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Item 1A. Risk Factors

2021-03-10 compared with 2020-03-13 · 94 added, 100 removed, 432 unchanged (31% of the section changed)

The Company’s businesses, operations, liquidity and financial condition are subject to various risks.

The Company’s business, financial condition or results of operation could be significantly affected by the risks below or additional risks not presently known to the Company or by risks that the Company presently deems immaterial, such as changes in the economy, disruptions due to terrorist activity or man-made or natural disasters, or changes in law or accounting standards.

The risks and uncertainties described below are those that the Company considers material.

The Company’s business, financial condition or results of operation could be materially affected by the risks below or additional risks not presently known to the Company or by risks that the Company presently deems immaterial, such as changes in the economy, disruptions due to terrorist activity or man-made or natural disasters, or changes in law or accounting standards.

The risks and uncertainties described below are those that the Company considers material as of the date hereof.

We have grouped the risk factors into categories for ease of reading, and without any reflection on the importance of, or likelihood of, any particular category.

Economic and political risks

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Retail economies are impacted by factors such as consumer demand and the condition of the retail industry, which in turn, are affected by general economic factors.

These general economic factors include, among other factors:

These general economic factors include, among others:

• recession, inflation, deflation, unemployment and other factors adversely affecting consumer spending patterns generally;

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• the impact of natural disasters, conflicts and terrorist activities;

• public health epidemics;

such as the recent 2019 Coronavirus outbreak first reported in Wuhan, Hubei Province, China in December 2019;

• public health epidemics, such as the COVID-19 pandemic;

• unfavorable economic conditions in the United States, the U.K., continental Europe, Asia and elsewhere;

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The occurrence of negative events related to any of the foregoing may adversely impact the Company’s results of operations and financial condition .

The Company must successfully manage the demand, supply, and operational challenges associated with the actual or perceived effects of the COVID-19 pandemic.

Any failure to do so could have a material adverse impact on the Company’s business, financial condition, results of operations, cash flows, and competitive position.

The COVID-19 pandemic has negatively impacted the global economy and disrupted global supply chains.

Continuing concerns over economic and business prospects in the U.S.

and other countries have contributed to increased volatility and diminished expectations for the global economy.

These factors, coupled with the prospect of decreased business and consumer confidence and increased unemployment resulting from the outbreak of COVID-19, may precipitate a prolonged economic slowdown and recession.

The Company’s business may be unfavorably impacted by the fear of exposure to or actual effects of the COVID-19 pandemic, such as reduced travel or recommendations or mandates from governmental authorities to cease particular business activities.

These risks include, but are not limited to:

• Reductions in demand or volatility in demand for one or more of the Company’s products, which may be caused by, among other things:

the temporary inability of consumers to purchase the Company’s products due to illness and, brick and mortar retailers closing their store operations, which has occurred as a result of reduced demand from such customers, quarantine or other travel restrictions, or financial hardship for customers and consumers;

• Inability to meet the Company’s customers’ needs and achieve cost targets due to disruptions in the Company's supply chain arrangements as well as distribution centers caused by the loss or disruption of transportation, trucking availability, workforce, or other distribution capability;

• Failure of third parties on which the Company relies, including the Company’s suppliers, third-party manufacturers, distributors, and external business partners, to meet their obligations to the Company, including due to a lack of manufacturing capacity, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties;

• Customers' inability to make payments due to the Company pursuant to existing payment terms as a result of store closures resulting from the COVID-19 pandemic;

• Significant changes in the political and labor conditions in markets in which the Company sells, or distributes products, including quarantines, governmental or regulatory actions, closures or other restrictions that limit or close the Company’s distribution facilities, restrict the Company’s employees’ ability or willingness to travel or perform necessary business functions, or otherwise prevent the Company's facilities or its third-party partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of the Company's products;

• Increased cybersecurity threats that could result from many of the Company’s key employees working remotely;

new and preexisting cybersecurity threats that arise from reliance on home networks, virtual workspaces, videoconferencing, and other forms of remote work practices to support this temporary working environment, which may expose additional cybersecurity threats and vulnerabilities to the Company's network, and increase the exposure of the Company to electrical or internet outages;

• Negative impact on the Company’s workforce that could result if executive officers or other key employees or a large number of its workers fall ill.

The temporary or permanent loss of any of the Company’s executive officers or other key employees could harm the Company’s business and negatively affect the Company’s ability to timely achieve its strategic initiatives.

Moreover, the Company may not be successful in finding or integrating suitable successors in the event of the loss of executive officers or other key employees or if such persons become unavailable for a prolonged period of time.

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the pandemic is highly uncertain and subject to change.

The Company does not yet know the full extent of the impact of COVID-19 on the global economy.

Although disruptions from the COVID-19 pandemic may continue to occur, the long-term economic impact and near-term financial impact on the Company, including but not limited to, any possible impairment, restructuring, and other charges, cannot be reliably quantified or estimated at this time due to the uncertainty of future developments.

Despite efforts to manage and remedy the impact of COVID-19, the ultimate impact of COVID-19 could materially and adversely affect the Company’s business, financial condition, results of operations, cash flows, and competitive position, and depends on factors beyond the Company’s knowledge or control, including the duration and severity of the COVID-19 pandemic as well as third-party actions taken in response thereto.

The Company’s U.K.

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left the European Union ("Brexit").

The U.K.’s exit from the European Union is unprecedented and it remains unclear what impact this will have on the U.K.’s access to the EU Single Market and on the legal and regulatory environment in which the Company operates, as well as its effect on the global macroeconomic environment.

In December 2020, the U.K and European Union announced the agreement of a new Trade and Cooperation Agreement that will govern the ongoing relationship between the U.K.

and the European Union.

The U.K.’s exit from the European Union is unprecedented and it remains unclear what long-term impact this will have on the U.K.’s access to the EU Single Market and on the legal and regulatory environment in which the Company operates, as well as its effect on the global macroeconomic environment.

Net sales attributable to U.K.

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government has announced and, in some cases, implemented additional tariffs on certain foreign goods, including finished products and raw materials such as steel and aluminum.

These tariffs and potential tariffs have resulted or

may result in increased prices for these imported goods and materials and may limit the amount of these goods and materials that may be imported into the U.S.

These tariffs and potential tariffs have resulted or may result in increased prices for these imported goods and materials and may limit the amount of these goods and materials that may be imported into the U.S.

A majority of the Company’s products are sourced from vendors in China.

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The Company has a substantial amount of indebtedness and is dependent on the availability of its bank loan facilities to finance its liquidity needs.

As of December 31, 2019, the Company had $303.0 million of consolidated debt, including $32.8 million under its senior secured asset-based revolving credit facility (the “ABL Agreement”) and $270.2 million outstanding under a senior secured term loan credit facility (the “Term Loan” and, collectively with the ABL Agreement, the “Debt Agreements”).

As of December 31, 2020, the Company had $289.9 million of consolidated debt, consisting of $27.3 million under its senior secured asset-based revolving credit facility (the “ABL Agreement”) and $262.6 million outstanding under a senior secured term loan credit facility (the “Term Loan” and, collectively with the ABL Agreement, the “Debt Agreements”).

The ABL Agreement provides for, among other things, a maximum aggregate principal amount of $150.0 million and will mature on March 2, 2023.

The Term Loan will be repaid in quarterly payments of principal equal to 0.25% of the original aggregate principal amount of the Term Loan, which payments commenced June 30, 2018.

The Term Loan requires the Company to make an annual mandatory prepayment of principal based upon excess cash flow, if any.

The Term Loan requires the Company to make an annual mandatory prepayment of principal based upon excess cash flow (the “Excess Cash Flow”), if any.

Per the Debt Agreements, when the Company makes an Excess Cash Flow payment, the payment is first applied to satisfy the future quarterly required payments in order of maturity.

This amount is recorded in the current maturity of the Term Loan on the consolidated balance sheets.

At December 31, 2020, borrowings under the Debt Agreements represented approximately 36% of total capital (indebtedness plus stockholders’ equity).

The maximum borrowing amount under the ABL Agreement may be increased to up to $200.0 million if certain conditions are met.

One or more tranches of additional term loans 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 the Term Loan, is no greater than 3.75 to 1.00 subject to certain limitations and for the period defined.

In 2018, the Company utilized the proceeds of borrowings under the Debt Agreements (i) to repay in full all existing indebtedness for borrowed money under its former credit agreement and (ii) to finance, in part, the acquisition of Filament, the refinancing of certain indebtedness of Filament and its subsidiaries, and the payment of fees and expenses in connection with the foregoing.

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• limiting the Company’s ability to borrow money, dispose of assets or sell equity to fund the Company’s working capital, capital expenditures, dividend payments, debt service, strategic initiatives or for other obligations or purposes;

• limiting the Company’s ability to sell eligible accounts receivable under its Receivables Purchase Agreement;

• limiting the Company’s flexibility in planning for, or reacting to, changes in the economy, the markets, regulatory requirements, its operations or business;

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Treasury securities.

Further, other central banks have convened working groups to determine alternative reference rates for other currencies.

For example, the working group for the Sterling Risk-Free Reference Rates, have recommended the Sterling Overnight Index Average ("SONIA") as the alternative to Sterling LIBOR.

The Company is evaluating the potential impact of the eventual replacement of the LIBOR benchmark interest rate, including the possibility of SOFR as the dominant replacement.

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If the Chinese renminbi should appreciate against the U.S.

dollar, the costs of the Company’s products will likely rise over time because of the impact the strengthening renminbi will have on the Company’s cost

of sales, and the Company may not be able to pass on these price increases to its customers.

dollar, the costs of the Company’s products will likely rise over time because of the impact the strengthening renminbi will have on the Company’s cost of sales, and the Company may not be able to pass on these price increases to its customers.

The Company is also subject to the risks of currency controls and devaluations.

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The further recognition of an impairment of the Company’s goodwill or any of the Company’s assets would negatively affect the Company’s results of operations and total capitalization, the effect of which could be material.

International Reporting Unit

During the third quarter of 2019, the Company performed an interim assessment of its European kitchenware business by comparing the fair value of the reporting unit with its carrying value.

The Company performed the analysis using a discounted cash flow and market multiple approach.

Based upon the analysis performed, the Company recognized a $9.7 million non-cash goodwill impairment charge during the third quarter of 2019.

The goodwill impairment charge was the result of a decline in operating performance and reduced expectations for future cash flows of the European kitchenware business.

The fair value of the business was approximately 30.1% below its carrying value as of September 30, 2019.

In 2018, the Company incurred a non-cash goodwill impairment charge of $2.2 million related to the European tableware business due to a decline in operating performance and reduced expectations for future cash flows.

Following the goodwill impairment charges taken in both the third quarter of 2019 and 2018, goodwill associated with the International reporting unit, comprised of the European kitchenware business and tableware business, acquired in 2014 and 2011, respectively, is zero.

Reporting Unit

During the first quarter of 2020, as a result of the economic downturn caused by the COVID-19 pandemic, the Company performed an interim assessment of the goodwill for the U.S.

reporting unit as of March 31, 2020, by comparing the fair value of the reporting unit with its carrying value.

The Company performed the analysis using a discounted cash flow and market multiple method.

Based upon the analysis performed, the Company recognized a non-cash goodwill impairment charge of $19.1 million during the first quarter of 2020.

The goodwill impairment charge resulted from, among other factors, the uncertain market conditions arising from the COVID-19 pandemic, which impacted the Company's market capitalization, as well as a reduction of forecasted future cash flows associated with the effects of the COVID-19 pandemic.

The fair value of the U.S.

reporting unit was approximately 3.9% below its carrying value as of March 31, 2020.

The Company performed its annual impairment assessment of its U.S.

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The Company performed the analysis using a discounted cash flow and market multiple method.

Based upon the analysis performed, the Company recognized a non-cash goodwill impairment charge of $33.2 million, during the three months ended December 31, 2019.

The goodwill impairment charge resulted from, among other factors, a sustained decline in the Company's market capitalization observed in the fourth quarter of 2019.The fair value of the U.S, reporting unit was approximately 6.1% below its carrying value.

As of October 1, 2020, the fair value of the U.S.

reporting unit exceeded the carrying value of goodwill.

In 2019, the Company recognized a non-cash goodwill impairment charge of $33.2 million, during the three months ended December 31, 2019.

The Company performed the analysis using a discounted cash flow and market multiple method.

The goodwill impairment charge resulted from, among other factors, a sustained decline in the Company's market capitalization observed in the fourth quarter of 2019.

The fair value of the U.S, reporting unit was approximately 6.1% below its carrying value at October 1, 2019.

The Company’s projections of product demand, sales and net income are highly subjective in nature and the Company’s future sales and net income could vary materially from the Company’s projections.

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The Company faces intense competition from other companies worldwide and if the Company is unable to compete successfully, the Company’s business, results of operations and financial condition could be materially and adversely affected.

The markets for the Company’s products are intensely competitive with the principal competitive factors being product innovation, brand name, product quality, aesthetic appeal to customers, packaging, breadth of product offerings, distribution capability, delivery

time and price.

Advantages or disadvantages in any of these competitive factors may be sufficient to cause the customer to consider changing providers of the kinds of products that the Company sells.

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In addition, as a result of the desire of retailers to more closely manage inventory levels, there is a growing trend among retailers to make purchases on a “just-in-time” basis.

While the Company generally orders products substantially in advance of the anticipated time of their sale by the Company, this trend may require the Company to shorten its lead time for production in certain cases and more closely anticipate demand, which may require the Company to carry additional inventories.

While the Company generally orders products significantly in advance of

the anticipated time of their sale by the Company, this trend may require the Company to shorten its lead time for production in certain cases and more closely anticipate demand, which may require the Company to carry additional inventories.

The Company’s annual earnings and cash flows also depend to a great extent on the results of operations in the latter half of the year due to the seasonality of its sales.

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Changes at the Company’s large customers, or actions taken by them, and consolidation in the retail industry could materially adversely affect the Company’s operating results.

During the years ended December 31, 2019, 2018 and 2017, Wal-Mart Stores, Inc., including Sam’s Club and, in the U.K., Asda Superstore, (“Walmart”), accounted for 16%, 14% and 15% of net sales, respectively.

Sales to Walmart are included in the Company's U.S.

During the years ended December 31, 2020, 2019 and 2018, Wal-Mart Stores, Inc., including Sam’s Club and, in the U.K., Asda Superstore, (“Walmart”), accounted for 20%, 16% and 14% of consolidated net sales, respectively.

During the years ended December 31, 2020 and 2019, sales to Costco Wholesale Corporation (“Costco”) accounted for 11% of consolidated net sales.

During the year ended December 31, 2020, Amazon.com Inc., (“Amazon”), accounted for 10% of consolidated net sales.

Sales to Walmart, Costco and Amazon are included in the Company's U.S.

and International segments.

During the year ended December 31, 2019, sales to Costco Wholesale Corporation (“Costco”) accounted for 11% of consolidated net sales.

Sales to Costco are included in the Company's U.S.

and International segment.

No other customers accounted for 10% or more of the Company’s sales during these periods.

A material reduction in sales to Walmart or other top customers in the aggregate, could have a significant adverse effect on the Company’s business and operating results.

In addition, pressures by such customers that would cause the Company to materially reduce the price of its products could result in reduced operating margin.

A material reduction in sales to the aforementioned or other top customers in the aggregate, could have a significant adverse effect on the Company’s business and operating results.

In addition, pressures by such customers that would cause the Company to materially reduce the price of its products could result in reduced sales and operating margin.

Any significant changes or financial difficulties that affect these customers, such as reduced sales by such customers (whether for reasons that affect a particular customer or the retail industry in general) may also result in reduced demand for the Company’s products.

The Company would also be subject to increased credit risk

with respect to such customers.

In particular, the concentration of the Company’s business with Walmart extends to its international business, including in China, as well as through Vasconia in Mexico and the Company’s strategic alliance in Canada, due to the market presence of Walmart in these foreign countries.

The Company would also be subject to increased credit risk with respect to such customers.

In particular, the concentration of the Company’s business with Walmart extends to its international business as well as through Vasconia in Mexico and the Company’s strategic alliance in Canada, due to the market presence of Walmart in these foreign countries.

Any changes in purchasing practices or decline in the financial condition, of Walmart or other large customers may have a material adverse impact on the business, results of operations and financial condition of the Company.

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The Company’s customers could carry products that directly compete with the Company’s products for retail space and consumer purchases.

There is a risk that these customers could give higher priority to products of, or form alliances with, the Company’s competitors.

There is a risk that these customers could give higher priority to products of, or form alliances with, the Company’s

The failure of customers to provide the Company’s products with similar or better levels of promotional support and retail space as competitors receive could have a material adverse effect on the Company’s business, results of operations and financial condition.

The rapidly changing retail environment could result in the loss of, or a material reduction in, sales to the Company’s brick-and-mortar customers, which could materially adversely affect the Company’s business, results of operations, financial condition and cash flows.

The retail environment is highly competitive.

Consumers are increasingly embracing shopping online and through mobile commerce applications.

As a result, a greater portion of total consumer expenditures with retailers is occurring online and through mobile commerce applications.

The retail environment is highly competitive and rapidly evolving with the increase pace of technological development.

Consumers are increasingly embracing shopping online and through mobile commerce applications, and this trend has been significantly increasing in response to the COVID-19 pandemic.

As a result, an increasing portion of total consumer expenditures with retailers is occurring online and through mobile commerce applications.

This overall trend has negatively affected many brick-and-mortar retailers, which has been exacerbated by the COVID-19 pandemic.

If the Company’s brick-and-mortar retail customers fail to maintain or grow their overall market position through the integration of physical retail presence and digital retail, these customers may experience financial difficulties including store closures, bankruptcies or liquidations.

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International suppliers subject the Company to regional regulatory, man-made or natural disasters, health epidemics, political, economic and foreign currency exchange risk that could materially and adversely affect the Company’s operating results.

The Company sources its products from suppliers located principally in Asia, Europe and the United States.

The Company’s vendors in Asia, from whom a substantial majority of the Company’s products are sourced, are located primarily in China, which subjects the Company to various risks within the region including regulatory, man-made or natural disasters, health epidemics, political, economic and foreign currency changes.

The Company sources its products from suppliers located principally in Asia, Europe and the United States, which international scope of operations subjects the Company to various risks, including man-made or natural disasters, health epidemics, political, economic and foreign currency changes.

Additionally, the Company’s vendors in Asia, from whom a substantial majority of the Company’s products are sourced, are located primarily in China, which subjects the Company to regional risks including regulatory, social and other risks.

The Company’s ability to select and retain reliable vendors and suppliers who provide timely deliveries of quality parts and products efficiently will impact its success in meeting customer demand for timely delivery of quality products.

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Changes in currency exchange rates might negatively affect the Company and its overseas vendors’ profitability and business prospects.

The Company does not have access to its vendors’ financial information and the Company is unable to assess its vendors’ financial condition, including their liquidity.

The Company does not have access to its vendors’ financial information and the Company is unable to assess its vendors’ financial condition, including

their liquidity.

Interruption of supplies from any of the Company’s vendors, or the loss of one or more key vendors, could have a negative effect on the Company’s business and operating results.

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The Company imports its products for delivery to its distribution centers, as well as arranges for its customers to import goods to which title has passed overseas or at a port of entry.

For purchases that are to be delivered to its distribution centers, the Company arranges for transportation, primarily by sea, from ports in Asia and Europe to ports in the United States, principally New York/Newark/Elizabeth and Los Angeles/Long Beach, and in the U.K., principally Felixstowe.

For purchases that are to be delivered to its distribution facilities, the Company arranges for transportation, primarily by sea, from ports in Asia and Europe to ports in the United States, principally New York/Newark/Elizabeth and Los Angeles/Long Beach, and in the U.K., principally Felixstowe.

Accordingly, the Company is subject to risks incidental to such transportation.

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Transportation disruptions and increased transportation costs could materially adversely affect the Company’s business, results of operations and financial condition.

The Company depends on third-party manufacturers to produce the majority of its products, which presents quality control risks to the Company.

The Company depends on third-party manufacturers to produce the vast majority of its products, which presents quality control risks to the Company.

With the exception of the Company’s sterling silver products, the Company sources almost all of its products from suppliers located outside the United States, primarily in China, which restricts the Company’s ability to monitor and control their manufacture of the Company’s goods.

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The Company’s inability to come to favorable agreements with its suppliers or to pass increased costs through to the Company’s customers could materially and adversely affect its financial condition or results of operations.

A widespread outbreak of an illness or other health issue could negatively affect various aspects of the business, including the Company's supply chain, and make it more difficult and expensive to meet the Company's obligations to its customers, and could result in reduced demand from its customers.

The Company's global operations are susceptible to global events, including a widespread outbreak of an illness or other health issue, As a result of epidemic outbreaks businesses can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and

individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions.

A widespread outbreak of an illness, such as the COVID-19 pandemic, or other health issue could negatively affect various aspects of the business, including the Company's supply chain, and make it more difficult and expensive to meet the Company's obligations to its customers, and could result in reduced demand from its customers.

The Company's global operations are susceptible to global events, including a widespread outbreak of an illness, such as the COVID-19 outbreak, or other health issue, As a result of epidemic outbreaks businesses can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions.

Epidemic outbreaks could also substantially interfere with general commercial activity related to the Company's supply chain and customer base, which could have a material adverse effect on the Company's financial condition, results of operations, business, or prospects.

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The Company may need to resort to litigation to enforce or defend its intellectual property rights.

If a competitor or collaborator files a patent application claiming technology also claimed by the Company, or a trademark application claiming a trademark, service mark or trade dress also used by the Company, in order to protect the Company’s rights, the Company may have to participate in opposition

or interference proceedings before the U.S.

Patent and Trademark Office or a similar foreign agency.

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Any such matters or proceedings could be burdensome, divert the time and resources of the Company’s personnel and the Company may not prevail.

Furthermore, even if the Company’s intellectual property rights are not directly challenged, disputes among third parties could lead to the weakening or invalidation of the Company’s intellectual property rights, or other parties such as the Company’s competitors may independently develop technologies that are substantially equivalent or superior to the Company’s technology.

Company’s competitors may independently develop technologies that are substantially equivalent or superior to the Company’s technology.

The laws of certain foreign countries in which the Company operates or may operate in the future do not protect, and the governments of certain foreign countries do not enforce, intellectual property rights to the same extent as do the laws and government of the U.S., which may negate the Company’s competitive or technological advantages in such markets.

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These entities also bear risks similar to those risks faced by the Company.

However, there are specific additional risks related to these

organizations, such as the failure of the Company’s partners or other investors to meet their obligations and higher credit and liquidity risks related to thinly capitalized entities.

However, there are specific additional risks related to these organizations, such as the failure of the Company’s partners or other investors to meet their obligations and higher credit and liquidity risks related to thinly capitalized entities.

Failure of these entities or the Company’s vendors to adhere to required regulatory or other standards, including social compliance standards, could materially and adversely impact the Company’s reputation and business.

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The Company is required to comply with the United States Foreign Corrupt Practices Act (“FCPA”), the U.K.

Bribery Act and similar anti-bribery, anti-corruption and anti-kickback laws adopted in many of the countries in which the Company does business which prohibit the Company from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business and also require maintenance of adequate record-keeping and internal accounting practices to accurately reflect transactions.

Bribery Act and similar anti-bribery, anti-corruption and anti-kickback laws adopted in many of the countries in which the Company does business that prohibit the Company from engaging in bribery or making other prohibited payments to foreign officials for the purpose of obtaining or retaining business and also require maintenance of adequate record-keeping and internal accounting practices to accurately reflect transactions.

Under the FCPA, companies operating in the United States may be held liable for actions taken by their strategic or local partners or representatives.

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In many of the countries in which the Company operates, particularly those with developing economies, it is or has been common for government officials and businesses to engage in business practices that are prohibited by these laws.

If the Company does not properly implement and maintain practices and controls with respect to compliance with applicable anti-corruption, anti-bribery and anti-kickback laws, or if the Company fails to enforce those practices and controls properly, the Company may be subject to regulatory sanctions, including administrative costs related to governmental and internal investigations, civil and criminal penalties, injunctions and restrictions on the Company’s business and capital raising activities, any of which could materially and adversely affect the Company’s business, results

of operations and financial condition.

The Company’s employees, distributors, dealers and other agents could engage in conduct that is not in compliance with such laws for which the Company might be held responsible.

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These existing and future laws and regulations may impede the growth of the Internet, e-commerce or other online services.

These regulations and laws may cover taxation, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, broadband residential Internet access and the characteristics and quality of products and services.

These regulations and laws may cover taxation, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications,

consumer protection, the provision of online payment services, broadband residential Internet access and the characteristics and quality of products and services.

It is not clear how existing laws governing issues such as property ownership, sales and other taxes, and personal privacy apply to the Internet and e-commerce.

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The Company has made significant efforts to secure its computer network to mitigate the risk of possible cyber-attacks, including, but not limited to, data breaches, and is continuously working to upgrade its existing information technology systems and provide employee awareness training around phishing, malware, and other cyber risks to ensure that the Company is protected, to the greatest extent possible, against cyber risks and security breaches.

Despite these efforts security of the Company’s computer networks could be compromised which could impact operations and confidential information could be misappropriated, which could lead to negative publicity, loss of sales and profits or cause the Company to incur significant costs to reimburse third- parties for damages, which could adversely impact profits.

In the first quarter of 2021, we experienced a cyber security incident affecting our information technology systems.

The business disruption caused by the cyber incident was minimal.

Despite our continuous efforts to ensure the security of the Company’s computer networks, any future cyber incidents could compromise our information technology systems, which could impact operations and confidential information could be misappropriated, which could lead to negative publicity, loss of sales and profits or cause the Company to incur significant costs to reimburse third- parties for damages, which could adversely impact profits.

Additionally, the Company must comply with increasingly complex and rigorous regulatory standards enacted to protect businesses and personal data, including the General Data Protection Regulation (“GDPR”) and the California Consumer Privacy Act.

GDPR is a comprehensive European Union privacy and data protection reform, effective in 2018, which applies to companies that are organized in the European Union or otherwise provide services to consumers who reside in the European Union, and imposes strict standards regarding the sharing, storage, use, disclosure and protection of end user data and significant penalties (monetary and otherwise) for

non-compliance.

The California Consumer Privacy Act, which became effective in January 2020, created new data privacy rights, including a new private right of action for data breaches and requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices and allow consumers to opt out of certain data sharing with third parties.

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The Company is in the process of transitioning the Company's Systems, Applications and Products and other critical systems to cloud-based technologies.

As the Company transitions to cloud-based technologies, the Company may be exposed to additional cyber threats as the Company migrates from legacy systems to cloud-based solutions.

As the Company transitions to cloud-based technologies, the Company may be exposed to additional cyber threats

as the Company migrates from legacy systems to cloud-based solutions.

The Company's increased dependence on third parties for cloud-based systems may also subject the Company to further cyber threats.

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These include laws and regulations that govern:

• discharges to the air, water and land;

• discharges into the air, water and land;

• the handling and disposal of solid and hazardous substances and wastes;

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Although the Company believes that it is substantially in compliance with applicable environmental laws and regulations at its facilities, the Company may not always be in compliance with such laws and regulations or any new laws and regulations in the future, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Wallace EPA Matter

Wallace Silversmiths de Puerto Rico, Ltd.

(“WSPR”), a wholly-owned subsidiary of the Company, operates a manufacturing facility in San Germán, Puerto Rico that is leased from the Puerto Rico Industrial Development Company (“PRIDCO”).

In March 2008, the United States Environmental Protection Agency (the “EPA”) announced that the San Germán Ground Water Contamination site in Puerto Rico (the “Site”) had been added to the Superfund National Priorities List due to contamination present in the local drinking water supply.

In May 2008, WSPR received from the EPA a Notice of Potential Liability and Request for Information pursuant to 42 U.S.C.

Sections 9607(a) and 9604(e) of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”).

In July 2011, WSPR received a letter from the EPA requesting access to the property that it leases from PRIDCO to conduct an environmental investigation, and the Company granted such access.

In February 2013, the EPA requested access to conduct a further environmental investigation at the property.

PRIDCO agreed to such access and the Company consented.

The EPA conducted a further investigation

during 2013 and, in April 2015, notified the Company and PRIDCO that the results from vapor intrusion sampling may warrant the implementation of measures to mitigate potential exposure to sub-slab soil gas.

The Company reviewed the information provided by the EPA and requested that PRIDCO, as the property owner, find and implement a solution acceptable to the EPA.

While WSPR did not cause the sub-surface condition that resulted in the potential for vapor intrusion, in order to protect the health of its employees and continue its business operations, it has nevertheless implemented corrective action measures to prevent vapor intrusion, such as sealing the floors of the building and conducting periodic air monitoring to address potential exposure.

On August 13, 2015, the EPA released its remedial investigation and feasibility study (“RI/FS”) for the Site.

On December 11, 2015, the EPA issued the Record of Decision (“ROD”) for an initial operable unit, electing to implement its preferred remedy which consists of soil vapor extraction and dual-phase extraction/in-situ treatment.

This selected remedy includes soil vapor extraction (“SVE”) to address soil (vadose zone) source areas at the Site, impermeable cover as necessary for the implementation of SVE, dual phase extraction in the shallow saprolite zone, and in-situ treatment as needed to address residual sources.

The EPA’s total net present worth estimated cost for its selected remedy is $7.3 million.

The EPA also designated a second operable unit under which the EPA has and will continue to conduct further investigations to determine the nature and extent of groundwater contamination, as well as a determination by the EPA on the necessity of any further response actions to address groundwater contamination.

In February 2017, the EPA indicated that it planned to expand its field investigation for the RI/FS to a second operable unit to further determine the nature and extent of the groundwater contamination at and from the Site and to determine the nature of the remedial action needed to address the contamination.

The EPA has requested access to the property occupied by WSPR to install monitoring wells and to undertake groundwater sampling as part of this expanded investigation.

WSPR has consented to the EPA’s access request, provided that the EPA receives PRIDCO’s consent, as the property owner.

WSPR never used the primary contaminant of concern and did not take up its tenancy at the Site until after the EPA had discovered the contamination in the local water supply.

The EPA has also issued notices of potential liability to a number of other entities affiliated with the Site, which used the contaminants of concern.

In December 2018, the Company, WSPR, and other identified Potentially Responsible Parties affiliated with the Site entered into tolling agreements to extend the statute of limitations for potential claims for the recovery of response costs for the initial operable unit under Section 107 of CERCLA.

In February 2020, the tolling agreements were extended to November 2020.

The tolling agreements do not constitute in any way an admission or acknowledgment of any fact, conclusion of law or liability by the parties to the agreements.

The EPA released its proposed plan for a second operable unit in July 2019.

The public comment period for the proposed plan ended on September 10, 2019.

On September 30, 2019, the EPA issued the ROD for operable unit 2 (“OU-2”), electing to implement its preferred remedy which consists of in-situ treatment of groundwater and a monitored natural attenuation (MNA) program including monitoring of the plume fringe at the Site.

The EPA’s estimated total net present worth cost for its selected remedy is $17.3 million.

Accordingly, based on the above uncertainties and variables, it is not possible at this time for the Company to estimate its share of liability, if any, related to this matter.

However, in the event of one or more adverse determinations related to this matter, it is possible that the ultimate liability resulting from this matter and the impact on the Company’s results of operations could be material.

For further discussion of the Company's legal proceedings refer to NOTE 14 — COMMITMENTS AND CONTINGENCIES to the Company's consolidated financial statements included in this Annual Report on Form 10-K.

The Company’ executives and other key employees are critical to the Company’s success.

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(i) enter into any agreement for a transaction that would result in a change of control of the Company;

(ii) consummate any transaction for the sale of all or substantially all of the Company’s assets;

(ii) consummate any transaction for the sale of all or

substantially all of the Company’s assets;

(iii) file for reorganization pursuant to Chapter 11, or for liquidation pursuant to Chapter 7, of the U.S.

1 unchanged sentence

(iv) liquidate or dissolve the business and affairs of the Company;

(v) take any Board of Directors action

to seek an amendment to the Company’s Certificate of Incorporation or approve, or recommend that the Company’s stockholders approve, an amendment to the Company’s Amended and Restated Bylaws, except as required by Delaware Law (as defined in the merger agreement) or other applicable law and other than amendments that would not materially and disproportionately affect Taylor Parent;

(v) take any Board of Directors action to seek an amendment to the Company’s Certificate of Incorporation or approve, or recommend that the Company’s stockholders approve, an amendment to the Company’s Amended and Restated Bylaws, except as required by Delaware Law (as defined in the merger agreement) or other applicable law and other than amendments that would not materially and disproportionately affect Taylor Parent;

(vi) incur additional debt in excess of $100 million in the aggregate, subject to certain exceptions;

5 unchanged sentences

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-K

Item 1A. Risk Factors