 times higher than pre-COVID. We won't be caught short again, and the risks involved are minimal. If there isn't another COVID wave, we may hold onto the inventory a bit longer, but the cost of doing so is relatively low. Additionally, there is potential for increased growth for TOG. Previously, we projected it at $7 million a year, but now we believe it can increase even more annually. So, $7 million is a solid starting point for us, and we'll build from there.

All right. Great. So to delve deeper into CID, is this about returning to the growth path they were on before the acquisition? I understand there was some transition or integration involved. Or is it primarily about exploring new opportunities beyond their existing operations? International expansion seems to be a new aspect. I'm curious about what is truly changing for CID, or if it's more about returning to previous performance levels. What observations do you have regarding that business?

Their e-commerce business, which is distributed through various channels including Amazon, has seen substantial growth. This trend began before COVID and has evolved into a more significant segment of their operations, indicating continued expansion. We have mentioned unique products that CID is introducing, which are innovative for the industry and designed to assist their partners, like e-tailers and traditional retailers, reaching new levels of service. They are a vibrant organization. After a couple of years focused on internal improvements, they now have an efficient warehouse system and a solid ERP in place. Their marketing efforts are impressive, and they are on the right track. We took the necessary pause for adjustments, and while the business has been performing well, we anticipate even greater opportunities for them moving forward.

Great. How does the WonderWink INDY launch relate to the improved outlook for health care uniforms, especially since you mentioned it was very well received?

Yes. INDY should be viewed as a long-term product. When a laundry introduces INDY to their customers, those customers are typically already engaged in a uniform program provided by that laundry. It's the responsibility of the laundry to persuade these customers, or potential new ones, to opt for a more fashionable product at a higher price point. There’s a compelling value proposition that these customers can’t find in their current offerings. We consider this a positive development. Initially, we had forecasted the sales for the first six months following the product's delivery in July, and we anticipated selling out within that timeframe, which has indeed happened. As a result, we’ve initiated multiple production runs to address other market needs. Once we complete all wear and wash tests, expected to conclude by year-end, we anticipate laundries confidently promoting this product to their customers. There's considerable excitement surrounding it. We have a unique advantage by being early and first in this market. Others may try to replicate our success, but we dedicated 2.5 years, nearly three, to development and production, ensuring we introduced the right product. We believe there’s significant growth potential. Looking at a five-year timeline, we project INDY will evolve into an eight-figure business, although achieving that will take time. However, if five or six large healthcare systems in the United States, each employing 15,000 to 20,000 people, come on board, it could significantly surpass our projections. We are being conservative with our estimates at this juncture.

Okay. That's helpful. And so on promotional products or BAMKO, in excess of 12% I believe you said, which is unchanged from before. Just obviously that's still a very healthy growth rate. Just wondering how you're thinking about that in terms of PPE versus traditional promotional products and how that plays into the outlook over that 4-year period.

Let me clarify that the figures I provided from 2021 to 2025 only reflect the PPE business we are currently aware of, which primarily consists of the sustainable business that will integrate into our programs. These numbers do not account for any potential emergency purchases of PPE, whether it be 10 million, 5 million, 20 million, or other smaller amounts. This is true for both our overall numbers and BAMKO's figures. However, I'll let Jake address that. Jake, as the COO and CFO of BAMKO, please share your thoughts on this.

Yes. Nice to meet you, Kevin. And so as it relates to long-term outlooks for BAMKO, we think of the business as a long-term potential. Yes, PPE should taper off, but legacy PPE won't. Even before the pandemic, we were doing PPE, hand sanitizers, wipes, things like that. And demand for promotional products and uniforms is going to continue to increase. We think PPE demand will continue for some time, but we aren't banking on it. And we're continuing to build our promo business. Had a lot of success in winning RFPs, converting PPE customers into branded merchandise customers, bringing on new sales reps. Kevin, the truth is that COVID's been pretty tough for our industry, right? The industry is down somewhere between 30% and 40% depending on what publication you read. But we're up 107% year-to-date in the BAMKO segment. And so we've capitalized on opportunities that our competitors just couldn't pivot too quickly enough. We're really diversified in our client base. And we believe that the pain that's happened this year in the promotional products industry is going to have some long-lasting effects on some of our competitors that will allow us to continue to pick up market share, putting us in a really strong position with sales reps, with customers that are going out to RFP and M&A opportunities.

Yes. That makes sense. I mean so what are you seeing kind of, on the pipeline for new salespeople in promotional products, given that dislocation in the industry? And just in general, kind of your performance versus the industry and how that's going to play into your favor going forward?

Yes. We continue to be extremely active in sales recruiting. I think we represent a really, really appealing landing spot for sales reps. We go through a really painstaking process of evaluating sales rep candidates and only take on the right ones that are a good fit for us and can immediately start generating revenue for the company. But look, we have great technology. We have great warehousing. We have an unbelievable management team. We have the support of the entire shared services model. We are a really, really appealing landing spot for a lot of people. And so we continue to see more and more interest in people coming to BAMKO when they see their own company struggling.

Got it. That's great, okay. So I guess the other piece of the long-term guidance is the margins. And I believe, correct me if I'm wrong, you said by 2025, in excess of 10% operating margin. I believe before, you were talking about 8% to 9% by 2024. So just confirm that I have that right. And maybe what's changing there that is enabling you to increase your target for that longer-term operating margin?

Great question. Scale, mostly. The fact that our uniform divisions will grow at a greater clip than we had anticipated. And even TOG will certainly help us get to that operating margin by then. I feel pretty confident in that. And I think we've shown through our scale from just the last two quarters, that what happens to our operating margin when we just add on additional volume. We're built to do more than we're currently doing. I can't say that's true in every aspect of it, but most aspects of this from a sales standpoint, from a marketing standpoint. You're always going to have to put some money into infrastructure. But it's quite small what we'll be putting into infrastructure beyond next year with our warehouse project that we've spoken about in terms of big infrastructure projects for the next few years.

Okay. Great. Just you mentioned TOG there. Just kind of maybe talk about what's driving the momentum there in this environment? And if it's just kind of business as usual during the pandemic, or if there's something about this environment that's favoring them? I know you said you've been able to expand your capacity with work from home, but just maybe any comments on what's driving growth in that business.

We have experienced significant growth during the pandemic in areas such as home warranty services, energy sales, and legal support among our customer base at TOG. Many of these customers were previously disappointed by other centers, but we were able to enhance our service levels, providing nearly the same quality from home as in our centers. There's a preference now for a hybrid model, with some personnel working internally while others work externally. Most of our growth has stemmed from existing customers, as numerous centers have let people down during the work-from-home transition, resulting in lost revenue and frustration. Additionally, due to disruptions in India, there is a shift of work back to this hemisphere and the Philippines, as many customers seek representatives they feel culturally aligned with and who are more manageable to visit easily when travel resumes. The Office Gurus is well-positioned to take advantage of this opportunity, especially given the recognition we've received for being a top call center and an excellent workplace for young professionals. Like all call centers, recruiting remains our biggest challenge. To hire 350 people, we reviewed over 1,000 resumes and conducted around 600 or 700 interviews. Enhancing our HR capabilities is crucial for managing this process. Looking back, we could have possibly achieved more last quarter with better recruitment efforts, and we are actively pursuing new strategies to improve this, as we believe we can accelerate our growth with better recruitment.

Okay. I understand you mentioned India and the rising fabric prices due to plant closures there. I think this situation will be temporary, but how do you plan to manage that short-term pressure? Will you consider implementing price increases to counter some of that, or should we anticipate a temporary impact on gross margin? How do you plan to handle this, and how should we expect it to reflect in the financials?

I anticipated that question. I'm going to let Jeff address any queries. So Jeff will discuss gross margins and everything you mentioned is accurate, but we have been responsible stewards of our gross margin. Jeff, please go ahead and elaborate on that.

Yes, this is Jeff. I'll discuss our operating margins and our current status, along with historical context and what we might be able to maintain moving forward. In the third quarter, our operating margin was 9.8%, down from a peak of 12.3%, which was influenced by significant PPE sales. Regarding your question about whether the fabric prices in India and other pricing pressures will affect us, I anticipate some impact. However, we are implementing strategies to mitigate these effects through our diverse supply chain and the pricing agreements we've established with both customers and vendors so far. Therefore, we believe we are well positioned to avoid a significant impact, at least in the next quarter, and we feel confident as we enter 2021.

Good, Jeff. I think those are the correct responses. Since beginning of 2019, Kevin, we've actually been able to hammer a lot of our prices down. And that's coming back now. That pendulum constantly swings. So 2017/2018, prices were rising. In 2019/2020, we've been able to push them down. We're going to see them change a little bit, but so will the mix of business as that happens. And I think to Jeff's point, our redundant manufacturing strategy has really served us well. I mean just think about it's not just CODEVI 2 that will have 800 people next year and be doing 20% of CID product. But CODEVI 1, we put a couple of hundred more people into that factory. We actually moved some of the fabric out of that factory, and we're using a separate warehouse so we could put more people into that factory. So it's doing a larger percent of our product, duty-free, which generally means to us anywhere from a 6% to a 17% savings on cost, which makes it a lot more competitive than, let's say, Vietnam or Bangladesh or Pakistan or any of these other places. It doesn't make it any cheaper than, let's say, Madagascar, which is duty-free, or our other Haiti factories that in Port-au-Prince are contract factories. But I don't think you've ever seen huge swings overall in our uniform margins from one quarter to the next or even one 6-month period to the next. So yes, I think Jeff is right. You'll see a little bit of a change. We'll make it up in other ways.

You've done an excellent job managing margins over the years, which is reassuring to hear. I may have missed it, but did you provide a specific figure for the PPE backlog for the second half of the year last quarter? I believe it was 52 million. Can you update me on the current status of the PPE backlog that you can identify or separate out?

Yes, of course. Our PPE backlog at this point is, I believe, what Jake mentioned regarding the uniform side, but I'm not entirely sure. The consolidated backlog, Jeff, as far as I know, is 60 million.

$61.2 million.

That's just over $60 million, as I mentioned in my script. This amount is divided between BAMKO and the rest of Superior. Kevin Steinke: Okay. And will that carry over into the next couple of quarters, do you think? Over the next two quarters, as we mentioned at the end of the first quarter, we had about $60 million of PPE. During the following quarter, we reported approximately $30 million. By the end of last quarter, we indicated we had around $50 million, with about half of that set to roll out. Yes, it will take place over two quarters. I noted in my remarks that 90% will roll out during this period. The remaining 10% is what we plan to retain and ship throughout next year as needed by our customers. Additionally, there will be extra PPE which is not included in my projections. Any substantial PPE that is a routine part of a uniform program is expected, but we also anticipate unexpected large PPE orders. For instance, we have a customer who has purchased over $10 million of PPE from us and has returned for additional multimillion-dollar orders, and we have several customers like this. Therefore, there will be other PPE opportunities, but we cannot predict them or include them in our financial projections. We decided to exclude that from our numbers for next year to maintain clarity and accuracy. I would certainly welcome the opportunity to add another $50 million of PPE next year and exceed $500 million again.

Yes. So none of that potential, which it's like you said, hard to predict, is in that $450 million number for 2021?

Right. That's correct.

All right. Okay. All right, great. Well, I think that's all I had for today. But again, congratulations on the strong results.

Thank you very much, Kevin.

And our next question will come from Fred Foulkes with Boston University.

This is Fred Foulkes, a shareholder from Boston. Congratulations on the quarter. You are performing exceptionally well. I have three questions. First, what has been your experience with your employees regarding COVID-19, testing, and tracing? My second question is about hiring. Are the new hires in temporary roles, or are they permanent positions with the expectation of stability? Lastly, acquisitions continue to be appealing. What type of companies would be the ideal fit? Are you looking for bolt-on acquisitions, and what criteria are you considering?

Our experience with testing and contact tracing has been ongoing in all our locations since we sent our employees home on March 17. Since then, anyone who entered our facilities has been tested whenever tests were available. We encountered some COVID cases in our distribution centers, with about 45 out of 500 people at one point needing to stay home, not all due to having COVID, but because some were awaiting test results after contact with someone who had it. We’ve had a few dozen confirmed cases who needed to isolate at home. Our HR department and our Director of Safety did an outstanding job with contact tracing, working tirelessly to ensure that everyone was informed. We arranged local testing for our employees in several areas, although testing was limited in rural regions like Arkansas. Thankfully, no one in our uniform business has died from COVID, and while there were some hospitalizations, I stopped receiving daily reports because we are not seeing new cases, which is great news. Regarding hiring, we have brought on approximately 4,500 new employees this year, mostly in our Haiti facilities, The Office Gurus, and distribution centers. These are permanent positions with benefits. We are excited about this growth. As for acquisitions, there's no perfect model. It's important to us to find a smart team that can help accelerate our business growth, and vice versa. The integration should be smooth in terms of systems, personnel, and culture; if it takes too long, we won't pursue it. Additionally, we need the acquisition to be accretive quickly—ideally, I want to see positive financial returns within a short timeframe. We’re not interested in acquiring small companies just for the sake of it; we prefer larger opportunities that can significantly impact our business, unless a smaller company offers unique advantages or capabilities that align with our interests.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Michael Benstock for any closing remarks.

Thank you very much. We appreciate you all taking the time to join us for our call today. I appreciate always your continued support. We look forward to updating you on our fourth quarter year-end 2020 results in February 2021. Please stay safe and healthy over the holiday season. And we'll speak with you next year. Best wishes.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.