What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-03 · 179 added, 181 removed, 285 unchanged (56% of the section changed)

24 unchanged sentences

• Technology, cybersecurity and data privacy risks;

• Geopolitical conditions, including war, conflict, unrest and sanctions, including those related to the conflict in Ukraine;

• Geopolitical conditions, including war, conflict, unrest and sanctions, including those related to the conflicts in Ukraine, Israel and surrounding areas;

• Product liability claims;

26 unchanged sentences

RECENT DEVELOPMENTS

The global economy is experiencing relatively high inflation, which has in part been caused by the supply chain disruptions and higher consumer spending.

The rise in inflation is contributing to higher prices, which may result in increased transportation and labor cost and consumer spending and buying patterns.

The global economy continues to experience relatively high inflation, which has in part been caused by the supply chain disruptions and higher consumer spending.

The rise in inflation has contributed to higher prices, resulting in increased transportation and labor cost and consumer spending and buying patterns.

Retailers have responded to the economic challenges by rightsizing inventory levels, and further reducing safety stock and weekly supply on hand.

The recent rise in interest rates has lessened inflationary pressures in the U.S., but has also resulted in higher interest expense on the Company’s outstanding borrowings.

Further, the U.K.

8 unchanged sentences

Management evaluates the performance of the U.S.

and International segments based on net sales and income (loss) from operations.

and International segments based on net sales and income from operations.

Such measures give recognition to specifically identifiable operating costs such as cost of sales, distribution expenses and selling, general and administrative expenses.

1 unchanged sentence

EQUITY INVESTMENT

As of June 30, 2023, the Company owned 24.7% of the outstanding capital stock of Grupo Vasconia S.A.B.

As of September 30, 2023, the Company owned 24.7% 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.

1 unchanged sentence

The Quotation Key is VASCONI.

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, 2023 and 2022 in the accompanying unaudited condensed consolidated statements of operations.

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 nine months ended September 30, 2023 and 2022 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 (the "Vasconia Board").

As of June 30, 2023, the Vasconia Board was comprised of eleven members, of whom the Company had no designated members.

As of September 30, 2023, the Vasconia Board was comprised of eleven members, of whom the Company had no designated members.

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

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

4 unchanged sentences

Selling, general and administrative expenses 21.0 19.5 23.6 21.9

Wallace facility remediation expense — 2.8 — 1.0

Restructuring expenses — — 0.1 —

Income (loss) from operations

Income from operations

7.1 4.1 3.4 2.2

Interest expense (2.7) (2.5) (3.4) (2.3)

Mark to market gain (loss) on interest rate derivatives

Mark to market (loss) gain on interest rate derivatives

(0.1) 0.4 — 0.4

Gain on early retirement of debt — — 0.3 —

Income (loss) before income taxes and equity in (losses) earnings

Income before income taxes and equity in losses

4.3 2.0 0.3 0.3

Income tax (provision) benefit

Income tax provision

(1.6) (1.0) (0.6) (0.7)

Equity in (losses) earnings, net of taxes

Equity in losses, net of taxes

(0.5) (4.4) (2.0) (1.4)

Net income (loss)

2.2 % (3.4) % (2.3) % (1.8) %

MANAGEMENT’S DISCUSSION AND ANALYSIS

THREE MONTHS ENDED JUNE 30, 2023 COMPARED TO THE THREE MONTHS ENDED

JUNE 30, 2022

Consolidated net sales for the three months ended June 30, 2023 were $146.4 million, representing a decrease of $4.9 million, or 3.2%, as compared to net sales of $151.3 million for the corresponding period in 2022.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2023 average rates to 2022 local currency amounts, consolidated net sales decreased by $5.3 million, or 3.5%, as compared to consolidated net sales in the corresponding period in 2022.

THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THE THREE MONTHS ENDED

SEPTEMBER 30, 2022

Consolidated net sales for the three months ended September 30, 2023 were $191.7 million, representing an increase of $5.1 million, or 2.7%, as compared to net sales of $186.6 million for the corresponding period in 2022.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2023 average rates to 2022 local currency amounts, consolidated net sales increased by $4.1 million, or 2.2%, as compared to consolidated net sales in the corresponding period in 2022.

Net sales for the U.S.

segment for the three months ended June 30, 2023 were $135.0 million, a decrease of $2.2 million, or 1.6%, as compared to net sales of $137.2 million for the corresponding period in 2022.

segment for the three months ended September 30, 2023 were $179.4 million, an increase of $6.6 million, or 3.8%, as compared to net sales of $172.8 million for the corresponding period in 2022.

Net sales for the U.S.

segment’s Kitchenware product category were $84.0 million for the three months ended June 30, 2023, a decrease of $0.3 million, or 0.4%, as compared to $84.3 million for the corresponding period in 2022.

The decrease was driven by lower sales for cutlery and boards reflecting retail inventory rightsizing, offset by higher sales in other product lines, most notably for Taylor branded measurement products.

segment’s Kitchenware product category were $97.7 million for the three months ended September 30, 2023, an increase of $5.1 million, or 5.5%, as compared to $92.6 million for the corresponding period in 2022.

The increase was driven by sales for kitchen tools and gadgets and cutlery and boards, partially offset by lower sales in bakeware products.

Net sales for the U.S.

segment’s Tableware product category were $26.1 million for the three months ended June 30, 2023, a decrease of $3.8 million, or 12.7%, as compared to $29.9 million for the corresponding period in 2022.

The decrease was attributable to lower dinnerware sales primarily due to a warehouse club program not repeated in 2023 and lower sales in other distribution channels.

segment’s Tableware product category were $48.9 million for the three months ended September 30, 2023, an increase of $4.4 million, or 9.9%, as compared to $44.5 million for the corresponding period in 2022.

The increase was attributable to higher dinnerware sales due to a new warehouse club program in 2023.

Net sales for the U.S.

segment’s Home Solutions product category were $24.9 million for the three months ended June 30, 2023, an increase of $1.9 million, or 8.3%, as compared to $23.0 million for the corresponding period in 2022.

The increase was in Taylor branded bath measurement products, partially offset by hydration products.

Net sales for the International segment were $11.4 million for the three months ended June 30, 2023, a decrease of $2.7 million, or 19.1%, as compared to net sales of $14.1 million for the corresponding period in 2022.

segment’s Home Solutions product category were $32.8 million for the three months ended September 30, 2023, a decrease of $2.9 million, or 8.1%, as compared to $35.7 million for the corresponding period in 2022.

The decrease was in hydration products, partially offset by Taylor branded bath measurement products.

Net sales for the International segment were $12.3 million for the three months ended September 30, 2023, a decrease of $1.5 million, or 10.9%, as compared to net sales of $13.8 million for the corresponding period in 2022.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales decreased $2.4 million, or 16.6%, as compared to consolidated net sales in the corresponding period in 2022.

The decrease was a result of a slowing of replenishment orders in the United Kingdom (“U.K.”) due to weaker end market demand caused by macroeconomic factors and lower e-commerce sales.

Gross margin for the three months ended June 30, 2023 was $56.0 million, or 38.2%, as compared to $55.2 million, or 36.5%, for the corresponding period in 2022.

The decrease was driven by the Company's global trading business in Asia due to a general slowing of replenishment orders in part caused by macroeconomic factors in the region.

Gross margin for the three months ended September 30, 2023 was $71.0 million, or 37.0%, as compared to $67.8 million, or 36.4%, for the corresponding period in 2022.

Gross margin for the U.S.

segment was $51.7 million, or 38.3%, for the three months ended June 30, 2023, as compared to $50.9 million, or 37.1%, for the corresponding period in 2022.

segment was $67.0 million, or 37.3%, for the three months ended September 30, 2023, as compared to $63.3 million, or 36.6%, for the corresponding period in 2022.

The improvement in the gross margin percentage for the U.S.

segment was driven by lower inbound freight costs and product mix.

Gross margin for the International segment was $4.3 million, or 37.7%, for the three months ended June 30, 2023, as compared to $4.3 million, or 30.5%, for the corresponding period in 2022.

The improvement in the gross margin percentage was attributable to lower product costs, lower inbound freight costs and product mix.

In addition, the current year reflects the benefit of lower duty costs on goods sold to European Union (“EU”) customers now distributed from the EU through the Company’s Netherlands distribution facility rather than the U.K.

segment was driven by product mix.

Gross margin for the International segment was $4.0 million, or 32.5%, for the three months ended September 30, 2023, as compared to $4.5 million, or 32.6%, for the corresponding period in 2022.

The decrease in the gross margin percentage was attributable to higher inventory reserves recorded in the current period compared to the prior quarter, mostly offset by lower product and inbound freight costs.

Distribution expenses

Distribution expenses for the three months ended June 30, 2023 were $15.7 million, as compared to $17.4 million for the corresponding period in 2022.

Distribution expenses as a percentage of net sales were 10.7% for the three months ended June 30, 2023, as compared to 11.5% for the three months ended June 30, 2022.

Distribution expenses for the three months ended September 30, 2023 were $17.1 million, as compared to $18.6 million for the corresponding period in 2022.

Distribution expenses as a percentage of net sales were 8.9% for the three months ended September 30, 2023, as compared to 10.0% for the three months ended September 30, 2022.

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

segment were approximately 9.3% and 10.5% for the three months ended June 30, 2023 and 2022, respectively.

Distribution expenses during the three months ended June 30, 2023 and 2022 included $0.2 million and $0.1 million, respectively, for redesign costs related to the Company's U.S.

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

warehouses, excluding non-recurring expenses, distribution expenses were 9.7% and 11.3% for the three months ended June 30, 2023 and 2022, respectively.

The decrease in expenses as a percentage of sales was attributable to improved labor management efficiencies resulting in a decrease of employee expenses, lower storage expenses, and pallet expenses.

Distribution expenses as a percentage of net sales for the International segment were 27.7% for the three months ended June 30, 2023, compared to 21.4% for the corresponding period in 2022.

As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 25.1% and 22.1% for the three months ended June 30, 2023 and 2022, respectively.

The increase in expenses as a percentage of sales was attributable to lower shipment volume.

segment were approximately 7.8% and 9.0% for the three months ended September 30, 2023 and 2022, respectively.

Distribution expenses during the three months ended September 30, 2023 included $0.2 million for redesign costs related to the Company's U.S.

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

warehouses, excluding non-recurring expenses, distribution expenses were 9.1% and 10.4% for the three months ended September 30, 2023 and 2022, respectively.

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

lower storage expenses, improved labor management efficiencies resulting in a decrease of employee expenses, and lower pallet expenses.

Distribution expenses as a percentage of net sales for the International segment were 26.1% for the three months ended September 30, 2023, compared to 22.5% for the corresponding period in 2022.

As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 22.4% and 22.9% for the three months ended September 30, 2023 and 2022, respectively.

The increase in expenses as a percentage of sales was attributable to lower sales.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended June 30, 2023 were $35.9 million, a decrease of $2.4 million, or 6.3%, as compared to $38.3 million for the corresponding period in 2022.

Selling, general and administrative expenses for the three months ended September 30, 2023 were $40.2 million, an increase of $3.7 million, or 10.1%, as compared to $36.5 million for the corresponding period in 2022.

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

segment were $27.4 million for the three months ended June 30, 2023, as compared to $29.1 million for the corresponding period in 2022.

As a percentage of net sales, selling, general and administrative expenses were 20.3% and 21.2% for the three months ended June 30, 2023 and 2022, respectively.

The decrease in expense was primarily due to integration costs related to the S'well acquisition incurred in the prior year.

Selling, general and administrative expenses for the International segment were $4.0 million for the three months ended June 30, 2023, as compared to $4.3 million for the corresponding period in 2022.

As a percentage of net sales, selling, general and administrative expenses were 35.1% and 30.5% for the three months ended June 30, 2023 and 2022, respectively.

The expense decrease was attributable to lower employee costs.

The reduction in employee costs was a result of the restructuring action taken by the Company in the fourth quarter of 2022.

Unallocated corporate expenses for the three months ended June 30, 2023 were $4.5 million, as compared to $4.9 million for the corresponding period in 2022.

The current period decrease was driven by lower stock compensation expense and salary costs.

segment were $31.6 million for the three months ended September 30, 2023, as compared to $28.3 million for the corresponding period in 2022.

As a percentage of net sales, selling, general and administrative expenses were 17.6% and 16.4% for the three months ended September 30, 2023 and 2022, respectively.

The increase in expenses was attributable to higher incentive compensation expense.

Selling, general and administrative expenses for the International segment were $3.7 million for the three months ended September 30, 2023, as compared to $3.9 million for the corresponding period in 2022.

As a percentage of net sales, selling, general and administrative expenses were 30.1% and 28.3% for the three months ended September 30, 2023 and 2022, respectively.

The decrease in expenses was attributable to lower foreign currency exchange losses.

Unallocated corporate expenses for the three months ended September 30, 2023 were $4.9 million, as compared to $4.3 million for the corresponding period in 2022.

The current period increase was driven by higher incentive compensation expense, partially offset by a decrease in salary costs.

The decrease in salary is due to the elimination of the Executive Chairman role as of March 31, 2023.

The decrease was partially offset by an increase in professional expenses.

Wallace facility remediation expense

In connection with the Wallace EPA matter, the Company recorded an expense of $5.1 million for the three months ended September 30, 2022, to increase its estimated liability for remediation cost related to the Wallace facility.

Refer to NOTE 13 — CONTINGENCIES for further discussion on this matter.

Interest expense

Interest expense was $5.5 million and $3.7 million for the three months ended June 30, 2023 and 2022, respectively.

Interest expense was $5.2 million and $4.6 million for the three months ended September 30, 2023 and 2022, respectively.

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

Mark to market gain (loss) on interest rate derivatives

Mark to market gain on interest rate derivatives was $0.2 million for the three months ended June 30, 2023, as compared to a mark to market gain on interest rate derivatives of $0.3 million for the three months ended June 30, 2022.

The gain recognized for the three months ended June 30, 2022 was attributable to the change in the fair value due to the change in the projected interest rate environment.

Mark to market (loss) gain on interest rate derivatives

Mark to market loss on interest rate derivatives was $0.1 million for the three months ended September 30, 2023, as compared to a mark to market gain on interest rate derivatives of $0.6 million for the three months ended September 30, 2022.

The gain recognized for the three months ended September 30, 2022 was attributable to the change in the fair value due to the change in the projected interest rate environment.

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

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

As of June 30, 2023, the intent of the Company is to hold these derivative contracts until their maturity.

Gain on early retirement of debt

Gain on early retirement of debt was $1.5 million for the three months ended June 30, 2023.

The gain recognized for the three months ended June 30, 2023 was attributable to the repurchase of $47.2 million in principal amount of the Term Loan.

Refer to NOTE 7 — DEBT for additional information.

Income tax provision of $1.2 million and income tax benefit of $0.1 million for the three months ended June 30, 2023 and 2022, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax provision rate of 212.3% and an income tax benefit rate of 2.5%, respectively.

The effective tax rate for the three months ended June 30, 2023 differs from the federal statutory income tax rate of 21.0% primarily due to state and local tax expense, the impact of non-deductible expenses, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance, partially offset by a benefit for federal credits.

The effective tax rate for the three months ended June 30, 2022 differs from the

federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Equity in (losses) earnings

Equity in losses of Vasconia, net of taxes, was $1.4 million for the three months ended June 30, 2023, as compared to equity in earnings of Vasconia, net of taxes, of $0.3 million for the three months ended June 30, 2022.

For the three months ended June 30, 2023, equity in losses included a non-cash impairment charge of $4.4 million to reduce the carrying value of the Company’s investment in Vasconia to its fair value.

As of September 30, 2023, the intent of the Company is to hold these derivative contracts until their maturity.

Income tax provision of $3.0 million and $1.8 million for the three months ended September 30, 2023 and 2022, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax provision rate of 36.5% and 50.6%, respectively.

The effective tax rate for the three months ended September 30, 2023 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

The effective tax rate for the three months ended September 30, 2022 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Equity in losses

Equity in losses of Vasconia, net of taxes, was $0.7 million for the three months ended September 30, 2023, as compared to equity in losses of Vasconia, net of taxes, of $2.0 million for the three months ended September 30, 2022.

For the three months ended September 30, 2023 and 2022, equity in losses included a non-cash impairment charge of $0.3 million and $6.2 million, respectively, to reduce the carrying value of the Company’s investment in Vasconia to its fair value.

The decline in the fair value was determined to be other than temporary due to the decline in the quoted stock price, the continued decline in the operating results of Vasconia and the recent downgrade in Vasconia’s debt rating.

Vasconia reported income from operations of $0.2 million for the three months ended June 30, 2023, as compared to income from operations of $0.5 million for the three months ended June 30, 2022.

The decrease in income from operations was primarily attributable to decreased operating results in the current period in Vasconia’s aluminum division.

Vasconia reported loss from operations of $1.1 million for the three months ended September 30, 2023, as compared to loss from operations of $5.5 million for the three months ended September 30, 2022.

The decrease in loss from operations was primarily attributable to improved operating results in the current period.

MANAGEMENT’S DISCUSSION AND ANALYSIS

SIX MONTHS ENDED JUNE 30, 2023 COMPARED TO THE SIX MONTHS ENDED

JUNE 30, 2022

Consolidated net sales for the six months ended June 30, 2023 were $291.9 million, a decrease of $42.1 million, or 12.6%, as compared to net sales of $334.0 million for the corresponding period in 2022.

NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THE NINE MONTHS ENDED

SEPTEMBER 30, 2022

Consolidated net sales for the nine months ended September 30, 2023 were $483.5 million, a decrease of $37.1 million, or 7.1%, as compared to net sales of $520.6 million for the corresponding period in 2022.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2023 average rates to 2022 local currency amounts, consolidated net sales decreased by $36.2 million, or 7.0%, as compared to consolidated net sales in the corresponding period in 2022.

Net sales for the U.S.

segment for the six months ended June 30, 2023 were $268.5 million, a decrease of $34.9 million, or 11.5%, as compared to net sales of $303.4 million for the corresponding period in 2022.

segment for the nine months ended September 30, 2023 were $447.9 million, a decrease of $28.3 million, or 5.9%, as compared to net sales of $476.2 million for the corresponding period in 2022.

Net sales for the U.S.

segment’s Kitchenware product category were $169.7 million for the six months ended June 30, 2023, a decrease of $28.8 million, or 14.5%, as compared to $198.5 million for the corresponding period in 2022.

The decrease was mainly driven by lower sales across most distribution channels for kitchen tools and gadgets, cutlery and board, and bakeware products.

The decrease was a result of slowing replenishment orders as retailers reduced safety stock and weeks supply, which began in the second quarter of 2022.

segment’s Kitchenware product category were $267.4 million for the nine months ended September 30, 2023, a decrease of $23.7 million, or 8.1%, as compared to $291.1 million for the corresponding period in 2022.

The decrease was mainly driven by lower sales across most distribution channels for kitchen tools and gadgets, cutlery and board, and bakeware products in the first half of 2023 due to retail inventory rightsizing, which began in the second quarter of 2022.

The decrease was partially offset by higher sales in the third quarter of 2023 as retailer's ordering patterns normalized.

Net sales for the U.S.

segment’s Tableware product category were $50.1 million for the six months ended June 30, 2023, a decrease of $6.4 million, or 11.3%, as compared to $56.5 million for the corresponding period in 2022.

The decrease was primarily driven by dinnerware sales due to a warehouse club program not repeated in 2023 and lower sales for e-commerce and brick-and-mortar customers.

This was partially offset by an increase in sales to off-price retailers.

segment’s Tableware product category were $99.0 million for the nine months ended September 30, 2023, a decrease of $2.0 million, or 2.0%, as compared to $101.0 million for the corresponding period in 2022.

The decrease was primarily driven by dinnerware sales primarily due to lower sales to e-commerce and brick-and-mortar customers, partially offset by off-price retailers and a new warehouse club program.

Net sales for the U.S.

segment’s Home Solutions product category were $48.7 million for the six months ended June 30, 2023, an increase of $0.3 million, or 0.6%, as compared to $48.4 million for the corresponding period in 2022.

The increase was primarily driven by a private label hydration program.

Net sales for the International segment were $23.4 million for the six months ended June 30, 2023, a decrease of $7.2 million, or 23.5%, as compared to net sales of $30.6 million for the corresponding period in 2022.

segment’s Home Solutions product category were $81.5 million for the nine months ended September 30, 2023, a decrease of $2.6 million, or 3.1%, as compared to $84.1 million for the corresponding period in 2022.

The decrease was in hydration products, partially offset by Taylor branded bath measurement products.

Net sales for the International segment were $35.6 million for the nine months ended September 30, 2023, a decrease of $8.8 million, or 19.8%, as compared to net sales of $44.4 million for the corresponding period in 2022.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales decreased $7.9 million, or 18.1%, as compared to consolidated net sales in the corresponding period in 2022.

1 unchanged sentence

due to weaker end market demand caused by macroeconomic factors and lower e-commerce sales.

Gross margin for the six months ended June 30, 2023 was $109.8 million, or 37.6%, as compared to $118.2 million, or 35.4%, for the corresponding period in 2022.

Gross margin for the nine months ended September 30, 2023 was $180.8 million, or 37.4%, as compared to $186.1 million, or 35.7%, for the corresponding period in 2022.

Gross margin for the U.S.

segment was $100.6 million, or 37.5%, for the six months ended June 30, 2023, as compared to $108.7 million, or 35.8%, for the corresponding period in 2022.

segment was $167.6 million, or 37.4%, for the nine months ended September 30, 2023, as compared to $172.1 million, or 36.1%, for the corresponding period in 2022.

The decrease in gross margin for the U.S.

1 unchanged sentence

The improvement in gross margin percentage was due to lower inbound freight costs and product mix.

Gross margin for the International segment was $9.2 million, or 39.3%, for the six months ended June 30, 2023, as compared to $9.5 million, or 31.0%, for the corresponding period in 2022.

Gross margin for the International segment was $13.2 million, or 37.1%, for the nine months ended September 30, 2023, as compared to $14.0 million, or 31.5%, for the corresponding period in 2022.

The decrease in gross margin was driven by lower sales.

2 unchanged sentences

Distribution expenses

Distribution expenses for the six months ended June 30, 2023 were $32.6 million, as compared to $36.6 million for the corresponding period in 2022.

Distribution expenses as a percentage of net sales were 11.2% for the six months ended June 30, 2023, as compared to 11.0% for the six months ended June 30, 2022.

Distribution expenses for the nine months ended September 30, 2023 were $49.7 million, as compared to $55.2 million for the corresponding period in 2022.

Distribution expenses as a percentage of net sales were 10.3% for the nine months ended September 30, 2023, as compared to 10.6% for the nine months ended September 30, 2022.

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

segment were approximately 9.7% and 9.6% for the six months ended June 30, 2023 and 2022, respectively.

Distribution expenses during the six months ended June 30, 2023 and 2022 include $0.4 million and $0.2 million, respectively, for redesign costs related to the Company's U.S.

segment were approximately 8.9% and 9.4% for the nine months ended September 30, 2023 and 2022, respectively.

Distribution expenses during the nine months ended September 30, 2023 and 2022 include $0.5 million and $0.1 million, respectively, for redesign costs related to the Company's U.S.

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

warehouses, excluding non-recurring expenses, distribution expenses were 10.0% and 10.6% for the six months ended June 30, 2023 and 2022, respectively.

The decrease in the expenses as a percentage of sales was a result of lower pallet expenses, improved labor management efficiencies resulting in a decrease of employee expenses and lower storage expenses, partially offset by higher real estate taxes.

Distribution expenses as a percentage of net sales for the International segment were 27.6% for the six months ended June 30, 2023, compared to 24.0% for the corresponding period in 2022.

Distribution expenses during the six months ended June 30, 2022 include $0.4 million for the Company’s relocation costs for its new warehouse distribution facility in the Netherlands.

As a percentage of sales shipped from the Company’s international warehouse, excluding non-recurring expenses, distribution expenses were 24.5% and 21.9% for the six months ended June 30, 2023 and 2022, respectively.

warehouses, excluding non-recurring expenses, distribution expenses were 9.7% and 10.5% for the nine months ended September 30, 2023 and 2022, respectively.

The decrease in the expenses as a percentage of sales was a result of improved labor management efficiencies resulting in a decrease of employee expenses, lower pallet expenses, and storage expenses, partially offset by higher real estate taxes and labor rates.

Distribution expenses as a percentage of net sales for the International segment were 27.2% for the nine months ended September 30, 2023, compared to 23.5% for the corresponding period in 2022.

Distribution expenses during the nine months ended September 30, 2022 include $0.5 million for the Company’s relocation costs for its new warehouse distribution facility in the Netherlands.

As a percentage of sales shipped from the Company’s international warehouse, excluding non-recurring expenses, distribution expenses were 23.8% and 22.2% for the nine months ended September 30, 2023 and 2022, respectively.

The increase was primarily attributed to lower shipment volume.

Selling, general and administrative expenses

Selling, general and administrative expenses for the six months ended June 30, 2023 were $73.8 million, a decrease of $3.9 million, or 5.0%, as compared to $77.7 million for the corresponding period in 2022.

Selling, general and administrative expenses for the nine months ended September 30, 2023 were $114.0 million, a decrease of $0.2 million, or 0.2%, as compared to $114.2 million for the corresponding period in 2022.

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

segment were $56.7 million for the six months ended June 30, 2023, as compared to $57.6 million for the corresponding period in 2022.

As a percentage of net sales, selling, general and administrative expenses were 21.1% and 19.0% for the six months ended June 30, 2023 and 2022, respectively.

The increase in selling, general and administrative expense as a percentage of net sales is due to the impact of fixed costs on lower sales volume.

The decrease was attributable to cost incurred in the prior year for integration costs related to the S'well acquisition and financing fees on receivables sold to HSBC, and lower rent expense in the current period.

The decrease was partially offset by the provision for doubtful accounts in the current period related to significant declines in the financial condition of the Company's customer Bed, Bath and Beyond Inc.

Selling, general and administrative expenses for the International segment were $7.5 million for the six months ended June 30, 2023, as compared to $9.3 million for the corresponding period in 2022.

segment were $88.3 million for the nine months ended September 30, 2023, as compared to $85.9 million for the corresponding period in 2022.

As a percentage of net sales, selling, general and administrative expenses were 19.7% and 18.0% for the nine months ended September 30, 2023 and 2022, respectively.

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

The increase in expenses was attributable to the provision for doubtful accounts in the current period primarily related to significant declines in the financial condition of the Company's customer, Bed, Bath and Beyond Inc.

and an increase in incentive compensation expense.

The increase was partially offset by cost incurred in the prior year for integration costs related to the S’well acquisition and financing fees on receivables sold to HSBC.

Selling, general and administrative expenses for the International segment were $11.3 million for the nine months ended September 30, 2023, as compared to $13.2 million for the corresponding period in 2022.

The decrease was primarily attributable to lower foreign currency exchange losses and lower employee costs.

The reduction in employee costs was a result of the restructuring action taken by the Company in the fourth quarter of 2022.

Unallocated corporate expenses for the six months ended June 30, 2023 were $9.5 million, as compared to $10.8 million for the corresponding period in 2022.

Unallocated corporate expenses for the nine months ended September 30, 2023 were $14.4 million, as compared to $15.1 million for the corresponding period in 2022.

The decrease was driven by lower salary costs, as a result of the elimination of the Executive Chairman role as of March 31, 2023 and lower stock compensation expense.

The decrease was partially offset by higher incentive compensation expense.

Wallace facility remediation expense

In connection with the Wallace EPA matter, the Company recorded an expense of $5.1 million for the nine months ended September 30, 2022, to increase its estimated liability for remediation cost related to the Wallace facility.

Refer to NOTE 13 — CONTINGENCIES for further discussion on this matter.

Restructuring expenses

For the six months ended June 30, 2023, the Company incurred $0.8 million of unallocated corporate expense related to the termination payment with its Executive Chairman.

On November 1, 2022, the Company entered into a transition agreement with its Executive Chairman, which provides for termination of his employment with the Company, effective March 31, 2023.

The transition agreement amends his employment agreement which was set to expire on December 31, 2022.

For the nine months ended September 30, 2023, the Company incurred $0.8 million of unallocated corporate expense related to the termination payment with its Executive Chairman.

On November 1, 2022, the Company entered into a transition agreement

with its Executive Chairman, which provided for termination of his employment with the Company, effective March 31, 2023.

The transition agreement amended his employment agreement which was set to expire on December 31, 2022.

The employment agreement provided for a one-time termination payment which was paid in April, 2023.

Interest expense

Interest expense was $10.9 million and $7.5 million for the six months ended June 30, 2023 and 2022, respectively.

Interest expense was $16.1 million and $12.1 million for the nine months ended September 30, 2023 and 2022, respectively.

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

Mark to market gain (loss) on interest rate derivatives

Mark to market loss on interest rate derivatives was $0.04 million for the six months ended June 30, 2023, as compared to a mark to market gain on interest rate derivatives of $1.4 million for the six months ended June 30, 2022.

Mark to market (loss) gain on interest rate derivatives

Mark to market loss on interest rate derivatives was $0.1 million for the nine months ended September 30, 2023, as compared to a mark to market gain on interest rate derivatives of $2.0 million for the nine months ended September 30, 2022.

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

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

As of June 30, 2023, the intent of the Company is to hold these derivative contracts until their maturity.

As of September 30, 2023, the intent of the Company is to hold these derivative contracts until their maturity.

Gain on early retirement of debt

Gain on early retirement of debt was $1.5 million for the six months ended June 30, 2023.

The gain recognized for the six months ended June 30, 2023 was attributable to the repurchase of $47.2 million in principal amount of the Term Loan.

Gain on early retirement of debt was $1.5 million for the nine months ended September 30, 2023.

The gain recognized for the nine months ended September 30, 2023 was attributable to the repurchase of $47.2 million in principal amount of the Term Loan.

Refer to NOTE 7 — DEBT for additional information.

Income tax benefit of $0.1 million and income tax provision of $1.6 million for the six months ended June 30, 2023 and 2022, respectively, represent taxes on both US and foreign earnings at a combined effective income tax benefit rate of 1.6% and an income tax provision of (69.8)%, respectively.

The negative tax rate for the six months ended June 30, 2022 reflects tax expense on a pretax financial reporting loss.

The effective tax rate for the six months ended June 30, 2023 differs from the federal statutory income tax rate of 21.0% 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 six months ended June 30, 2022 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Equity in (losses) earnings

Equity in losses of Vasconia, net of taxes, was $2.1 million for the six months ended June 30, 2023, as compared to equity in earnings of Vasconia, net of taxes, of $0.8 million for the six months ended June 30, 2022.

For the six months ended June 30, 2023, equity in losses included a non-cash impairment charge of $6.5 million to reduce the carrying value of the Company’s investment in Vasconia to its fair value.

Income tax provision of $2.9 million and $3.4 million for the nine months ended September 30, 2023 and 2022, respectively, represent taxes on both US and foreign earnings at a combined effective income tax provision rate of 197.0% and 245.9%, respectively.

The effective tax rate for the nine months ended September 30, 2023 differs from the federal statutory income tax rate of 21.0% primarily due to the impact of non-deductible expenses, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

The effective tax rate for the nine months ended September 30, 2022 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Equity in losses

Equity in losses of Vasconia, net of taxes, was $2.9 million for the nine months ended September 30, 2023, as compared to equity in losses of Vasconia, net of taxes, of $1.2 million for the nine months ended September 30, 2022.

For the nine months ended September 30, 2023 and 2022, equity in losses included non-cash impairment charges of $6.8 million and $6.2 million, respectively, to reduce the carrying value of the Company’s investment in Vasconia to its fair value.

Vasconia reported loss from operations of $0.8 million for the six months ended June 30, 2023, as compared to income from operations of $5.2 million for the six months ended June 30, 2022.

The decrease in income from operations was primarily attributable to decreased operating results in the current period in Vasconia's aluminum divisions.

Vasconia reported loss from operations of $1.9 million for the nine months ended September 30, 2023, as compared to loss from operations of $0.3 million for the nine months ended September 30, 2022.

The decrease in loss from operations was primarily attributable to decreased operating results in the current period.

LIQUIDITY AND CAPITAL RESOURCES

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

At June 30, 2023, the Company had cash and cash equivalents of $15.1 million, compared to $23.6 million at December 31, 2022.

Working capital was $222.4 million at June 30, 2023, compared to $270.4 million at December 31, 2022.

Liquidity, which includes cash and cash equivalents, availability under the ABL Agreement, and available funding under the Receivables Purchase Agreement, was approximately $190.5 million at June 30, 2023.

At September 30, 2023, the Company had cash and cash equivalents of $6.3 million, compared to $23.6 million at December 31, 2022.

Working capital was $236.9 million at September 30, 2023, compared to $270.4 million at December 31, 2022.

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, 2023, inventory turnover was 1.7 times, or 213 days, as compared to 1.4 times, or 270 days, for the three months ended June 30, 2022.

For the three months ended September 30, 2023, inventory turnover was 2.2 times, or 164 days, as compared to 1.7 times, or 219 days, for the three months ended September 30, 2022.

The improvement was attributable to lower inventory levels as compared to the prior year, which were elevated due to inventory buildup at retailers as a result of supply chain disruptions and weaker end market demand.

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

On October 25, 2023, the Company launched the syndication of an Amendment & Extension of the Company’s existing Term Loan B facility due 2025 through an extended maturity of August 2027.The Company has received the required commitments from the lenders and expects the closing of such Term Loan B facility in the fourth quarter of 2023.

The Company closely monitors the creditworthiness of its customers.

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Additionally, the Term Loan 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, which payments are to be adjusted from time to time to account for prepayments made.

Per the Term Loan, when the Company makes an Excess Cash Flow payment, the payment is first applied

to satisfy the next eight (8) scheduled future quarterly required payments of the Term Loan in order of maturity and then to the remaining scheduled installments on a pro rata basis.

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

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

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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 on a pro forma basis pursuant to the Term Loan, after giving effect to such increase, is no greater than 3.75 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan but not to mature earlier than the maturity date of the then existing term loans.

As of June 30, 2023 and December 31, 2022, the total availability under the ABL Agreement was as follows (in thousands):

June 30, 2023

As of September 30, 2023 and December 31, 2022, the total availability under the ABL Agreement was as follows (in thousands):

September 30, 2023

December 31, 2022

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Current portion of Term Loan:

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Total Non-current portion of Term Loan $ 183,234 $ 242,857

The estimated Excess Cash Flow principal payment recorded at June 30, 2023 represents the Company’s estimate for the 2024 Excess Cash Flow Payment.

The estimated Excess Cash Flow principal payment recorded at September 30, 2023 represents the Company’s estimate for the 2024 Excess Cash Flow Payment.

There was no Excess Cash Flow payment due in 2023.

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subsidiaries with certain minor exceptions.

Certain payment obligations under the ABL Agreement are also direct obligations of its foreign subsidiary borrowers designated as such under the ABL Agreement and, subject to limitations on such guaranty, are guaranteed by the foreign subsidiary borrowers, as well as by the Company.

Certain payment obligations under the ABL Agreement are also direct obligations of

its foreign subsidiary borrowers designated as such under the ABL Agreement and, subject to limitations on such guaranty, are guaranteed by the foreign subsidiary borrowers, as well as by the Company.

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

The obligations of the Company under the Debt Agreements and any

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

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

subsidiary guarantors, subject to certain exceptions.

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

The interest rate on outstanding borrowings under the ABL Agreement at June 30, 2023 was 4.93%.

The Company paid a commitment fee of 0.25% during the six months ended June 30, 2023.

The interest rate on outstanding borrowings under the ABL Agreement at September 30, 2023 was between 6.44% and 8.75%.

The Company paid a commitment fee of 0.25% during the nine months ended September 30, 2023.

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

(i) alternate base rate, defined, for any day, as the greater of (x) the prime rate, (y) a federal funds and overnight bank funding based rate plus 0.5% or (z) one-month Adjusted Term SOFR, but not less than 1.0%, plus 1.0%, plus a margin of 2.5% or (ii) SOFR for the applicable interest period, multiplied by any statutory reserve rate, but not less than 1.0%, plus a margin of 3.5%.

The interest rate on outstanding borrowings under the Term Loan at June 30, 2023 was 8.72%.

The interest rate on outstanding borrowings under the Term Loan at September 30, 2023 was 8.93%.

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

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

The Company was in compliance with the covenants of the Debt Agreements at June 30, 2023.

The Company was in compliance with the covenants of the Debt Agreements at September 30, 2023.

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

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

The Company’s adjusted EBITDA (including pro forma adjustments), for the trailing twelve months ended June 30, 2023 was $52.9 million.

Capital expenditures for the six months ended June 30, 2023 were $1.0 million.

The Company’s adjusted EBITDA (including pro forma adjustments), for the trailing twelve months ended September 30, 2023 was $55.8 million.

Capital expenditures for the nine months ended September 30, 2023 were $1.8 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 (loss) income, as reported, to adjusted EBITDA, for each of the last four quarters and the 12 months ended June 30, 2023:

Quarter Ended Twelve Months Ended June 30, 2023

September 30, 2022 December 31,

2022 March 31,

The following is a reconciliation of the net income (loss), as reported, to adjusted EBITDA, for each of the last four quarters and the 12 months ended September 30, 2023:

Quarter Ended Twelve Months Ended September 30, 2023

December 31, 2022 March 31,

2023 June 30,

2023 September 30,

(in thousands)

Net (loss) income as reported

Net income (loss) as reported

$ 3,272 $ (8,805) $ (6,520) $ 4,206 $ (7,847)

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Depreciation and amortization 5,001 4,870 4,925 4,821 19,617

Mark to market (gain) loss on interest rate derivatives

Mark to market loss (gain) on interest rate derivatives

19 234 (197) 98 154

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Restructuring expenses 1,420 856 — — 2,276

Warehouse relocation and redesign expenses (1)

59 — 194 157 410

S'well integration costs (2)

Warehouse redesign expenses (1)

— 194 157 176 527

Wallace facility remediation expense 5,140 — — — 5,140

Adjusted EBITDA, before limitation 18,772 19,654 5,465 10,681 54,572

Adjusted EBITDA 19,654 5,465 10,681 19,693 55,493

Pro forma projected synergies adjustment (2)

Pro forma Adjusted EBITDA, before limitation (5)

Permitted non-recurring charge limitation (4)

Pro forma Adjusted EBITDA (3)

$ 19,654 $ 5,465 $ 10,681 $ 19,693 $ 55,816

(1) For the twelve months ended June 30, 2023, the warehouse relocation and redesign expenses were related to the U.S.

(2) For the twelve months ended June 30, 2023, S'well integration costs included $0.3 million of expenses related to inventory step up adjustment in connection with S'well acquisition.

(3) Pro forma projected synergies represents the projected cost savings of $0.8 million associated with the reorganization of the International segment's workforce, $0.4 million associated with the Executive Chairman's cessation of service in such role, and $0.2 million associated with reorganization of the U.S.

(1) For the twelve months ended September 30, 2023, the warehouse redesign expenses were related to the U.S.

(2) Pro forma projected synergies represents the projected cost savings of $0.2 million associated with the Executive Chairman's cessation of service in such role, and $0.1 million associated with reorganization of the U.S.

segment's sales management structure.

(4) Permitted non-recurring charges include restructuring expenses, integration charges, Wallace facility remediation expense, and warehouse relocation and redesign expenses.

These are permitted exclusions from the Company’s adjusted EBITDA, subject to limitations, pursuant to the Company’s Debt Agreements.

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

Adjusted EBITDA is defined as net (loss) income, adjusted to exclude undistributed equity in losses, income tax provision (benefit), interest expense, depreciation and amortization, mark to market (gain) loss on interest rate derivatives, stock compensation expense, gain on early retirement of debt, Wallace facility remediation expense, and other items detailed in the table above that are consistent with exclusions permitted by our debt agreements.

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

Accounts Receivable Purchase Agreement

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Under the Receivables Purchase Agreement, the Company may offer to sell certain eligible accounts receivable (the “Receivables”) to HSBC, which may accept such offer, and purchase the offered Receivables.

Under the Receivables

Purchase Agreement, following each purchase of Receivables, the outstanding aggregate purchased Receivables shall not exceed $30.0 million.

Under the Receivables Purchase Agreement, following each purchase of Receivables, the outstanding aggregate purchased Receivables shall not exceed $30.0 million.

HSBC will assume the credit risk of the Receivables purchased, and the Company will continue to be responsible for all non-credit risk matters.

The Company will service the Receivables, and as such servicer, collect and otherwise enforce the Receivables on behalf of HSBC.

The term of the agreement is for 364 days and shall automatically be extended for annual successive terms unless terminated.

The term of the agreement is for 364 days and shall automatically be

extended for annual successive terms unless terminated.

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

The Company did not sell receivables to HSBC during the three and six months ended June 30, 2023.

Pursuant to the Receivable Purchase Agreement, the Company sold to HSBC $33.5 million and $79.8 million of receivables during the three and six months ended June 30, 2022, respectively.

Charges of $0.2 million and $0.3 million, respectively, related to the sale of the receivables were included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2022.

At June 30, 2023 and 2022, zero and $25.6 million, respectively, of receivables sold were outstanding and due to HSBC from customers.

At June 30, 2023, $23.3 million of accounts receivables were available for sale to HSBC, net of applicable charges.

The Company did not sell receivables to HSBC during the three and nine months ended September 30, 2023.

Pursuant to the Receivable Purchase Agreement, the Company sold to HSBC $30.0 million and $109.8 million of receivables during the three and nine months ended September 30, 2022, respectively.

Charges of $0.2 million and $0.5 million, respectively, related to the sale of the receivables were included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022.

At September 30, 2023 and 2022, zero and $20.2 million, respectively, of receivables sold were outstanding and due to HSBC from customers.

At September 30, 2023, $24.8 million of accounts receivables were available for sale to HSBC, net of applicable charges.

Interest Rate Swaps

The Company’s total outstanding notional value of interest rate swaps was $25.0 million at June 30, 2023.

The Company’s total outstanding notional value of interest rate swaps was $25.0 million at September 30, 2023.

These non-designated interest rate swaps were entered into in June 2019 and 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.

The Company’s interest rate swaps that were designated 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 expired in March 2023.

The Company has no designated interest rate swaps at June 30, 2023.

The Company has no designated interest rate swaps at September 30, 2023.

Foreign Exchange Contracts

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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 value of foreign exchange contracts at June 30, 2023 was $7.0 million.

The aggregate gross notional value of foreign exchange contracts at September 30, 2023 was $8.8 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, 2023, these foreign exchange contracts have been designated as hedges in to order to apply hedge accounting.

The Company does not enter into such contracts for speculative purposes, and as of September 30, 2023, these foreign exchange contracts have been designated as hedges in to order to apply hedge accounting.

Operating activities

Net cash provided by operating activities was $29.0 million for the six months ended June 30, 2023, as compared to net cash used in operating activities of $8.9 million for the six months ended June 30, 2022.

The increase from 2023 compared to 2022 was attributable to a reduction in inventory levels and the timing of payments for accounts payable and accrued expenses, partially offset by timing of collections related to the Company's accounts receivables.

Net cash provided by operating activities was $17.0 million for the nine months ended September 30, 2023, as compared to net cash used in operating activities of $20.1 million for the nine months ended September 30, 2022.

The increase from 2023 compared to 2022 was attributable to the timing of payments for accounts payable and accrued expenses and a reduction in inventory levels, partially offset by timing of collections related to the Company's accounts receivables.

Investing activities

Net cash used in investing activities was $1.0 million and $19.4 million for the six months ended June 30, 2023 and 2022, respectively.

Net cash used in investing activities was $1.8 million and $19.9 million for the nine months ended September 30, 2023 and 2022, respectively.

The decrease from 2023 compared to 2022 was attributable to the cash consideration of $18.0 million paid for the acquisition of S'well in 2022.

Financing activities

Net cash used in financing activities was $36.5 million for the six months ended June 30, 2023, as compared to net cash provided by financing activities of $7.7 million for the six months ended June 30, 2022.

The change was mainly attributable to the repurchase of a portion of the term loan in the 2023 period, compared to the Excess Cash Flow principal payment on the term loan in the 2022 period and lower proceeds from the revolving credit facility in the 2023 period.

Net cash used in financing activities was $32.4 million for the nine months ended September 30, 2023, as compared to net cash provided by financing activities of $18.4 million for the nine months ended September 30, 2022.

The change was attributable to the repurchase of a portion of the term loan in the 2023 period, compared to the Excess Cash Flow principal payment on the term loan in the 2022 period and lower proceeds from the revolving credit facility in the 2023 period.

The cash used in financing activities was partially offset by decreased payments for stock repurchases in the 2023 period.

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

During the six months ended June 30, 2023, the Company repurchased 320,204 shares for a total cost of $2.5 million and thereafter retired the shares.

During the nine months ended September 30, 2023, the Company repurchased 320,204 shares for a total cost of $2.5 million and thereafter retired the shares.

No repurchases were effected during the three months ended September 30, 2023.

As of September 30, 2023, the remaining dollar amount available for repurchases under the Board authorized plan was $11.1 million.

Quantitative and Qualitative Disclosures About Market Risk

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis