What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-11-06 · 173 added, 227 removed, 220 unchanged (65% of the section changed)

24 unchanged sentences

• Geopolitical conditions, including political instability in the U.S.

and abroad, unrest and sanctions, war, conflict, including the ongoing conflicts between Russia and the Ukraine, conflicts in the Middle East, and increasing tensions between China and Taiwan;

• Legislative and regulatory risk, including those relating to the recent enactment of the OBBBA and the impact of a continued shutdown of the U.S.

and abroad, unrest, sanctions, war and armed conflicts, increasing regional and global tensions, and associated disruptions and volatility in energy and oil markets;

• Legislative and regulatory risk;

• Product liability claims;

5 unchanged sentences

Information contained on this website is not a part of or incorporated by reference into this Quarterly Report on Form 10-Q.

The Company makes available on its website the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports as soon as reasonably

practicable after these reports are filed with or furnished to the SEC.

Users can access these reports free of charge on the Company’s website.

Users can access these reports free of charge on the

Company’s website.

The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding the Company’s electronic filings with the SEC at http://www.sec.gov.

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RECENT DEVELOPMENTS

Tariff and Supply Chain Considerations

The Company sources almost all of its product from third-party manufacturers outside the U.S., primarily in China.

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New or increased tariffs, quotas, embargoes, or other trade barriers could adversely impact our supply chain and cost structure.

To mitigate the impact of these tariffs, the Company has negotiated price increases to its U.S.

customers, negotiated lower product costs with its foreign suppliers and pursues diversification of its foreign sourced products to countries that are expected to be subject to lower tariffs.

The Company's tariff mitigation strategy is intended to maintain the Company's gross margin dollars and therefore, may result in a decline in gross margin percentage.

If tariffs rates were to increase further and the Company is unable to mitigate the impact of the increase cost, it would result in lower gross margin from the sale of its products.

In 2025, the Company implemented several actions to mitigate the impact of the tariffs imposed by the U.S.

administration.

For example, the Company negotiated price increases to its U.S.

customers which went into effect in the third quarter of 2025.

The Company’s tariff mitigation strategy was intended to maintain the Company’s gross margin dollars and therefore, may result in a decline in gross margin percentage.

On February 20, 2026, the U.S.

Supreme Court held that the U.S.

administration’s imposition of tariffs pursuant to the International Emergency Economic Powers Act (“IEEPA”) was unlawful, striking down the 10% global baseline tariff, as well as the higher tariffs imposed on certain U.S.

trading partners.

Supreme Court’s ruling did not affect all of the recently imposed tariffs, including those imposed following trade remedy investigations by the Department of Commerce or the U.S.

Trade Representative.

Nor did it prohibit the imposition of future tariffs through alternative trade authorities available to the U.S.

administration.

On February 20, 2026, shortly after the announced U.S.

Supreme Court decision, the U.S.

administration announced that it would be imposing a new 10% global tariff for a period of 150 days pursuant to a balance-of-payments provision in Section 122 of the Trade Act of 1974, to become effective February 24, 2026.

administration further announced that it would begin additional trade remedy investigations into unidentified trading partners pursuant to Section 301 of the Trade Act of 1974 and with respect to certain unidentified product sectors pursuant to Section 232 of the Trade Expansion Act of 1962.

Government has stated publicly that companies will need to litigate to obtain refunds, which could take years.

While guidance and processes relating to refunds continue to develop, it remains challenging to predict if, and when, any refunds will, in fact, be obtained and whether refunds would be paid in cash or credits against future duties or tariffs.

As of April 20, 2026, the CBP has launched Phase One of the Consolidated Administration and Processing of Entries ("CAPE") program to process refunds.

The Company is actively engaging with its custom brokers and outside legal counsel to assess and pursue potential refund claims related to the the IEEPA tariffs paid.

The Company estimates that the total tariff payments made related to the IEEPA tariffs totaled $41.7 million.

While the Company plans to pursue the recovery of the IEEPA tariffs paid, these amounts represent a gain contingency and have not been recognized in the consolidated financial statements as of March 31, 2026.

Net sales for the first quarter of 2026 U.S.

sales were favorably impacted by higher selling prices, however volume was impacted in certain channels due to softening consumer discretionary demand.

For the first quarter of 2026, U.S.

gross margin percentage improved by 170 basis points compared to the first quarter of 2025.

This improvement was in part driven by favorable product mix, which offset the combined impact of tariffs and our mitigation strategy.

We expect continued margin pressure through 2026 as higher-cost inventory is sold through, reflecting the full impact of these tariffs.

The Company cannot predict what additional changes to trade policy will be made by the U.S.

administration or Congress, including whether existing tariff policies will be maintained or modified, what products may be subject to such policies, or whether the entry into new bilateral or multilateral trade agreements will occur, nor can we predict the effects that any such changes would have on our business, capital expenditures, and results of operations.

The Company is actively monitoring the rapidly evolving tariff and global trade policies that become effective, as well as potential retaliatory actions by other countries.

If tariffs rates were to increase further and the Company is unable to mitigate the impact of the increase in cost, it would result in lower gross margin from the sale of its products.

The broader macroeconomic impacts related to the changes in tariff policies including potential mitigation efforts by retailers may negatively impact consumer spending and buying patterns of the Company’s products.

This could materially adversely affect the Company’s results of operations and financial condition.

Escalating geopolitical conflicts in the Middle East, including shipping disruptions in the Strait of Hormuz, have lead to increased volatility on global energy prices.

Sustained increases in energy costs could materially increase the Company’s product and transportation costs, including through higher input costs and increased fuel prices, which typically lead to fuel surcharges and higher freight rates from third-party logistics providers.

This could increase the Company’s distribution and inbound freight costs.

T he duration of the conflict and the potential for further escalation, including military actions, sanctions, or disruptions to key trade routes, could adversely affect the global macroeconomic environment, and in turn, negatively impact consumer spending and demand for the Company’s products.

The Company continues to monitor these developments, however the extent and duration of their impact remain uncertain.

If energy prices remain elevated or if macroeconomic conditions deteriorate, the Company’s results of operations and financial condition could be materially adversely affected.

Hagerstown Facility

In January 2025, the Company announced the relocation of the Company’s east coast distribution operations currently located in Robbinsville, NJ (the “Robbinsville Facility”) to Hagerstown, Maryland (the “Hagerstown Facility”).

In connection with the relocation, the Company expects to incur exit costs of approximately $7.0 million for employee severance, certain employee relocation costs, and remaining lease costs for the Robbinsville Facility, which costs are expected to be incurred in 2025 and 2026.

The Hagerstown Facility will require capital expenditures for equipment and certain leasehold improvements of approximately $9.0 million.

In connection with the relocation, the Company expects to incur exit costs of approximately $6.0 million for employee severance, certain employee relocation costs, and remaining lease costs for the Robbinsville Facility.

For the three months ended March 31, 2026, the Company has incurred $1.2 million, primarily related to employee severance costs.

The remaining costs are expected to be incurred in 2026.

The Hagerstown Facility will require capital expenditures for equipment and certain leasehold improvements that are estimated to be approximately $9.6 million, of which $3.9 million remains to be purchased as of March 31, 2026.

The Company incurred capital expenditures related to this relocation of $3.4 million during the three months ended March 31, 2026 and $2.3 million during the year-ended December 31, 2025.

Start-up costs are estimated to be approximately $7.0 million, which includes recruitment, relocation of inventory, set up costs and lease expenses prior to the Hagerstown Facility being fully operational.

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These incentives include real property tax abatement, employee state withholding tax credit, conditional grants and income tax credits.

Project Concord

In January 2025, the Company launched Project Concord, management’s comprehensive plan to propel growth and streamline the cost structure of its International operations.

The Company expects this plan to improve future results of its International segment through sales growth and the identified costs efficiencies.

This project resulted in several reorganizations and restructuring of the international workforce which have primarily affected the structure of the International segment’s merchandising and sale workforce.

The following actions were taken under this plan:

• On July 8, 2025 the Company announced a reorganization of its international workforce in connection with Project Concord.

The reorganization primarily affected the structure of the International segment's merchandising and sales workforce.

The restructuring expenses related to severance associated with the reorganization of $0.3 million was recorded in the third quarter of 2025.

• On March 26, 2026 the Company announced a second reorganization of its international workforce in connection with Project Concord.

The restructuring expenses related to severance associated with the reorganization of $0.2 million was recorded in the three months ended March 31, 2026.

As of March 31, 2026, the Company expects to record additional approximately $0.2 million of restructuring charges in connection with Project Concord for severance and related costs.

BUSINESS SEGMENTS

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The Company’s business and working capital needs are seasonal, with a majority of sales occurring in the third and fourth quarters.

In 2024 and 2023, net sales for the third and fourth quarters accounted for 58% and 57% of total annual net sales, respectively.

In 2025 and 2024, net sales for the third and fourth quarters accounted for 58% of total annual net sales, for both periods.

In anticipation of the pre-holiday shipping season, inventory levels increase primarily in the June through October time period.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2025 2024 2025 2024

Net sales 100.0 % 100.0 %

3 unchanged sentences

Selling, general and administrative expenses 25.6 22.4

Goodwill impairment — — 7.5 —

Restructuring expenses 1.4 —

Income (loss) from operations

3.9 4.7 (6.6) 2.5

(Loss) income from operations

Interest expense (3.1) (3.5)

Mark to market loss on interest rate derivatives

— (0.5) (0.2) (0.3)

Loss on equity securities

Income (loss) before income taxes and equity in losses

1.0 1.0 (10.2) (4.3)

Income tax (provision) benefit

(1.7) (0.8) — (0.4)

Equity in losses, net of taxes

Net (loss) income

Mark to market gain (loss) on interest rate derivatives

Loss before income taxes

Income tax benefit

(3.3) % (3.0) %

MANAGEMENT’S DISCUSSION AND ANALYSIS

THREE MONTHS ENDED SEPTEMBER 30, 2025 COMPARED TO THE THREE MONTHS ENDED

SEPTEMBER 30, 2024

Consolidated net sales for the three months ended September 30, 2025 were $171.9 million, representing a decrease of $11.9 million, or 6.5%, as compared to net sales of $183.8 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2025 average rates to 2024 local currency amounts, consolidated net sales decreased by $12.5 million, or 6.8%, as compared to consolidated net sales in the corresponding period in 2024.

Net sales for the U.S.

segment for the three months ended September 30, 2025 were $158.1 million, a decrease of $12.1 million, or 7.1%, as compared to net sales of $170.2 million for the corresponding period in 2024.

For the three months ended September 30, 2025, net sales were favorably impacted by higher selling prices, reflecting the implementation of price increases for the Company's U.S.

customers that became effective during the third quarter of 2025.

This impact was offset by lower sales volume, as price increases softened consumer demand and certain retailers shifted the timing of orders.

Net sales for the U.S.

segment’s Kitchenware product category were $98.6 million for the three months ended September 30, 2025, an increase of $1.3 million, or 1.3%, as compared to $97.3 million for the corresponding period in 2024.

The increase was driven by higher sales for cutlery and boards and kitchen measurement products.

These increases were offset by a reduction in sales for bakeware and barware products.

Net sales for the U.S.

segment’s Tableware product category were $31.6 million for the three months ended September 30, 2025, a decrease of $9.3 million, or 22.7%, as compared to $40.9 million for the corresponding period in 2024.

The decrease was attributable to lower warehouse club programs for dinnerware and flatware.

Net sales for the U.S.

segment’s Home Solutions product category were $27.9 million for the three months ended September 30, 2025, a decrease of $4.1 million, or 12.8%, as compared to $32.0 million for the corresponding period in 2024.

The decrease was attributable to lower sales for home décor and bath measurement products, which was partially offset by higher sales in the back-to-school lunch box category.

Net sales for the International segment were $13.8 million for the three months ended September 30, 2025, an increase of $0.2 million, or 1.5%, as compared to net sales of $13.6 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales decreased by $0.4 million, or 2.7%, as compared to consolidated net sales in the corresponding period in 2024.

The decrease in constant currency net sales was driven by lower sales in the U.K., partially offset by higher sales in the Asia Pacific region.

Gross margin for the three months ended September 30, 2025 was $60.4 million, or 35.1%, as compared to $67.4 million, or 36.7%, for the corresponding period in 2024.

Gross margin for the U.S.

segment was $55.5 million, or 35.1%, for the three months ended September 30, 2025, as compared to $62.7 million, or 36.8%, for the corresponding period in 2024.

The decrease in the gross margin percentage was attributable to higher selling prices, offset by higher tariffs.

The decrease in gross margin dollars was driven by lower sales volume.

Gross margin for the International segment was $4.9 million, or 35.5%, for the three months ended September 30, 2025, as compared to $4.7 million, or 34.6%, for the corresponding period in 2024.

The increase in gross margin percentage was driven by customer and product mix.

Distribution expenses

Distribution expenses for the three months ended September 30, 2025 were $17.9 million, as compared to $20.0 million for the corresponding period in 2024.

Distribution expenses as a percentage of net sales were 10.4% for the three months ended September 30, 2025, as compared to 10.9% for the three months ended September 30, 2024.

Distribution expenses as a percentage of net sales for the U.S.

segment were 9.0% and 9.7% for the three months ended September 30, 2025 and 2024, respectively.

Distribution expense during the three months ended September 30, 2025 and 2024 included $0.1 million and $0.6 million, respectively, for redesign costs related to the Company's warehouses.

As a percentage

of sales shipped from the Company’s U.S.

warehouses, excluding non-recurring expenses, distribution expenses were 8.5% and 10.1% for the three months ended September 30, 2025 and 2024, respectively.

The decrease in expenses as a percentage of sales was attributable to lower depreciation expense due to changes in asset retirement obligation estimates in the prior year, improved labor management efficiencies resulting in a decrease of employee expenses and higher sales volume due to sales mix resulting in a favorable impact of fixed expenses.

The decrease was partially offset by higher software expenses due to the launch of a new warehouse management system at the Company's west coast distribution center in September 2024.

Distribution expenses as a percentage of net sales for the International segment were 27.1% for the three months ended September 30, 2025, compared to 25.4% for the corresponding period in 2024.

As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 22.6% and 24.2% for the three months ended September 30, 2025 and 2024, respectively.

The decrease in expenses as a percentage of sales was due to lower freight-out expenses and higher shipment volume due to sales mix resulting in favorable impact of fixed expenses, partially offset by an increase in expense due to expanded distribution of the Company's products within the Asia Pacific region.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended September 30, 2025 were $35.5 million, a decrease of $3.3 million, or 8.5%, as compared to $38.8 million for the corresponding period in 2024.

Selling, general and administrative expenses for the U.S.

segment were $28.4 million for the three months ended September 30, 2025, as compared to $29.9 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 18.0% and 17.6% for the three months ended September 30, 2025 and 2024, respectively.

The decrease in selling, general and administrative expenses was attributable to lower employee expenses, including incentive compensation, partially offset by an increase in amortization expense related to an indefinite-lived trade name, which was reclassified to a finite-lived trade name in the fourth quarter 2024.

The increase in selling, general and administrative expenses as a percentage of net sales, was attributable to the impact of fixed costs on lower sales volume.

Selling, general and administrative expenses for the International segment were $3.4 million for the three months ended September 30, 2025, as compared to $4.5 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 24.6% and 33.1% for the three months ended September 30, 2025 and 2024, respectively.

The decrease in expenses was due to lower employee expenses, lower advertising and commission expenses, and the prior year expense included penalties related to tax filings.

Unallocated corporate expense for the three months ended September 30, 2025 was $3.7 million, as compared to $4.3 million for the corresponding period in 2024.

The decrease compared to the prior period was due to lower incentive compensation and legal expenses.

Restructuring expense

Restructuring expenses for the International segment were $0.3 million for the three months ended September 30, 2025, which was related to severance associated with the reorganization of the International segment's workforce.

The reorganization is in connection with Project Concord and primarily affects the structure of the International segment's merchandising and sales workforce.

Interest expense

Interest expense was $5.0 million and $5.8 million for the three months ended September 30, 2025 and 2024, respectively.

The decrease in expense was a result of lower average outstanding borrowings in the current period, and lower interest rates on outstanding borrowings.

Mark to market loss on interest rate derivatives

Mark to market loss on interest rate derivatives was $0.01 million for the three months ended September 30, 2025, as compared to $0.9 million for the three months ended September 30, 2024.

The loss recognized for the three months ended September 30, 2025 and 2024, respectively, was attributable to the change in the fair value due to the change in the projected interest rate environment.

The mark to market amount represents the change in fair value on the Company’s interest rate derivatives that have not been designated as hedging instruments.

These derivatives were entered into for purposes of locking-in a fixed interest rate on a portion of the Company’s variable interest rate debt.

As of September 30, 2025, the intent of the Company is to hold these derivative contracts until their maturity.

Income tax provision of $2.9 million and $1.5 million for the three months ended September 30, 2025 and 2024, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax provision rate of 171.1% and 81.4%, respectively.

The effective tax rate for the three months ended September 30, 2025 differs from the federal statutory income tax rate of 21.0% primarily due to the impact of non-deductible expenses, foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance and a partial valuation allowance on U.S.

deferred tax assets that are not more likely than not to be realized as a result of the goodwill impairment in the second quarter.

The effective tax rate for the three months ended September 30, 2024 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

MANAGEMENT’S DISCUSSION AND ANALYSIS

NINE MONTHS ENDED SEPTEMBER 30, 2025 COMPARED TO THE NINE MONTHS ENDED

SEPTEMBER 30, 2024

Consolidated net sales for the nine months ended September 30, 2025 were $443.9 million, a decrease of $23.8 million, or 5.1%, as compared to net sales of $467.7 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2025 average rates to 2024 local currency amounts, consolidated net sales decreased by $24.9 million, or 5.3%, as compared to consolidated net sales in the corresponding period in 2024.

THREE MONTHS ENDED MARCH 31, 2026 COMPARED TO THE THREE MONTHS ENDED

MARCH 31, 2025

Consolidated net sales for the three months ended March 31, 2026 were $143.5 million, representing an increase of $3.4 million, or 2.4%, as compared to net sales of $140.1 million for the corresponding period in 2025.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2026 average rates to 2025 local currency amounts, consolidated net sales increased by $2.5 million, or 1.8%, as compared to consolidated net sales in the corresponding period in 2025.

Net sales for the U.S.

segment for the nine months ended September 30, 2025 were $406.0 million, a decrease of $25.2 million, or 5.8%, as compared to net sales of $431.2 million for the corresponding period in 2024.

For the nine months ended September 30, 2025, net sales were favorably impacted by higher selling prices, reflecting the implementation of price increases for the Company's U.S.

customers that became effective during the third quarter of 2025.

This impact was offset by lower sales volume, as price increases softened consumer demand and certain retailers shifted the timing of orders.

segment for the three months ended March 31, 2026 were $130.7 million, an increase of $2.2 million, or 1.7%, as compared to net sales of $128.5 million for the corresponding period in 2025.

For the three months ended March 31, 2026, net sales were favorably impacted by higher selling prices, reflecting the implementation of price increases for the Company’s U.S.

customers that went into effect during the third quarter of 2025.

Net sales for the U.S.

segment’s Kitchenware product category were $260.7 million for the nine months ended September 30, 2025, a decrease of $1.0 million, or 0.4%, as compared to $261.7 million for the corresponding period in 2024.

The decrease was driven by lower sales for kitchen tools, bakeware and barware, partially offset by higher sales for cutlery and boards and kitchen measurement products.

segment’s Kitchenware product category were $78.5 million for the three months ended March 31, 2026, a decrease of $1.0 million, or 1.3%, as compared to $79.5 million for the corresponding period in 2025.

The decrease was driven by a decrease in sales for cutlery and boards and kitchen measurement products.

These decreases were partially offset by an increase in sales for kitchen tools.

Net sales for the U.S.

segment’s Tableware product category were $80.5 million for the nine months ended September 30, 2025, a decrease of $12.5 million, or 13.4%, as compared to $93.0 million for the corresponding period in 2024.

The decrease was driven by lower flatware sales due to a warehouse club program not repeated, partially offset by higher sales in dinnerware in the dollar channel.

segment’s Tableware product category were $25.9 million for the three months ended March 31, 2026, a decrease of $1.7 million, or 6.2%, as compared to $27.6 million for the corresponding period in 2025.

The decrease was primarily attributable to lower sales in the dollar channel for dinnerware.

Net sales for the U.S.

segment’s Home Solutions product category were $64.8 million for the nine months ended September 30, 2025, a decrease of $11.7 million, or 15.3%, as compared to $76.5 million for the corresponding period in 2024.

The decrease was attributable to lower sales of hydration products and bath measurement products.

The decrease was partially offset by higher sales in the back-to-school lunch box category.

Net sales for the International segment were $37.9 million for the nine months ended September 30, 2025, an increase of $1.4 million, or 3.8%, as compared to net sales of $36.5 million for the corresponding period in 2024.

segment’s Home Solutions product category were $26.3 million for the three months ended March 31, 2026, an increase of $4.9 million, or 22.9%, as compared to $21.4 million for the corresponding period in 2025.

The increase was primarily attributable to higher sales for home décor products in the dollar channel and warehouse club programs.

Net sales for the International segment were $12.8 million for the three months ended March 31, 2026, an increase of $1.2 million, or 10.3%, as compared to net sales of $11.6 million for the corresponding period in 2025.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales increased by $0.3 million, or 2.5%, as compared to consolidated net sales in the corresponding period in 2025.

The increase was attributable to higher sales in the Asia Pacific region, partially offset by lower sales in the U.K.

Gross margin for the nine months ended September 30, 2025 was $161.9 million, or 36.5%, as compared to $179.5 million, or 38.4%, for the corresponding period in 2024.

The increase in net sales was driven by higher sales in the Asia Pacific region.

Gross margin for the three months ended March 31, 2026 was $54.2 million, or 37.7%, as compared to $50.6 million, or 36.1%, for the corresponding period in 2025.

Gross margin for the U.S.

segment was $148.9 million, or 36.7%, for the nine months ended September 30, 2025, as compared to $166.5 million, or 38.6%, for the corresponding period in 2024.

The decrease in the gross margin percentage was attributable to higher selling prices, offset by higher tariffs.

The decrease in gross margin dollars was driven by lower sales volume.

Gross margin for the International segment was $13.0 million, or 34.3%, for the nine months ended September 30, 2025, as compared to $13.0 million, or 35.6%, for the corresponding period in 2024.

The decrease in gross margin percentage was driven by customer and product mix.

segment was $49.5 million, or 37.9%, for the three months ended March 31, 2026, as compared to $46.5 million, or 36.2%, for the corresponding period in 2025.

The improvement in the gross margin percentage was attributable to favorable product mix, higher selling prices, offset by higher tariffs.

Gross margin for the International segment was $4.7 million, or 36.7%, for the three months ended March 31, 2026, as compared to $4.1 million, or 35.3%, for the corresponding period in 2025.

The increase in gross margin percentage was driven by customer and product mix.

Distribution expenses

Distribution expenses for the nine months ended September 30, 2025 were $53.3 million, as compared to $51.3 million for the corresponding period in 2024.

Distribution expenses as a percentage of net sales were 12.0% for the nine months ended September 30, 2025, as compared to 11.0% for the nine months ended September 30, 2024.

Distribution expenses for the three months ended March 31, 2026 were $17.6 million, as compared to $18.1 million for the corresponding period in 2025.

Distribution expenses as a percentage of net sales were 12.3% for the three months ended March 31, 2026, as compared to 12.9% for the three months ended March 31, 2025.

Distribution expenses as a percentage of net sales for the U.S.

segment were 10.5% and 9.6% for the nine months ended September 30, 2025 and 2024, respectively.

Distribution expenses during the nine months ended September 30, 2025 and 2024 included $0.2 million and $0.7 million, respectively, for redesign costs related to the Company's warehouses.

segment were 10.9% and 11.5% for the three months ended March 31, 2026 and 2025, respectively.

Distribution expense during the three months ended March 31, 2026 included $0.2 million for relocation and redesign costs related to the Company’s warehouses.

As a percentage of sales shipped from the Company’s U.S.

warehouses, excluding non-recurring expenses, distribution expenses were 10.3% and 10.0% for the nine months ended September 30, 2025 and 2024, respectively.

The increase in expenses as a percentage of sales was attributable to an increase in freight-out expenses, higher software expenses due to the launch of a new warehouse management system at the Company's west coast distribution center in September 2024, partially offset by lower depreciation expense due to changes in asset retirement obligation estimates in the prior year.

Distribution expenses as a percentage of net sales for the International segment were 28.4% for the nine months ended September 30, 2025, compared to 26.9% for the corresponding period in 2024.

As a percentage of sales shipped from the Company’s international warehouses, distribution expenses were 24.6% and 24.3% for the nine months ended September 30, 2025 and 2024, respectively.

The increase in expenses as a percentage of sales was primarily attributed to higher warehouse expenses related to the expanded distribution of the Company's products within the Asia Pacific region, partially offset by a decrease in freight-out expenses.

warehouses, excluding non-recurring expenses, distribution expenses were 10.9% and 11.9% for the three months ended March 31, 2026 and 2025, respectively.

The decrease in expenses as a percentage of sales was attributable to

higher sales resulting in a favorable impact of fixed expenses, lower volume due to sales mix resulting in a decrease of employee expenses, and lower facility supply expenses.

The decrease was partially offset by higher freight rates.

Distribution expenses as a percentage of net sales for the International segment were 26.4% for the three months ended March 31, 2026, compared to 28.3% for the corresponding period in 2025.

As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 23.2% and 25.0% for the three months ended March 31, 2026 and 2025, respectively.

The decrease in expenses as a percentage of sales was attributable to higher sales resulting in a favorable impact of fixed expenses and a decrease in variable warehouse expenses at third-party operated distribution facilities.

Selling, general and administrative expenses

Selling, general and administrative expenses for the nine months ended September 30, 2025 were $104.5 million, a decrease of $12.1 million, or 10.4%, as compared to $116.6 million for the corresponding period in 2024.

Selling, general and administrative expenses for the three months ended March 31, 2026 were $36.8 million, an increase of $5.3 million, or 16.8%, as compared to $31.5 million for the corresponding period in 2025.

Selling, general and administrative expenses for the U.S.

segment were $87.9 million for the nine months ended September 30, 2025, as compared to $90.2 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 21.7% and 20.9% for the nine months ended September 30, 2025 and 2024, respectively.

The decrease in selling, general and administrative expenses was attributable to lower employee expenses, including incentive compensation, partially offset by an increase in provision for doubtful accounts in the current period, and an increase in amortization expense related to an indefinite-lived trade name, which was reclassified to a finite-lived trade name in the fourth quarter 2024.

The increase in selling, general and administrative expenses as a percentage of net sales, was attributable to the impact of fixed costs on lower sales volume.

Selling, general and administrative expenses for the International segment were $10.8 million for the nine months ended September 30, 2025, as compared to $12.5 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 28.5% and 34.2% for the nine months ended September 30, 2025 and 2024, respectively.

The decrease was primarily attributable to foreign currency exchange gains, lower advertising expenses and commissions, and the prior year expense included penalties related to tax filings.

Unallocated corporate expenses for the nine months ended September 30, 2025 were $5.8 million, as compared to expenses of $13.9 million for the corresponding period in 2024.

The decrease in expenses was driven by the recognition of a net legal settlement gain of $6.4 million in the current period, lower incentive compensation, legal expenses and professional fees, partially offset by an increase in stock compensation expense.

Goodwill impairment

During the second quarter of 2025, the Company’s qualitative assessment of goodwill indicated triggering events had occurred in its U.S.

reporting unit.

The Company performed an interim impairment test of the goodwill in the U.S.

reporting unit as of June 30, 2025, that resulted in a $33.2 million non-cash goodwill impairment charge.

segment were $28.2 million for the three months ended March 31, 2026, as compared to $30.0 million for the corresponding period in 2025.

As a percentage of net sales, selling, general and administrative expenses were 21.6% and 23.3% for the three months ended March 31, 2026 and 2025, respectively.

The decrease in selling, general and administrative expenses was attributable to lower employee expenses, a decrease in the provision for doubtful accounts in the current period, and lower advertising expenses.

This was partially offset by an increase in insurance expenses.

The decrease in selling, general and administrative expenses as a percentage of net sales, was also attributable to the impact of fixed costs on higher sales volume.

Selling, general and administrative expenses for the International segment were $3.7 million for both the three months ended March 31, 2026 and 2025.

As a percentage of net sales, selling, general and administrative expenses were 28.9% and 31.9% for the three months ended March 31, 2026 and 2025, respectively.

Selling, general and administrative expenses remained flat year-over-year, as decreases in employee expenses and commission expenses were fully offset by unfavorable foreign currency exchange impacts.

The decrease in selling, general and administrative expenses as a percentage of net sales, was attributable to the impact of fixed costs on higher sales volume.

Unallocated corporate expense for the three months ended March 31, 2026 was $4.9 million, as compared to unallocated corporate income of $2.2 million for the corresponding period in 2025.

The decrease compared to the prior period was due to the recognition of a net legal settlement gain of $6.4 million in the prior period, partially offset by an increase in professional fees and legal expenses in the current period.

Restructuring expense

Restructuring expenses for the International segment were $0.3 million for the nine months ended September 30, 2025, which was related to severance associated with the reorganization of the International segment's workforce.

The reorganization is in

connection with Project Concord and primarily affects the structure of the International segment's merchandising and sales workforce.

Restructuring expenses for the three months ended March 31, 2026 were $2.0 million, which consist of employee severance expenses related to the east coast distribution facility relocation of $1.2 million, sterling flatware manufacturing operations restructuring expense of $0.7 million, and Project Concord severance expense of $0.1 million.

See NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

Interest expense

Interest expense was $15.0 million and $16.6 million for the nine months ended September 30, 2025 and 2024, respectively.

The decrease in expense was a result of lower average outstanding borrowings in the current period, and lower interest rates on outstanding borrowings.

Mark to market loss on interest rate derivatives

Mark to market loss on interest rate derivatives was $0.8 million for the nine months ended September 30, 2025, as compared to $1.2 million for the nine months ended September 30, 2024.

The decrease was attributable to the change in the fair value based on the increase in interest rates.

Interest expense was $4.5 million and $4.9 million for the three months ended March 31, 2026 and 2025, respectively.

The decrease in expense was a result of lower average outstanding borrowings in the current period, partially offset by higher interest rates on outstanding borrowings.

Mark to market gain (loss) on interest rate derivatives

Mark to market gain on interest rate derivatives was $0.3 million for the three months ended March 31, 2026, as compared to mark to market loss of $0.5 million for the three months ended March 31, 2025.

The gain (loss) recognized for the three months ended March 31, 2026 and 2025, respectively, was attributable to the change in the fair value due to the change in the projected interest rate environment.

The mark to market amount represents the change in fair value on the Company’s interest rate derivatives that have not been designated as hedging instruments.

These derivatives were entered into for purposes of locking-in a fixed interest rate on a portion of the Company’s variable interest rate debt.

As of September 30, 2025, the intent of the Company is to hold these derivative contracts until their maturity.

Loss on equity securities

Loss on equity securities was $14.2 million for the nine months ended September 30, 2024.

In the second quarter of 2024, the Company lost significant influence over its investment in Vasconia and discontinued the equity method of accounting.

This change resulted in the reclassification of previously recognized accumulated other comprehensive losses to the investment balance and subsequently resulted in a non-cash loss of $14.2 million, to reduce the investment to its fair value.

NOTE 4 —INVESTMENT for additional information.

Income tax benefit of $(0.1) million and income tax provision of $1.7 million for the nine months ended September 30, 2025 and 2024, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax benefit rate of 0.14% and provision rate of (8.2)%, respectively.

The effective tax rate for the nine months ended September 30, 2025 differs from the federal statutory income tax rate of 21.0% primarily due to a partial valuation allowance on U.S.

deferred tax assets that are not more likely than not to be realized as a result of the goodwill impairment in the second quarter.

The negative rate for the nine months ended September 30, 2024 reflects tax expense on a pretax financial reporting loss.

The effective tax rate for the nine months ended September 30, 2024 differs from the federal statutory income tax rate of 21.0% primarily due to the impact of non-deductible expenses and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Equity in losses, net of taxes

Equity in losses of Vasconia, net of taxes , was $2.1 million for the nine months ended September 30, 2024.

As of March 31, 2026, the intent of the Company is to hold these derivative contracts until their maturity.

Income tax benefit of $1.7 million and $0.1 million for the three months ended March 31, 2026 and 2025, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax rate of 26.0% and 3.3%, respectively.

The effective tax rate for the three months ended March 31, 2026 differs from the federal statutory income tax rate of 21.0% primarily due to state and local tax expense, the impact of non-deductible expenses, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance, partially offset by a benefit for federal credits.

The effective tax rate for the three months ended March 31, 2025 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES

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The Company’s primary uses of funds consist of working capital requirements, capital expenditures, acquisitions and investments, payments of dividends, and payments of principal and interest on its debt.

At September 30, 2025, the Company had cash and cash equivalents of $12.1 million, compared to $2.9 million at December 31, 2024.

Working capital was $236.4 million at September 30, 2025, compared to $221.8 million at December 31, 2024.

Liquidity as of September 30, 2025 was $50.9 million, consisting of $12.1 million of cash and cash equivalents, $25.2 million of availability under the ABL Agreement, limited by the Term Loan financial covenant, and $13.6 million of available funding under the Receivables Purchase Agreement.

At March 31, 2026, the Company had cash and cash equivalents of $13.9 million, compared to $4.3 million at December 31, 2025.

Working capital was $220.1 million at March 31, 2026, compared to $242.6 million at December 31, 2025.

Liquidity as of March 31, 2026 was $110.2 million, consisting of $13.9 million of cash and cash equivalents, $80.0 million of availability under the ABL Agreement, limited by the Term Loan financial covenant, and $16.3 million of available funding under the Receivables Purchase Agreement.

Inventory, a large component of the Company’s working capital, is expected to fluctuate from period to period, with inventory levels higher primarily in the June through October time period.

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Certain other product categories experience higher inventory turns due to lower minimum order quantities or trending sale demands.

For the three months ended September 30, 2025, inventory turnover was 2.0 times, or 181 days, as compared to 2.1 times, or 175 days, for the three months ended September 30, 2024.

For the three months ended March 31, 2026, inventory turnover was 1.9 times, or 194 days, as compared to 1.8 times, or 208 days, for the three months ended March 31, 2025.

Inventory turns have remained relatively consistent.

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The ABL Agreement provides for a senior secured asset-based revolving credit facility in the maximum aggregate principal amount of $200.0 million, which facility will mature on August 26, 2027.

The ABL Agreement is subject to an earlier springing maturity date of May 28, 2027, 90 days prior to the Term Loan maturity date of August 26, 2027, if the Company’s Term Loan has not been repaid or refinanced by such date.

On November 14, 2023, the Company entered into Amendment No.

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The Term Loan requires the Company to make quarterly payments of principal each equal to 1.25% of the aggregate principal amount of the Term Loan, which commenced on March 31, 2024, with the remaining balance payable on the maturity date.

The Term Loan requires the Company to make an annual prepayment of principal, beginning with those for the fiscal year ending December 31, 2024, based upon a percentage of the Company’s excess cash flow, (“Excess Cash Flow”), if any.

Term Loan requires the Company to make an annual prepayment of principal, beginning with the fiscal year ending December 31, 2024, based upon a percentage of the Company’s excess cash flow, (“Excess Cash Flow”), if any.

The percentage applied to the Company’s Excess Cash Flow is based on the Company’s Total Net Leverage Ratio (as defined in the Debt Agreements).

When an Excess Cash Flow payment is required, each lender has the option to decline a portion or all of the prepayment amount payable to it.

Per the Term Loan, when the Company makes an Excess Cash Flow prepayment, the payment is first applied to satisfy the next eight (8) scheduled future quarterly required payments of the Term Loan in order of maturity and then to the remaining scheduled installments on a pro rata basis.

The maximum borrowing amount under the ABL Agreement may be increased to up to $250.0 million if certain conditions are met.

Under the Term Loan, when the Company makes an Excess Cash Flow prepayment, the payment is first applied to satisfy the next eight (8) scheduled future quarterly required payments of the Term Loan in order of maturity and then to the remaining scheduled installments on a pro rata basis.

The maximum borrowing amount under the ABL Agreement may be increased up to $250.0 million if certain conditions are met.

One or more tranches of additional term loans (the “Incremental Term Facilities”) may be added under the Term Loan if certain conditions are met.

The Incremental Facilities may not exceed the sum of (i) $50.0 million plus (ii) an unlimited amount so long as, in the case of (ii) only, the Company’s secured net leverage ratio, as defined in and computed on a pro forma basis

pursuant to the Term Loan, after giving effect to such increase, is no greater than 3.25 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan but not to mature earlier than the maturity date of the then existing term loans.

As of September 30, 2025 and December 31, 2024, the total availability under the ABL Agreement were as follows (in thousands):

September 30, 2025

The Incremental Term Facilities may not exceed the sum of (i) $50.0 million plus (ii) an unlimited amount so long as, in the case of (ii) only, the Company’s secured net leverage ratio, as defined in and computed on a pro forma basis pursuant to the Term Loan, after giving effect to such increase, is no greater than 3.25 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan but not to mature earlier than the maturity date of the then existing term loans.

As of March 31, 2026 and December 31, 2025, the total availability under the ABL Agreement were as follows (in thousands):

March 31, 2026

December 31, 2025

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The Company’s borrowing capacity may be further limited by the Term Loan financial covenant of 5.00 to 1.00 maximum Total Net Leverage Ratio.

As of September 30, 2025, the availability under the ABL Agreement, limited by the Term Loan financial covenant, was $25.2 million.

As of March 31, 2026, the availability under the ABL Agreement, as limited by the Term Loan financial covenant, was $80.0 million.

The current and non-current portions of the Company’s Term Loan included in the condensed consolidated balance sheets were as follows (in thousands):

September 30, 2025 December 31, 2024

March 31, 2026 December 31, 2025

Current portion of Term Loan:

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Total Non-current portion of Term Loan $ 124,650 $ 125,927

The 2024 excess cash flow payment of $1.2 million was paid on April 4, 2025 and reduced the scheduled quarterly payment due on June 30, 2025.

As of September 30, 2025, the Company estimates no excess cash flow payment will be due for 2025.

As of March 31, 2026 the Company estimates that no excess cash flow payment will be due for 2026.

For the year ended December 31, 2025, there was no excess cash flow payment due for 2025.

The Company’s payment obligations under its Debt Agreements are unconditionally guaranteed by its existing and future U.S.

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The obligations of the foreign subsidiary borrowers under the ABL Agreement are secured by security interests in substantially all of the assets of, and stock in, such foreign subsidiary borrowers, subject to certain limitations.

The obligations of the Company under the Debt Agreements and any hedging arrangements and cash management services and the guarantees by its domestic subsidiaries in respect of those obligations are secured by security interests in substantially all of the assets and stock (but in the case of foreign subsidiaries, limited to 65% of the capital stock in first-tier foreign subsidiaries and not including the stock of subsidiaries of such first-tier foreign subsidiaries) owned by the Company and the U.S.

The obligations of the Company under the Debt Agreements and any

hedging arrangements and cash management services and the guarantees by its domestic subsidiaries in respect of those obligations are secured by security interests in substantially all of the assets and stock (but in the case of foreign subsidiaries, limited to 65% of the capital stock in first-tier foreign subsidiaries and not including the stock of subsidiaries of such first-tier foreign subsidiaries) owned by the Company and the U.S.

subsidiary guarantors, subject to certain exceptions.

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In addition, the Company pays a commitment fee of 0.20% to 0.25% per annum based on the average daily unused portion of the aggregate commitment under the ABL Agreement.

The interest rate on outstanding borrowings under the ABL Agreement at September 30, 2025 was between 3.27% and 5.76%.

The Company paid a commitment fee of 0.25% on the unused portion of the ABL Agreement during the nine months ended September 30, 2025.

The interest rate on outstanding borrowings under the ABL Agreement at March 31, 2026 was between 3.33% and 7.13%.

The Company paid a commitment fee of 0.25% on the unused portion of the ABL Agreement during the three months ended March 31, 2026.

The Term Loan bears interest, at the Company’s option, at one of the following rates:

(i) alternate base rate, defined, for any day, as the greater of (x) the prime rate, (y) a federal funds and overnight bank funding based rate plus 0.5% or (z) one-month Adjusted Term SOFR, but not less than 1.0%, plus 1.0%, plus a margin of 4.5% or (ii) Adjusted Term SOFR (Term SOFR plus the Term SOFR Adjustment) for the applicable interest period, but not less than 1.0%, plus a margin of 5.5%.

The interest rate on outstanding borrowings under the Term Loan at September 30, 2025 was 9.75%.

The interest rate on outstanding borrowings under the Term Loan at March 31, 2026 was 9.29%.

The Debt Agreements provide for customary restrictions and events of default.

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Further, the ABL Agreement provides that during any period (a) commencing on the last day of the most recently ended four consecutive fiscal quarters on or prior to the date availability under the ABL Agreement is less than the greater of $20.0 million and 10% of the aggregate commitment under the ABL Agreement at any time and (b) ending on the day after such availability has exceeded the greater of $20.0 million and 10% of the aggregate commitment under the ABL Agreement for 45 consecutive days, the Company is required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 as of the last day of any period of four consecutive fiscal quarters.

The Company was in compliance with the covenants of the Debt Agreements at September 30, 2025.

The Company was in compliance with the covenants of the Debt Agreements at March 31, 2026.

The Company expects that it will continue to borrow, subject to availability, and repay funds under the ABL Agreement based on working capital and other corporate needs.

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Adjusted EBITDA (a non-GAAP financial measure), which is defined in the Company’s Debt Agreements, is used in the calculation of the Fixed Charge Coverage Ratio, Secured Net Leverage Ratio, Total Leverage Ratio and Total Net Leverage Ratio, which are required to be provided to the Company’s lenders pursuant to its Debt Agreements.

The Company’s adjusted EBITDA (including pro forma adjustments), for the trailing twelve months ended September 30, 2025 was $47.2 million.

Capital expenditures for the nine months ended September 30, 2025 were $3.2 million.

The Company’s adjusted EBITDA (including pro forma adjustments), for the trailing twelve months ended March 31, 2026 was $52.7 million.

Capital expenditures for the three months ended March 31, 2026 were $3.8 million.

Non-GAAP financial measure

Adjusted EBITDA is a non-GAAP financial measure within the meaning of Regulation G and Item 10(e) of Regulation S-K, each promulgated by the SEC.

This measure is provided because management of the Company uses this financial measure in evaluating the Company’s on-going financial results and trends, and management believes that exclusion of certain items allows for more accurate period-to-period comparison of the Company’s operating performance by investors and analysts.

This measure is provided because management of the Company uses this financial measure in

evaluating the Company’s on-going financial results and trends, and management believes that exclusion of certain items allows for more accurate period-to-period comparison of the Company’s operating performance by investors and analysts.

Management also uses this non-GAAP information as an indicator of business performance.

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Further, the Company’s non-GAAP information may be different from the non-GAAP information provided by other companies including other companies within the home retail industry.

The following is a reconciliation of the net income (loss), as reported, to Adjusted EBITDA, for each of the last four quarters and the 12 months ended September 30, 2025:

Quarter Ended Twelve Months Ended September 30, 2025

December 31, 2024 March 31,

2025 June 30,

2025 September 30,

The following is a reconciliation of the net (loss) income, as reported, to Adjusted EBITDA, for each of the last four quarters and the 12 months ended March 31, 2026:

Quarter Ended Twelve Months Ended March 31, 2026

June 30, 2025 September 30,

2025 December 31,

2025 March 31,

(in thousands)

Net income (loss) as reported

Net (loss) income as reported

$ (39,699) $ (1,189) $ 18,152 $ (4,772) $ (27,508)

Income tax provision (benefit)

Income tax (benefit) provision

(2,782) 2,861 (3,220) (1,676) (4,817)

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Gain on disposition of fixed assets — (94) — — (94)

Mark to market (gain) loss on interest rate derivatives

Mark to market loss (gain) on interest rate derivatives

220 8 (1) (294) (67)

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Stock compensation expense 1,044 994 201 1,043 3,282

Legal settlement gain, net (1)

— (4,578) — — (4,578)

Severance expense 270 — 241 — 511

Acquisition related expenses

Acquisition-related diligence expenses

123 49 1,799 1,104 3,075

Restructuring expenses — 304 24 2,030 2,358

Warehouse redesign expenses (2)

Warehouse relocation and redesign expenses (1)

139 76 48 159 422

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$ 3,043 $ 13,420 $ 27,607 $ 7,388 $ 52,708

(1) For the twelve months ended September 30, 2025, legal settlement gain, net included a net settlement of $6.4 million discussed in NOTE 12 — CONTINGENCIES, and adjusted for legal fees incurred from March 2, 2018 through March 31, 2025 of $1.8 million.

(2) For the twelve months ended September 30, 2025, the warehouse redesign expenses were related to the U.S.

(3) Pro forma adjustments represent the amount of operating expense reductions projected by the Company as a result of actions taken through September 30, 2025 or expected to be taken within 18 months of September 30, 2025, net of the benefits realized during the twelve months ended September 30, 2025.

(1) For the twelve months ended March 31, 2026, warehouse relocation and redesign expenses were related to the U.S.

(2) Pro forma adjustments represent operating expense reductions projected by the Company as a result of actions taken through March 31, 2026 or expected to be taken within 18 months of March 31, 2026, net of the benefits realized during the twelve months ended March 31, 2026.

These actions include cost savings initiatives for the U.S.

segment related to reductions in employee expenses (i.e., including terminated employees, furloughed employees and temporary salary reductions) and costs saving for the International segment related to Project Concord.

segment related to reductions in employee expenses and cost savings for the International segment related to Project Concord.

(3) Adjusted EBITDA is a non-GAAP financial measure that is defined in the Company’s debt agreements.

Adjusted EBITDA is defined as net income (loss), adjusted to exclude income tax provision (benefit), interest expense, depreciation and amortization, gain on disposition of fixed assets, mark to market (gain) loss on interest rate derivatives, goodwill impairment, stock compensation expense, legal settlement gain, net and other items detailed in the table above that are consistent with exclusions permitted by our debt agreements.

Adjusted EBITDA is defined as net (loss) income, adjusted to exclude income tax (benefit) provision, interest expense, depreciation and amortization, gain on disposition of fixed assets, mark to market loss (gain) on interest rate derivatives, goodwill impairment, stock compensation expense, and other items detailed in the table above that are consistent with exclusions permitted by the Company’s debt agreements.

Accounts Receivable Purchase Agreement

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Either party may terminate the agreement at any time upon sixty days’ prior written notice to the other party.

The Company did not sell receivables to HSBC during the three and nine months ended September 30, 2025 and September 30, 2024.

At September 30, 2025, $13.6 million of accounts receivables were available for sale to HSBC, net of applicable charges.

The Company’s risk management strategy includes the use derivative financial instruments to manage its exposure to interest rate movements and to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates primarily to offset the earnings impact related to inventory purchases.

The Company does not enter into derivative

transactions for trading purposes.

The Company did not sell receivables to HSBC during the three months ended March 31, 2026 and March 31, 2025.

At March 31, 2026, $16.3 million of accounts receivable were available for sale to HSBC, net of applicable charges.

The Company’s risk management strategy includes the use of derivative financial instruments to manage its exposure to interest rate movements and to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates primarily to offset the earnings impact related to inventory purchases.

The Company does not enter into derivative transactions for trading purposes.

The Company classifies cash flows from its derivative transactions as cash flows from operating activities in the consolidated statements of cash flows.

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These interest rate swaps involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

In March 2024 and October 2024, the Company entered into interest rate swap agreements, each with an aggregate notional value of $25.0 million and expire in August 2027.

In March 2024 and October 2024, the Company entered into interest rate swap agreements, each with an aggregate notional value of $25.0 million and expiring in August 2027.

These non-designated interest rate swaps serve as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings.

The Company’s total outstanding notional value of interest rate swaps was $50.0 million at September 30, 2025.

The Company’s total outstanding notional value of interest rate swaps was $50.0 million at March 31, 2026.

Foreign Exchange Contracts

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The Company designates these contracts for accounting purposes as cash flow hedges.

The Company purchases foreign currency forward contracts with terms less than 18 months.

The aggregate gross notional value of foreign exchange contracts at September 30, 2025 was $3.4 million.

The Company purchases foreign currency forward contracts with terms of less than 18 months.

The aggregate gross notional value of foreign exchange contracts at March 31, 2026 was zero.

Operating activities

Net cash provided by operating activities was $3.9 million for the nine months ended September 30, 2025, as compared to net cash used in operating activities of $1.7 million for the nine months ended September 30, 2024.

The increase from 2025 compared to 2024 was attributable to a net legal settlement gain received in the current period, lower investment in inventory, and timing of collections related to the Company's accounts receivables, partially offset by timing of payments for accounts payable and accrued expenses.

Net cash provided by operating activities was $33.8 million for the three months ended March 31, 2026, as compared to net cash provided by operating activities of $16.7 million for the three months ended March 31, 2025.

The increase from 2026 compared to 2025 was attributable to lower investment in inventory, timing of collections related to the Company's accounts receivables, and timing of payments for accounts payable and accrued expenses, partially offset by lower operating results in the current period.

Investing activities

Net cash used in investing activities was $3.1 million and $1.6 million for the nine months ended September 30, 2025 and 2024, respectively.

Net cash used in investing activities was $3.8 million and $1.6 million for the three months ended March 31, 2026 and 2025, respectively.

The increase in investment activities was driven by purchases of equipment for the Hagerstown Facility.

Financing activities

Net cash provided by financing activities was $8.3 million for the nine months ended September 30, 2025, as compared to net cash used in financing activities of $6.9 million for the nine months ended September 30, 2024.

The change was attributable to higher net proceeds from revolving credit facility in the 2025 period, compare to net repayments of revolving credit facility in the 2025 period.

Net cash used in financing activities was $20.3 million for the three months ended March 31, 2026, as compared to net cash used in financing activities of $7.8 million for the three months ended March 31, 2025.

The change was attributable to higher net repayments of revolving credit facility in the 2026 period.

Stock repurchase program

On March 14, 2022, the Company announced that its Board of Directors of the Company authorized the repurchase of up to $20.0 million of the Company’s common stock, replacing the Company’s previously-authorized $10.0 million share repurchase program.

On March 14, 2022, the Company announced that its Board of Directors authorized the repurchase of up to $20.0 million of the Company’s common stock, replacing the Company’s previously-authorized $10.0 million share repurchase program.

The repurchase authorization permits the Company to effect repurchases from time to time through open market purchases and privately negotiated transactions.

No shares were repurchased during the nine months ended September 30, 2025.

As of September 30, 2025, the remaining dollar amount available for repurchases under the Board of Directors’ authorized plan was $11.1 million.

No shares were repurchased during the three months ended March 31, 2026.

As of March 31, 2026, the remaining dollar amount available for repurchases under the Board of Directors’ authorized plan was $11.1 million.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis