What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 172 added, 171 removed, 289 unchanged (54% of the section changed)

2 unchanged sentences

(the “Company” and, unless the context otherwise requires, references to the “Company” shall include its consolidated subsidiaries), contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements.

These forward-looking statements include information concerning the Company’s plans, objectives, goals, strategies, future events, future revenues, performance, capital expenditures, financing needs and other information that is not historical information.

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The Company believes there is a reasonable basis for its expectations and assumptions, but there can be no assurance that the Company will realize its expectations or that the Company’s assumptions will prove correct.

There are a number of risks and uncertainties that could cause the Company’s actual results to differ materially from the forward-looking statements contained in this Quarterly Report.

Important factors that could cause the Company’s actual results to differ materially from those expressed as forward-looking statements are set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Annual Report on Form 10-K”) in Part I, Item 1A under the heading Risk Factors .

There are a number of risks and uncertainties that could cause the Company’s actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Important factors that could cause the Company’s actual results to differ materially from those expressed as forward-looking statements include, without limitation, those set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the “2020 Annual Report on Form 10-K”) in Part I, Item 1A under the heading Risk Factors, and in the Company’s subsequent filings with the U.S.

Securities and Exchange Commission (the “SEC”).

Such risks, uncertainties and other important factors include, among others, risks related to:

4 unchanged sentences

• Access to the capital markets and credit markets;

• The credit-worthiness of our customers and the counterparties to our derivatives;

• The credit-worthiness of the Company’s customers and the counterparties to its derivatives;

• Seasonality;

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Except as may be required by law, the Company undertakes no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

The Company is required to file its Annual Reports on Forms 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Form 8-K, and other reports and documents as required from time to time with the United States Securities and Exchange Commission (the “SEC”).

The Company also maintains a website at http://www.lifetimebrands.com .

Information contained on this website is not a part of or incorporated by reference into this Annual Report.

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.

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The Company owns or licenses a number of leading brands in its industry, including Farberware ® , Mikasa ® , Taylor ® , KitchenAid ® , KitchenCraft ® , Pfaltzgraff ® , Built NY ® , Rabbit ® , Kamenstein ® , and MasterClass®.

Historically, the Company’s sales growth has come from expanding product offerings within its product categories, by developing existing brands, acquiring new brands (including complementary brands in markets outside the U.S.), and establishing new product categories.

Historically, the Company’s sales growth has come from expanding product offerings within its product categories, developing existing brands, acquiring new brands (including complementary brands in markets outside the U.S.), and establishing new product categories.

Key factors in the Company’s growth strategy have been the selective use and management of the Company’s brands and the Company’s ability to provide a stream of new products and designs.

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EQUITY INVESTMENTS

As of June 30, 2021, the Company owns approximately 27% of the outstanding capital stock of Grupo Vasconia S.A.B.

As of September 30, 2021, the Company owned approximately 25% of the outstanding capital stock of Grupo Vasconia S.A.B.

(“Vasconia”), an integrated manufacturer of aluminum products and one of Mexico’s largest housewares companies.

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The Company accounts for its investment in Vasconia using the equity method of accounting and records its proportionate share of Vasconia’s net income in the Company’s condensed consolidated statements of operations.

Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired) for the three and six months ended June 30, 2021 and 2020 in the accompanying unaudited condensed consolidated statements of operations.

Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired) for the three and nine months ended September 30, 2021 and 2020 in the accompanying unaudited condensed consolidated statements of operations.

Pursuant to a Shares Subscription Agreement, the Company may designate four persons to be nominated as members of Vasconia’s Board of Directors.

As of June 30, 2021, Vasconia’s Board of Directors is comprised of eleven members of whom the Company has designated two members.

As of September 30, 2021, Vasconia’s Board of Directors is comprised of eleven members, of whom the Company has designated two members.

On June 30, 2021, Vasconia sold shares, which diluted the Company’s investment ownership from approximately 30% to approximately 27%.

The dilution in ownership did not change the Company's accounting for its investment in Vasconia and the Company continues to apply the equity method of accounting.

The Company recorded a non-cash gain of $1.7 million, increasing the Company’s investment balance.

Additionally, a loss of $2.0 million was recognized for the proportionate share of the diluted ownership for amounts previously recognized in accumulated other comprehensive loss.

The net loss of $0.3 million was included in equity in earnings (losses), net of taxes, in the accompanying unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2021.

On July 29, 2021, the Company sold 2.2 million shares further reducing its ownership of approximately 27% in Vasconia for net cash proceeds of approximately $3.0 million.

The Company estimates the gain on the sale, without consideration for income taxes, is $1.0 million.

The Company also estimates a non-cash loss of $1.4 million for amounts previously recognized in accumulated other comprehensive loss.

The net loss of $0.3 million was included in equity in earnings (losses), net of taxes, in the accompanying unaudited condensed consolidated statements of operations for the nine months ended September 30, 2021.

On July 29, 2021, the Company sold 2.2 million shares further reducing its ownership from approximately 27% to approximately 25% in Vasconia for net cash proceeds of approximately $3.1 million, as a result the Company recorded a gain of $1.0 million, after decreasing the Company’s investment balance.

The gain on the sale resulted in a tax expense of $0.1 million.

Additionally, a loss of $1.4 million was recognized for the proportionate share of the reduced ownership for amounts previously recognized in accumulated other comprehensive loss.

The net loss, including taxes, of $0.5 million was included in equity in earnings (losses), net of taxes, in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021.

The Company continues to apply the equity method of accounting.

The Company continues to explore opportunities to sell additional shares of its investment in Vasconia.

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RESTRUCTURING

During the three and six months ended June 30, 2021, the Company did not incur any restructuring expenses.

During the three and six months ended June 30, 2020, the Company's international segment incurred $0.3 million of restructuring expenses related to severance associated with the strategic reorganization of the international segment’s product development and sales workforce.

During the three and nine months ended September 30, 2021, the Company did not incur any restructuring expenses.

During the nine months ended September 30, 2020, the Company’s international segment incurred $0.3 million of restructuring expenses related to severance associated with the strategic reorganization of the international segment’s product development

and sales workforce.

The strategic reorganization is the result of the Company’s efforts to achieve product development efficiencies and a country tailored international sales approach.

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The Company has been impacted by these disruptions and has experienced higher inbound freight cost, delays in importing inventory due to limited availability of containers, and an increase in product costs.

The increasing costs trend is expected to impact the Company into the third and fourth quarter of fiscal year 2021.

In the U.S., there have been instances of limited trucking availability.

The increasing costs trend is expected to impact the Company into the fourth quarter of fiscal year 2021.

There have also been instances of limited trucking availability.

The Company has experienced instances of trucking shortages, which has resulted in delays of shipments to certain of its customers.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Goodwill and other impairments

Income (loss) from operations

Income from operations

9.6 9.6 6.9 0.1

4 unchanged sentences

8.0 7.8 5.1 (2.9)

Income tax (provision) benefit

Income tax provision

(2.5) (1.7) (1.7) (0.6)

4 unchanged sentences

MANAGEMENT’S DISCUSSION AND ANALYSIS

THREE MONTHS ENDED JUNE 30, 2021 COMPARED TO THE THREE MONTHS ENDED

JUNE 30, 2020

Consolidated net sales for the three months ended June 30, 2021 were $186.6 million, representing an increase of $36.5 million, or 24.3%, as compared to net sales of $150.1 million for the corresponding period in 2020.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2021 average rates to 2020 local currency amounts, consolidated net sales increased by $34.3 million, or 22.5%, as compared to consolidated net sales in the corresponding period in 2020.

THREE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED TO THE THREE MONTHS ENDED

SEPTEMBER 30, 2020

Consolidated net sales were $224.8 million for both the three months ended September 30, 2021 and 2020.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2021 average rates to 2020 local currency amounts, consolidated net sales decreased by $1.4 million, or 0.6%, as compared to consolidated net sales in the corresponding period in 2020.

Net sales for the U.S.

segment for the three months ended June 30, 2021 were $166.6 million, an increase of $34.0 million, or 25.6%, as compared to net sales of $132.6 million for the corresponding period in 2020.

segment for the three months ended September 30, 2021 were $197.7 million, a decrease of $3.8 million, or 1.9%, as compared to net sales of $201.5 million for the corresponding period in 2020.

Net sales for the U.S.

segment’s Kitchenware product category were $103.6 million for the three months ended June 30, 2021, an increase of $19.2 million, or 22.7%, as compared to $84.4 million for the corresponding period in 2020.

The increase was mainly driven by higher consumer demand, primarily in wholesale channels, for essential kitchen tools and gadgets and cutlery and board products.

The strong demand for these products has been a result of shifts in consumer purchasing patterns as consumers continue to spend more time at home.

segment’s Kitchenware product category were $113.4 million for the three months ended September 30, 2021, a decrease of $6.2 million, or 5.2%, as compared to $119.6 million for the corresponding period in 2020.

The decrease was mainly driven by lower sales due to supply chain constraints for kitchen tools and gadgets and cutlery and board products, partially offset by higher selling prices.

Net sales for the U.S.

segment’s Tableware product category were $37.3 million for the three months ended June 30, 2021, an increase of $13.7 million, or 58.0%, as compared to $23.6 million for the corresponding period in 2020.

The increase came from all product lines most notably on sales from a new flatware warehouse club program, continued recovery of sales to brick-and-mortar customers and higher dinnerware e-commerce sales.

segment’s Tableware product category were $51.7 million for the three months ended September 30, 2021, an increase of $0.4 million, or 0.8%, as compared to $51.3 million for the corresponding period in 2020.

The increase came from higher dinnerware e-commerce sales, partially offset by lower sales of flatware which was impacted by supply chain constraints.

Net sales for the U.S.

segment’s Home Solutions product category were $25.7 million for the three months ended June 30, 2021, an increase of $1.1 million, or 4.5%, as compared to $24.6 million for the corresponding period in 2020.

The increase was primarily driven by home décor and measurement product sales, partially offset by lower sales in the hydration product category due to a warehouse club program not repeating in 2021.

Net sales for the International segment were $20.1 million for the three months ended June 30, 2021, an increase of $2.6 million, or 14.9%, as compared to net sales of $17.5 million for the corresponding period in 2020.

segment’s Home Solutions product category were $32.6 million for the three months ended September 30, 2021, an increase of $1.9 million, or 6.2%, as compared to $30.7 million for the corresponding period in 2020.

The increase was primarily driven by a new private label hydration program and sales in the back-to-school lunch box category, offset by lower sales in the hydration product category due to a warehouse club program not repeating in 2021.

Net sales for the International segment were $27.1 million for the three months ended September 30, 2021, an increase of $3.9 million, or 16.8%, as compared to net sales of $23.2 million for the corresponding period in 2020.

In constant currency, which excludes the impact of foreign exchange fluctuations, net sales increased $2.5 million, or 10.0%, as compared to consolidated net sales in the corresponding period in 2020.

The increase in sales was primarily attributable to sales in the Company's global trading business in Asia, continued recovery of sales to brick-and-mortar retailers, offset by lower e-commerce sales.

Gross margin for the three months ended June 30, 2021 was $66.2 million, or 35.4%, as compared to $54.2 million, or 36.1%, for the corresponding period in 2020.

The increase was primarily attributable to increased sales in the Company’s global trading business in Asia, higher e-commerce sales, continued recovery of sales to brick-and-mortar retailers, and higher selling prices.

Gross margin for the three months ended September 30, 2021 was $83.1 million, or 37.0%, as compared to $78.8 million, or 35.1%, for the corresponding period in 2020.

Gross margin for the U.S.

segment was $59.6 million, or 35.8%, for the three months ended June 30, 2021, as compared to $49.8 million, or 37.6%, for the corresponding period in 2020.

The decrease in gross margin was primarily due to higher inbound freight costs, and product mix.

Gross margin for the International segment was $6.5 million, or 32.3%, for the three months ended June 30, 2021, as compared to $4.4 million, or 24.8%, for the corresponding period in 2020.

The increase in gross margin was driven by the comparable prior period being negatively impacted by higher inventory reserves, and customer mix.

segment was $74.5 million, or 37.7%, for the three months ended September 30, 2021, as compared to $71.7 million, or 35.6%, for the corresponding period in 2020.

Gross margin for the International segment was $8.6 million, or 31.7%, for the three months ended September 30, 2021, as compared to $7.0 million, or 30.2%, for the corresponding period in 2020.

The improvement in gross margin for the U.S.

and International segments was primarily driven by price increases, channel and product mix, partially offset by higher inventory cost.

Distribution expenses

Distribution expenses for the three months ended June 30, 2021 were $18.9 million, as compared to $15.2 million for the corresponding period in 2020.

Distribution expenses as a percentage of net sales were 10.1% for the three months ended June 30, 2021 as compared to 10.1% for the three months ended June 30, 2020.

Distribution expenses for the three months ended September 30, 2021 were $18.9 million, as compared to $19.0 million for the corresponding period in 2020.

Distribution expenses as a percentage of net sales were 8.4% for the three months ended September 30, 2021, as compared to 8.4% for the three months ended September 30, 2020.

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

segment were approximately 9.0% and 8.8% for the three months ended June 30, 2021 and 2020, respectively.

segment were approximately 7.2% and 7.6% for the three months ended September 30, 2021 and 2020, respectively.

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

warehouses distribution expenses were 9.4% and 9.0% for the three months ended June 30, 2021 and 2020, respectively.

The increase was a result of higher hourly labor rates and warehouse equipment and supply expenses, partially offset by the leverage benefit of fixed costs on higher sales volume.

Distribution expenses as a percentage of net sales for the International segment were 19.9% for the three months ended June 30, 2021 and 2020.

Distribution expenses during the three months ended June 30, 2020 include $0.3 million for the Company’s facility relocation costs.

warehouses, distribution expenses were 8.4% and 8.4% for the three months ended September 30, 2021 and 2020, respectively.

The improvement in expenses as a percentage of net sales was attributable to improved labor management, lower warehouse supply expenses in the current period, partially offset by higher hourly labor rates.

Distribution expenses as a percentage of net sales for the International segment were 17.5% for the three months ended September 30, 2021, compared to 15.5% for the corresponding period in 2020.

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

warehouses, excluding the moving and relocation costs for U.K.

operations, distribution expenses were 17.5% and 15.0% for the three months ended June 30, 2021 and 2020, respectively.

The increase was primarily attributed to increased shipping cost for products shipped from the U.K warehouse to continental Europe.

warehouse distribution expenses were 14.5% and 13.6% for the three months ended September 30, 2021 and 2020, respectively.

The increase was primarily attributed to increased shipping cost for products shipped from the U.K.

warehouse to continental Europe and higher cost due to transportation shortages.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended June 30, 2021 were $36.2 million, an increase of $1.8 million, or 5.2%, as compared to $34.4 million for the corresponding period in 2020.

Selling, general and administrative expenses for the three months ended September 30, 2021 were $42.5 million, an increase of $4.2 million, or 11.0%, as compared to $38.3 million for the corresponding period in 2020.

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

segment were $26.4 million for the three months ended June 30, 2021, as compared to $25.0 million for the corresponding period in 2020.

As a percentage of net sales, selling, general and administrative expenses were 15.8% and 18.9% for the three months ended June 30, 2021 and 2020, respectively.

was primarily attributable to lower expenses in the prior period due to the Company's savings initiative in response to the COVID-19 pandemic.

The increase was partially offset by lower allowances for bad debt.

The improvement in selling, general and administrative expense as a percentage of net sales is due to the leverage benefit of fixed costs on higher sales volume.

Selling, general and administrative expenses for the International segment were $4.2 million for the three months ended June 30, 2021, as compared to $4.4 million for the corresponding period in 2020.

The decrease was primarily attributable to lower selling expenses related to advertising and marketing.

Unallocated corporate expenses for the three months ended June 30, 2021 were $5.7 million, as compared to $5.0 million for the corresponding period in 2020.

The increase was driven by higher incentive compensation expense and reversal of temporary COVID-19 pandemic savings, partially offset by lower professional fees.

Restructuring expenses

During the three months ended June 30, 2020, the Company's international segment incurred $0.3 million of restructuring expenses related to severance associated with the strategic reorganization of the international segment’s product development and sales workforce.

The strategic reorganization is the result of the Company's efforts to achieve product development efficiencies and a country tailored international sales approach.

segment were $29.3 million for the three months ended September 30, 2021, as compared to $27.3 million for the corresponding period in 2020.

As a percentage of net sales, selling, general and administrative expenses were 14.8% and 13.5% for the three months ended September 30, 2021 and 2020, respectively.

The increase was primarily attributable to lower expenses in the prior period due to the Company's savings initiative in response to the COVID-19 pandemic.

Selling, general and administrative expenses for the International segment were $6.3 million for the three months ended September 30, 2021, as compared to $4.8 million for the corresponding period in 2020.

The increase was primarily attributable to foreign currency exchange losses and increased professional fees.

Unallocated corporate expenses for the three months ended September 30, 2021 were $6.9 million, as compared to $6.3 million for the corresponding period in 2020.

The increase was driven by higher incentive compensation expense, partially offset by lower professional fees.

Interest expense

Interest expense was $3.8 million for the three months ended June 30, 2021 and $4.2 million for the three months ended June 30, 2020.

Interest expense was $3.8 million for the three months ended September 30, 2021 and $4.1 million for the three months ended September 30, 2020.

The decrease in expense was a result of less debt outstanding.

Mark to market gain (loss) on interest rate derivatives

Mark to market gain on interest rate derivatives was $0.05 million for the three months ended June 30, 2021 as compared to a mark to market loss on interest rate derivatives of $0.2 million for the three months ended June 30, 2020.

Mark to market gain on interest rate derivatives was $0.1 million for both the three months ended September 30, 2021 and 2020.

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.

The current period gain was a result of slightly higher interest rates during the period.

The prior period loss was a result of declines in interest rates during that period.

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.

The intent of the Company is to hold these derivative contracts until their maturity.

Income tax provision of $1.8 million and $3.0 million for the three months ended June 30, 2021 and 2020, respectively, represent taxes on both U.S.

As of September 30, 2021, the intent of the Company is to hold these derivative contracts until their maturity.

Income tax provision of $5.6 million and $3.7 million for the three months ended September 30, 2021 and 2020, respectively, represent taxes on both U.S.

and foreign earnings at combined effective income tax provision rates of 31.1% and 21.2%, respectively.

The effective tax rate for the three months ended June 30, 2021 differs from the federal statutory income tax rate of 21% primarily due to state and local tax expense, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance, net of a benefit related to share based equity compensation.

The effective tax rate fo r the three months ended June 30, 2020 differs from the federal statutory income tax rate of 21% primarily due to the impact of the non-deductible portion of the goodwill impairment charge (recorded in the three months ended March 31, 2020), the reversal of a discrete benefit recorded in the three months ended March 31, 2020 for a favorable rate arbitrage related to a net operating loss carryback claim available under the CARES Act, which is no longer expected based on a revised estimate, and other permanent items.

The effective tax rate for the three months ended September 30, 2021 differs from the federal statutory income tax rate of 21% primarily due to state and local tax expense, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

The effective tax rate for the three months ended September 30, 2020 is consistent with the federal statutory income tax rate of 21.0% and includes an increase for state and local tax expense offset by other items that are not material.

Equity in earnings (losses)

Equity in earnings of Vasconia, net of taxes, was $0.7 million for the three months ended June 30, 2021, as compared to equity in losses of Vasconia, net of taxes, of $0.6 million for the three months ended June 30, 2020.

Vasconia reported income from operations of $6.5 million for the three months ended June 30, 2021, as compared to income from operations of $1.4 million for the three months ended June 30, 2020.

Equity in earnings of Vasconia, net of taxes, was $0.7 million for the three months ended September 30, 2021, as compared to equity in earnings of Vasconia, net of taxes, of $0.1 million for the three months ended September 30, 2020.

Vasconia reported income from operations of $3.9 million for the three months ended September 30, 2021, as compared to income from operations of $3.0 million for the three months ended September 30, 2020.

The increase in income from operations was primarily attributable to improved operating results in the current period in both Vasconia's kitchenware and aluminum divisions.

For the three months ended June 30, 2021, the Company recognized a net loss of $0.3 million related to the dilution of the Company's ownership in its Vasconia investment.

The net loss was comprised of a loss of $2.0 million, related to amounts that were previously recognized in accumulated other comprehensive loss, net of a non-cash gain of $1.7 million for the difference between the selling price and the Company's basis in the diluted shares.

During the three months ended June 30, 2020, the Company recognized a loss of $0.2 million, relating to cumulative translation foreign currency losses that were recognized to earnings upon the dissolution of Lifetime Brands Do Brasil Participacoes Ltda.,

a 100% owned foreign subsidiary.

The foreign currency translation losses related to the notes receivable due to the company from the 2016 sale of its equity interest in GS International S/A.

For the three months ended September 30, 2021, the Company recognized a net loss, including taxes, of $0.5 million related to a partial sale of the Company’s ownership in its Vasconia investment.

The net loss was comprised of a gain of $1.0 million, for the difference between the selling price and the Company’s basis in the sale of shares, offset by tax expense of $0.1 million and a loss of $1.4 million, related to amounts previously recognized in accumulated other comprehensive loss.

MANAGEMENT’S DISCUSSION AND ANALYSIS

SIX MONTHS ENDED JUNE 30, 2021 COMPARED TO THE SIX MONTHS ENDED

JUNE 30, 2020

Consolidated net sales for the six months ended June 30, 2021 were $382.3 million, representing an increase of $87.1 million, or 29.5%, as compared to net sales of $295.2 million for the corresponding period in 2020.

NINE MONTHS ENDED SEPTEMBER 30, 2021 COMPARED TO THE NINE MONTHS ENDED

SEPTEMBER 30, 2020

Consolidated net sales for the nine months ended September 30, 2021 were $607.1 million, an increase of $87.1 million, or 16.8%, as compared to net sales of $520.0 million for the corresponding period in 2020.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2021 average rates to 2020 local currency amounts, consolidated net sales increased by $82.5 million, or 15.7%, as compared to consolidated net sales in the corresponding period in 2020.

Net sales for the U.S.

segment for the six months ended June 30, 2021 were $342.8 million, an increase of $81.0 million, or 30.9%, as compared to net sales of $261.8 million for the corresponding period in 2020.

segment for the nine months ended September 30, 2021 were $540.5 million, an increase of $77.2 million, or 16.7%, as compared to net sales of $463.3 million for the corresponding period in 2020.

Net sales for the U.S.

segment’s Kitchenware product category were $223.6 million for the six months ended June 30, 2021, an increase of $59.9 million, or 36.6%, as compared to $163.7 million for the corresponding period in 2020.

The increase was mainly driven by higher consumer demand, in both e-commerce and wholesale channels, for essential kitchen tools and gadgets, cutlery and board and bakeware products.

segment’s Kitchenware product category were $337.1 million for the nine months ended September 30, 2021, an increase of $53.8 million, or 19.0%, as compared to $283.3 million for the corresponding period in 2020.

The increase was mainly driven by higher consumer demand, in both e-commerce and wholesale channels, for essential kitchen tools and

gadgets, cutlery and board and bakeware products, and higher selling prices.

The increase was partially offset by lower sales due to supply chain constraints for kitchen tools and gadgets and cutlery and board products.

The strong demand for these products has been a result of shifts in consumer purchasing patterns as consumers continue to spend more time at home.

Net sales for the U.S.

segment’s Tableware product category were $67.5 million for the six months ended June 30, 2021, an increase of $20.3 million , or 43.0%, as compared to $47.2 million for the corresponding period in 2020.

segment’s Tableware product category were $119.2 million for the nine months ended September 30, 2021, an increase of $20.7 million, or 21.0%, as compared to $98.5 million for the corresponding period in 2020.

The increase came from all product lines, most notably on sales from a new flatware warehouse club program, continued recovery of sales to brick-and-mortar customers and higher dinnerware e-commerce sales.

Net sales for the U.S.

segment’s Home Solutions product category were $51.6 million for the six months ended June 30, 2021, an increase of $0.7 million, or 1.4%, as compared to $50.9 million for the corresponding period in 2020.

Net sales for the International segment were $39.5 million for the six months ended June 30, 2021, an increase of $6.1 million, or 18.3%, as compared to net sales of $33.4 million for the corresponding period in 2020.

segment’s Home Solutions product category were $84.2 million for the nine months ended September 30, 2021, an increase of $2.7 million, or 3.3%, as compared to $81.5 million for the corresponding period in 2020.

The increase was primarily driven by home décor, a new private label hydration program and sales in the back-to-school lunch box category.

The increase was partially offset by lower sales in the hydration product category due to a warehouse club program not repeating in 2021.

Net sales for the International segment were $66.6 million for the nine months ended September 30, 2021, an increase of $10.0 million, or 17.7%, as compared to net sales of $56.6 million for the corresponding period in 2020.

In constant currency, which excludes the impact of foreign exchange fluctuations, net sales increased $5.5 million, or 9.1%, as compared to consolidated net sales in the corresponding period in 2020.

The increase in sales was primarily attributable to sales in the Company's global trading business in Asia, and continued recovery of sales to brick-and-mortar retailers, partially offset by lower e-commerce sales.

Gross margin for the six months ended June 30, 2021 was $132.2 million, or 34.6%, as compared to $107.1 million, or 36.3%, for the corresponding period in 2020.

The increase in sales was primarily attributable to sales in the Company’s global trading business in Asia, continued recovery of sales to brick-and-mortar retailers, and higher selling prices, partially offset by lower e-commerce sales.

Gross margin for the nine months ended September 30, 2021 was $215.3 million, or 35.5%, as compared to $185.9 million, or 35.8%, for the corresponding period in 2020.

Gross margin for the U.S.

segment was $119.4 million, or 34.8%, for the six months ended June 30, 2021, as compared to $99.1 million, or 37.9%, for the corresponding period in 2020.

segment was $193.9 million, or 35.9%, for the nine months ended September 30, 2021, as compared to $170.9 million, or 36.9%, for the corresponding period in 2020.

The decrease in gross margin was primarily due to higher inbound freight costs, product mix and the inclusion in the 2020 period of a benefit from a duty exclusion on certain products.

Gross margin for the International segment was $12.7 million, or 32.2%, for the six months ended June 30, 2021, as compared to $8.0 million, or 23.9%, for the corresponding period in 2020.

The decrease was partially offset by higher prices.

Gross margin for the International segment was $21.4 million, or 32.1%, for the nine months ended September 30, 2021, as compared to $15.0 million, or 26.5%, for the corresponding period in 2020.

The increase was driven by the comparable prior period being negatively impacted by higher sales allowances and inventory reserves, and customer mix.

In addition, higher prices, partially offset by increased inbound freight costs contributed to the improvement.

Distribution expenses

Distribution expenses for the six months ended June 30, 2021 were $37.6 million, as compared to $31.7 million for the corresponding period in 2020.

Distribution expenses as a percentage of net sales were 9.8% for the six months ended June 30, 2021, as compared to 10.8% for the six months ended June 30, 2020.

Distribution expenses for the nine months ended September 30, 2021 were $56.5 million, as compared to $50.7 million for the corresponding period in 2020.

Distribution expenses as a percentage of net sales were 9.3% for the nine months ended September 30, 2021, as compared to 9.8% for the nine months ended September 30, 2020.

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

segment were approximately 8.8% and 9.3% for the six months ended June 30, 2021 and 2020, respectively.

segment were approximately 8.2% and 8.6% for the nine months ended September 30, 2021 and 2020, respectively.

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

warehouses distribution expenses were 9.1% and 9.4% for the six months ended June 30, 2021 and 2020, respectively.

The improvement was a result of the leverage benefit of fixed costs on higher sales volume, partially offset by higher hourly labor rates and warehouse equipment and supply expenses.

Distribution expenses as a percentage of net sales for the International segment were 18.6% for the six months ended June 30, 2021, compared to 22.2% for the corresponding period in 2020.

Distribution expenses during the six months ended June 30, 2020 include $1.1 million for the Company’s facility relocation costs.

warehouses, distribution expenses were 8.9% and 9.0% for the nine months ended September 30, 2021 and 2020, respectively.

The improvement was a result of the leverage benefit of fixed costs on higher sales volume, improved labor management, partially offset by higher hourly labor rates and warehouse supply expenses.

Distribution expenses as a percentage of net sales for the International segment were 18.1% for the nine months ended September 30, 2021, compared to 19.5% for the corresponding period in 2020.

Distribution expenses during the nine months ended September 30, 2020 include $1.1 million for the Company’s facility relocation costs.

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

warehouses, excluding the moving and relocation costs for U.K.

operations, distribution expenses were 15.9% and 15.5% for the six months ended June 30, 2021 and 2020, respectively.

The increase was primarily attributed to increased shipping cost for products shipped from the U.K warehouse to continental Europe.

warehouse, excluding the moving and relocation costs for U.K.

operations, distribution expenses were 15.4% and 14.7% for the nine months ended September 30, 2021 and 2020, respectively.

The increase was primarily attributed to increased shipping cost for products shipped from the U.K.

warehouse to continental Europe and higher cost due to transportation shortages.

Selling, general and administrative expenses

Selling, general and administrative expenses for the six months ended June 30, 2021 were $74.3 million, a decrease of $1.6 million, or 2.1%, as compared to $75.9 million for the corresponding period in 2020.

Selling, general and administrative expenses for the nine months ended September 30, 2021 were $116.9 million, an increase of $2.6 million, or 2.3%, as compared to $114.3 million for the corresponding period in 2020.

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

segment were $53.8 million for the six months ended June 30, 2021, as compared to $55.4 million for the corresponding period in 2020.

As a percentage of net sales, selling, general and administrative expenses were 15.7% and 21.2% for the six months ended June 30, 2021 and 2020, respectively.

The decrease was primarily attributable to lower estimates for bad debt expense and selling and facility expenses which was partially offset by an increase in incentive compensation.

segment were $83.2 million for the nine months ended September 30, 2021, as compared to $82.7 million for the corresponding period in 2020.

As a percentage of net sales, selling, general and

administrative expenses were 15.4% and 17.8% for the nine months ended September 30, 2021 and 2020, respectively.

The increase was primarily attributable to higher incentive compensation, and lower expenses in the prior period due to the Company’s savings initiative in response to the COVID-19 pandemic.

The increase was partially offset by lower estimates for bad debt expense and facility expenses recorded in the current period.

The improvement in selling, general and administrative expense as a percentage of net sales is due to the leverage benefit of fixed costs on higher sales volume.

Selling, general and administrative expenses for the International segment were $9.2 million for the six months ended June 30, 2021, as compared to $10.8 million for the corresponding period in 2020.

The decrease was primarily attributable to lower estimates for bad debt expense, and lower employee expenses due to a reduction in headcount.

Unallocated corporate expenses for the six months ended June 30, 2021 were $11.4 million, as compared to $9.7 million for the corresponding period in 2020.

The increase was driven by higher incentive compensation expense.

Selling, general and administrative expenses for the International segment were $15.5 million for the nine months ended September 30, 2021, as compared to $15.7 million for the corresponding period in 2020.

The decrease was primarily attributable to lower selling expenses related to advertising and lower estimates for bad debt expense.

The decrease was partially offset by unfavorable foreign currency exchange losses.

Unallocated corporate expenses for the nine months ended September 30, 2021 were $18.2 million, as compared to $15.9 million for the corresponding period in 2020.

The increase was driven by higher incentive compensation expense, partially offset by lower professional fees.

Restructuring expenses

During the six months ended June 30, 2020, the Company's international segment incurred $0.3 million of restructuring expenses related to severance associated with the strategic reorganization of the international segment’s product development and sales workforce.

The strategic reorganization is the result of the Company’s efforts for product development efficiencies and a country tailored international sales approach.

Goodwill and infinite-lived intangible asset impairment

During the six months ended June 30, 2020, the Company recorded a $20.1 million non-cash goodwill and intangible asset impairment charge related to the U.S.

During the nine months ended September 30, 2020, the Company recorded a $20.1 million non-cash goodwill and intangible asset impairment charge related to the U.S.

reporting unit.

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Interest expense

Interest expense was $7.8 million for the six months ended June 30, 2021 and $9.0 million for the six months ended June 30, 2020.

Interest expense was $11.7 million for the nine months ended September 30, 2021 and $13.1 million for the nine months ended September 30, 2020.

The decrease in expense was a result of less debt outstanding.

Mark to market gain (loss) on interest rate derivatives

Mark to market gain on interest rate derivatives was $0.5 million for the six months ended June 30, 2021 as compared to a mark to market loss on interest rate derivatives of $2.4 million for the six months ended June 30, 2020.

Mark to market gain on interest rate derivatives was $0.7 million for the nine months ended September 30, 2021, as compared to a mark to market loss on interest rate derivatives of $2.3 million for the nine months ended September 30, 2020.

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.

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The prior period loss was a result of declines in interest rates during that period.

The intent of the Company is to hold these derivative contracts until their maturity.

Income tax provision for the six months ended June 30, 2021 was $4.2 million as compared to an income tax benefit of $0.7 million for the corresponding period in 2020.

The Company's effective income tax provision rate for the six months ended June 30, 2021 was 32.8% as compared to an income tax benefit rate of 2.2% for the corresponding 2020 period.

The effective tax rate for the six months ended June 30, 2021 differs from the federal statutory income tax rate of 21% primarily due to state and local tax expense, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance, net of a benefit related to share based equity compensation.

The effective tax rate for the six months ended June 30, 2020 differs from the federal statutory income tax rate of 21% primarily due to the impact of the non-deductible portion of the goodwill impairment charge (recorded in the three months ended March 31, 2020) and other permanent items.

As of September 30, 2021, the intent of the Company is to hold these derivative contracts until their maturity.

Income tax provision of $9.8 million and $3.0 million for the nine months ended September 30, 2021 and 2020, respectively, represent taxes on both US and foreign earnings at combined effective income tax provision rates of 31.8% and (20.3)%, respectively.

The negative rate for the nine months ended September 30, 2020 reflects tax expense on a pretax financial reporting loss.

The effective tax rate for the nine months ended September 30, 2021 differs from the federal statutory income tax rate of 21% primarily due to state and local tax expense, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

The effective tax rate for the nine months ended September 30, 2020 differs from the federal statutory income tax rate of 21% primarily due to state and local tax expense, equity based awards, and the non-deductible portion of the goodwill impairment recorded in the three months ended March 31, 2020.

Equity in earnings (losses)

Equity in earnings of Vasconia, net of taxes, was $0.5 million for the six months ended June 30, 2021, as compared to equity in losses of Vasconia, net of taxes, of $0.3 million for the six months ended June 30, 2020.

Vasconia reported income from operations of $10.3 million for the six months ended June 30, 2021, as compared to income from operations of $0.9 million for the six months ended June 30, 2020.

Equity in earnings of Vasconia, net of taxes, was $1.2 million for the nine months ended September 30, 2021, as compared to equity in losses of Vasconia, net of taxes, of $0.2 million for the nine months ended September 30, 2020.

Vasconia reported income from operations of $14.2 million for the nine months ended September 30, 2021, as compared to income from operations of $3.8 million for the nine months ended September 30, 2020.

The increase in income from operations was primarily attributable to improved operating results in the current period in both Vasconia's kitchenware and aluminum divisions.

For the six months ended June 30, 2021, the Company recognized a net loss of $0.3 million related to the dilution of the Company's ownership in its Vasconia investment.

During the nine months ended September 30, 2021, the Company's ownership in its equity method investment decreased as a result of a dilution of its investment in Vasconia and a subsequent partial sale of its investment.

The Company recognized a net loss of $0.3 million related to the dilution of the Company's ownership in its Vasconia investment.

During the six months ended June 30, 2020, the Company recognized a loss of $0.2 million, relating to cumulative translation foreign currency losses that were recognized to earnings upon the dissolution of Lifetime Brands Do Brasil Participacoes Ltda., a 100% owned foreign subsidiary.

Additionally, the Company recognized a net loss of $0.5 million related to a partial sale of the Company’s ownership in its Vasconia investment.

During the nine months ended September 30, 2020, the Company recognized a loss of $0.2 million, relating to cumulative translation foreign currency losses that were recognized to earnings upon the dissolution of Lifetime Brands Do Brasil Participacoes Ltda., a 100% owned foreign subsidiary.

The foreign currency translation losses related to the notes receivable due to the Company from the 2016 sale of its equity interest in GS International S/A.

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

At June 30, 2021, the Company had cash and cash equivalents of $33.3 million, compared to $36.0 million at December 31, 2020.

Working capital was $225.6 million at June 30, 2021, compared to $241.2 million at December 31, 2020.

Liquidity, which includes cash and cash equivalents and availability under the ABL Agreement, was approximately $179.9 million at June 30, 2021.

At September 30, 2021, the Company had cash and cash equivalents of $8.7 million, compared to $36.0 million at December 31, 2020.

Working capital was $251.5 million at September 30, 2021, compared to $241.2 million at December 31, 2020.

Liquidity, which includes cash and cash equivalents and availability under the ABL Agreement, was approximately $153.8 million at September 30, 2021.

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 June 30, 2021, inventory turnover was 2.3 times, or 162 days, as compared to 2.3 times, or 157 days, for the three months ended June 30, 2020.

For the three months ended September 30, 2021, inventory turnover was 2.4 times, or 154 days, as compared to 3.1 times, or 119 days, for the three months ended September 30, 2020.

The decrease in inventory turnover was attributable to higher inventory costs and increased inventory investment in the current period.

The Company believes that availability under the revolving credit facility under its ABL Agreement, cash on hand and cash flows from operations are sufficient to fund the Company’s operations for the next twelve months.

However, if circumstances were to adversely change, the Company may seek alternative sources of liquidity including debt and/or equity financing.

However, there can be no assurance that any such alternative sources would be available or sufficient.

However, there can be no assurance that any such alternative sources would be available or sufficient or on terms favorable to the Company.

The Company closely monitors the creditworthiness of its customers.

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The Term Loan requires the Company to make an annual prepayment of principal 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 our debt agreements).

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, lenders have the option to decline a portion or all of the prepayment amount.

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Additionally, the Term Loan facility requires quarterly payments, which commenced on June 30, 2018, of principal equal to 0.25% of the original aggregate principal amount of the Term Loan facility.

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.

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.

The quarterly principal payments have been satisfied through maturity of the Term Loan by the annual Excess Cash Flow payments.

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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 pursuant to the Term Loan, is no greater than 3.75 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan.

As of June 30, 2021 and December 31, 2020, the total availability under the ABL Agreement was as follows (in thousands):

June 30, 2021

As of September 30, 2021 and December 31, 2020, the total availability under the ABL Agreement was as follows (in thousands):

September 30, 2021

December 31, 2020

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

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Current portion of Term Loan facility:

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Total Non-current portion of Term Loan facility $ 238,729 $ 238,977

The estimated Excess Cash Flow principal payment recorded at June 30, 2021 represents the Company's estimate for the 2022 Excess Cash Flow payment.

The estimated Excess Cash Flow principal payment recorded at September 30, 2021 represents the Company’s estimate for the 2022 Excess Cash Flow payment.

The 2021 Excess Cash Flow payment, paid on March 30, 2021, totaled $10.5 million.

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subsidiary guarantors, subject to certain exceptions.

Such security interest consists of (1) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and its domestic subsidiaries (the “ABL Collateral”) pledged as collateral in favor of lenders under the ABL Agreement and a second-priority lien in the ABL Collateral in favor of the lenders under the Term Loan and (2) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and its domestic subsidiaries (the “Term Loan Collateral”) pledged as collateral in favor of lenders under the Term Loan and a second-priority lien in the Term Loan Collateral in favor of the lenders under the ABL Agreement.

pledged as collateral in favor of lenders under the Term Loan and a second-priority lien in the Term Loan Collateral in favor of the lenders under the ABL Agreement.

Borrowings under the ABL Agreement bear interest, at the Company’s option, at one of the following rates:

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The respective margins are based upon the Company’s total leverage ratio, as defined in and computed pursuant to the ABL Agreement.

There were no outstanding borrowings under the ABL Agreement at June 30, 2021.

The interest rate on outstanding borrowings under the ABL Agreement at September 30, 2021 was 3.5%.

In addition, the Company pays a commitment fee of 0.375% on the unused portion of the ABL Agreement.

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(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 LIBOR, but not less than 1.0%, plus 1.0%, which alternate base rate shall not be less than 2%, plus a margin of 2.5% or (ii) LIBOR, but not less than 1%, plus a margin of 3.5%.

The interest rate on outstanding borrowings under the Term Loan at June 30, 2021 was 4.5%.

The interest rate on outstanding borrowings under the Term Loan at September 30, 2021 was 4.5%.

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 $15.0 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 $15.0 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 June 30, 2021.

The Company was in compliance with the covenants of the Debt Agreements at September 30, 2021.

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 following is the Company’s adjusted EBITDA, for the last four fiscal quarters:

Adjusted EBITDA for the Four Quarters Ended June 30, 2021

(in thousands)

Three months ended June 30, 2021 $ 18,166

Three months ended March 31, 2021 16,830

Three months ended December 31, 2020 32,458

Three months ended September 30, 2020 29,228

Adjusted EBITDA for the twelve months ended June 30, 2021 $ 96,682

Capital expenditures for the six months ended June 30, 2021 were $2.5 million.

The Company’s adjusted EBITDA, for the last twelve months ended September 30, 2021 was $96.7 million.

Capital expenditures for the nine months ended September 30, 2021 were $3.4 million.

Non-GAAP financial measure

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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, as reported, to adjusted EBITDA, for each of the last four quarters and the 12 months ended June 30, 2021:

Three Months Ended Twelve Months Ended June 30, 2021

September 30, 2020 December 31,

2020 March 31,

The following is a reconciliation of the net income, as reported, to adjusted EBITDA, for each of the last four quarters and the 12 months ended September 30, 2021:

Quarter Ended Twelve Months Ended September 30, 2021

December 31, 2020 March 31,

2021 June 30,

2021 September 30,

(in thousands)

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126 182 72 41 421

Restructuring expenses (benefit)

Restructuring benefit

(42) — — — (42)

Wallace facility remedial design expense — — — 500 500

Adjusted EBITDA $ 32,458 $ 16,830 $ 18,166 $ 29,259 $ 96,713

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

Pursuant to this agreement, the Company sold to HSBC $38.9 million and $79.5 million of receivables during the three and six months ended June 30, 2021, respectively and $36.0 million and $73.9 million of receivables during the three and six months ended June 30, 2020, respectively.

Charges of $0.1 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for each of thethree months ended June 30, 2021 and 2020.

Charges of $0.2 million and $0.3 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021 and 2020, $14.6 million and $20.8 million, respectively, of receivables sold were outstanding and due to HSBC from customers.

Pursuant to the Receivable Purchase Agreement, the Company sold to HSBC $33.7 million and $113.2 million of receivables during the three and nine months ended September 30, 2021, respectively, and $43.0 million and $116.9 million of receivables during the three and nine months ended September 30, 2020, respectively.

Charges of $0.1 million and $0.3 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021, respectively.

Charges of $0.1 million and $0.4 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2020, respectively.

At September 30, 2021 and 2020, $15.8 million and $26.7 million, respectively, of receivables sold were outstanding and due to HSBC from customers.

Interest Rate Swaps

The Company's total outstanding notional value of interest rate swaps was $75.0 million at June 30, 2021.

The Company's total outstanding notional value of interest rate swaps was $75.0 million at September 30, 2021.

The Company designated a portion of these interest rate swaps 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.

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The original notional values are reduced over these periods.

The aggregate notional value of designated interest rate swaps was $50.0 million at June 30, 2021.

In June 2019, the Company entered into additional interest rate swap agreements, with an aggregate notional value of $25.0 million at June 30, 2021.

The aggregate notional value of designated interest rate swaps was $50.0 million at September 30, 2021.

In June 2019, the Company entered into additional interest rate swap agreements, with an aggregate notional value of $25.0 million at September 30, 2021.

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 and expire in February 2025.

Foreign Exchange Contracts

The Company is a party from time to time to certain foreign exchange contracts, primarily to offset the earnings impact related to fluctuations in foreign currency exchange rates associated with inventory purchases denominated in foreign currencies.

Fluctuations in the value of certain foreign currencies as compared to the U.S.

dollar may positively or negatively affect the Company’s revenues, gross margins, operating expenses, and retained earnings, all of which are expressed in USD.

The Company is party from time to time to certain foreign exchange contracts, primarily to offset the earnings impact related to fluctuations in foreign currency exchange rates associated with inventory purchases denominated in foreign currencies.

Fluctuations in the value of certain foreign currencies as compared to the USD may positively or negatively affect the Company’s revenues, gross margins, operating expenses, and retained earnings, all of which are expressed in USD.

Where the Company deems it prudent, the Company engages in hedging programs using foreign currency forward contracts aimed at limiting the impact of foreign currency exchange rate fluctuations on earnings.

The Company purchases short-term (i.e., 12 months or less) foreign currency forward contracts to protect against currency exchange risks associated with the payment of merchandise purchases to foreign suppliers.

The Company purchases foreign currency forward contracts with terms less than 18 months to protect against currency exchange risks associated with the payment of merchandise purchases to foreign suppliers.

The Company does not hedge the translation of foreign currency profits into USD, as the Company regards this as an accounting exposure rather than an economic exposure.

The aggregate gross notional values of foreign exchange contracts at June 30, 2021 was $10.8 million.

The aggregate gross notional values of foreign exchange contracts at September 30, 2021 was $31.3 million.

These foreign exchange contracts have been designated as hedges in order to apply hedge accounting.

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All foreign currency forward contracts that the Company enters into are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure.

The Company does not enter into such contracts for speculative purposes and as of June 30, 2021, the Company does not have any foreign currency forward contract derivatives that are not designated as hedges.

The Company does not enter into such contracts for speculative purposes, and as of September 30, 2021, the Company did not have any foreign currency forward contract derivatives that are not designated as hedges.

Operating activities

Net cash provided by operating activities was $42.1 million for the six months ended June 30, 2021, as compared to net cash provided by operating activities of $66.2 million for the six months ended June 30, 2020.

The decrease from 2021 compared to 2020 was attributable to a higher investment in inventory, and timing of payment for accounts payable and accrued expenses in the current period as the comparable period reflected cost savings initiatives and payment deferral strategies utilized in response to the COVID-19 pandemic.

This was partially offset by timing of collections related to the Company's accounts receivables.

Net cash provided by operating activities was $14.6 million for the nine months ended September 30, 2021, as compared to net cash provided by operating activities of $49.2 million for the nine months ended September 30, 2020.

The decrease from 2021 compared to 2020 was attributable to an increased investment in inventory and timing of payment for accounts payable and accrued expenses.

The timing of payment for accounts payable and accrued expenses in the comparable period reflected cost savings initiatives and payment deferral strategies utilized in response to the COVID-19 pandemic.

The decrease in net cash provided by operating actives was partially offset by timing of collections related to the Company’s accounts receivables.

Investing activities

Net cash used in investing activities was $2.7 million and $1.4 million for the six months ended June 30, 2021 and 2020, respectively.

Net cash used in investing activities was $0.5 million and $1.6 million for the nine months ended September 30, 2021 and 2020, respectively.

The nine months ended September 30, 2021 included $3.1 million of proceeds received from a partial sale of the Company’s investment in its equity method investment, offset by cash used for purchases of property and equity of $3.4 million.

Financing activities

Net cash used in financing activities was $42.2 million for the six months ended June 30, 2021, as compared to net cash used in financing activities of $12.3 million for the six months ended June 30, 2020.

Net cash used in financing activities was $41.5 million for the nine months ended September 30, 2021, as compared to net cash used in financing activities of $16.2 million for the nine months ended September 30, 2020.

The change was mainly attributable to repayments on the Company’s revolving credit facility under its ABL Agreement in the 2021 period compared to proceeds received in the 2020 period.

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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