What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 151 added, 242 removed, 191 unchanged (67% of the section changed)

12 unchanged sentences

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

• Macroeconomic conditions, including labor disputes, inflationary impacts and disruptions to the global supply chain;

• Macroeconomic conditions, including labor disputes, depreciation of the U.S.

dollar, volatility in the capital markets, inflationary impacts and disruptions to the global supply chain;

• Increase in supply chain costs, including raw materials, sourcing, transportation and energy;

• The impact of tariffs and trade policies, particularly with respect to China;

• Legislative or regulatory risks relating to climate change;

• Indebtedness, compliance with credit agreements, and access to credit markets;

15 unchanged sentences

The Company makes available on its website the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports as soon as reasonably practicable after these reports are filed with or furnished to the SEC.

Users can access these reports free of charge on the

Company’s website.

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

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

5 unchanged sentences

The Company’s product categories include two categories of products used to prepare, serve, and consume foods:

Kitchenware (kitchen tools and gadgets, cutlery, kitchen scales, thermometers, cutting boards, shears, cookware, pantryware, spice racks, and bakeware) and Tableware (dinnerware, stemware, flatware, and giftware);

Kitchenware (kitchen tools, cutlery, kitchen scales, thermometers, cutting boards, shears, cookware, pantryware, spice racks, and bakeware) and Tableware (dinnerware, stemware, flatware, and giftware);

and one category, Home Solutions, which comprises other products used in the home (thermal beverageware, bath scales, weather and outdoor household products, food storage, neoprene travel products and home décor).

1 unchanged sentence

The Company believes it possesses certain competitive advantages based on its brands, its emphasis on innovation and new product development, and its sourcing capabilities.

The Company owns or licenses a number of leading brands in its industry, including Farberware ® , Mikasa ® , KitchenAid ® , Taylor ® , Rabbit ® , Pfaltzgraff ® , Built NY ® , Sabatier ® , Fred ® & Friends, Kamenstein ® , S’well ® and Dolly ® .

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 United States), and establishing new product categories.

The Company owns or licenses a number of leading brands in its industry, including Farberware ® , KitchenAid ® Mikasa ® , Taylor ® , Pfaltzgraff ® , Built NY ® , S’well ® , Fred ® & Friends, KitchenCraft ® , Rabbit ® , Kamenstein ® , and Dolly ® .

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 United States), 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.

1 unchanged sentence

RECENT DEVELOPMENTS

The global economy experienced relatively high inflation throughout 2023.

As global inflation levels moderate, the impact of elevated inflation and high interest rates have negatively impacted, and may continue to negatively impact consumer spending and buying patterns in 2024.

Shifts in consumer spending and buying patterns may directly impact our retailer ordering patterns, which may adversely impact the Company’s results.

In addition, disruptions in the global supply chain, including the heightened risks of attacks on commercial vessels in the Red Sea and the potential longshoremen strike in the U.S., have and may continue to adversely impact the Company’s results due to supply delays leading to an increase in safety stock levels and an increase in transportation costs.

The Company expects continued uncertainty as result of these trends in 2024.

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

This concentration in suppliers exposes the Company to risks associated with doing business globally, including risks relating to the tariffs recently implemented and that may be implemented in the future.

As of April 9, 2025, the U.S.

has imposed an aggregate 145% tariff on imports from China.

Other recent tariff policy updates that went into effect in April 2025 include a 10% universal tariff for all countries and reciprocal tariffs for specific countries, which have been paused for 90 days.

As the Company sources almost all of its products from suppliers located outside the United States, primarily in China, any new or increased tariffs, quotas, embargoes, or other trade barriers could impact our supply chain and cost structure.

Additionally, retaliatory measures by affected countries, could further disrupt operations or reduce our competitiveness in international markets.

The Company continues to monitor these changing tariffs and trade restrictions.

The Company is developing a plan to mitigate the impact of the increase price of goods imported by the Company into the U.S.

The Company may seek to increase prices to its customers, negotiate product costs with its suppliers and further diversify its imports to countries that are expected to be subject to lower tariffs.

To the extent the tariffs remain in place and the Company cannot mitigate the impact of the increase on the price of goods imported by the Company into the U.S., it may result in lower gross margin that the Company realizes from the sale of its products which could materially adversely affect the Company’s results of operations and financial condition and result in an impairment of our long-lived assets, including goodwill within the U.S.

segment reporting unit.

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

In connection with the relocation, the Company will exit the Robbinsville Facility.

The Company expects to incur one-time exit costs up to $7.0 million for employee severance, certain employee relocation costs, and remaining lease costs for the Robbinsville Facility, which costs are expected to be incurred in 2025 and 2026.

The Hagerstown Facility will require capital expenditures for equipment and certain leasehold improvements of approximately $10.0 million.

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

These one-time costs are expected to be incurred in 2026.

The Company expects that the Hagerstown Facility will be operational by the second quarter of 2026.

Additionally, in connection with the relocation to the Hagerstown Facility, the Company will receive tax abatement and incentives over the term of the Lease from the State of Maryland and Washington County, Maryland totaling approximately

$13.1 million.

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

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

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

BUSINESS SEGMENTS

The Company has two reportable segments, U.S.

The Company operates in two reportable segments:

and International.

The Company has segmented its operations to reflect the manner in which management reviews and evaluates the results of its operations.

segment includes the Company’s primary domestic business that designs, markets and distributes its products to retailers, distributors and directly to consumers through its own websites.

The International segment consists of certain business operations conducted outside the U.S..

Management evaluates the performance of the U.S.

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.

Certain general and administrative expenses, such as senior executive salaries and benefits, stock compensation, director fees, and accounting, legal fees and consulting fees, are not allocated to the specific segments and are reflected as unallocated corporate expenses.

EQUITY INVESTMENT

As of September 30, 2024, the Company owned 24.7% of the outstanding capital stock of Grupo Vasconia S.A.B.

(“Vasconia”), an integrated manufacturer of aluminum products and a housewares company in Mexico.

Shares of Vasconia’s capital stock are traded on the Bolsa Mexicana de Valores, the Mexican Stock Exchange.

The Quotation Key is VASCONI.

During the second quarter of 2024, Vasconia’s shareholders’ approved a resolution to a reorganization process in terms of the Law of Commercial Bankruptcy in Mexico and subsequently a bankruptcy suit was filed against Vasconia by one of its largest suppliers.

The Company concluded that the recent events constituted a loss of significant influence and resulted in the

discontinuation of the equity method of accounting.

The Company accounts for its Vasconia investment at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 321:

Investments — Equity Securities , with any changes in fair value recorded within income (loss) on equity securities on the consolidated statements of operations.

As a result of the loss of significant influence, the accumulated other comprehensive losses previously recognized under the equity method of accounting were reclassified to the carrying value of the Vasconia investment and subsequently resulted in a non-cash loss of $14.2 million to reduce the investment to its fair value during the three months ended June 30, 2024.

The fair value of the Vasconia investment was not material as of September 30, 2024.

segment is the Company’s domestic business that designs, markets and distributes its products to retailers and distributors, as well as directly to consumers through third parties and its own internet websites primarily in the U.S..

The International segment is the Company’s international business that sells and distributes products to consumers primarily in the U.K., the European Union and the Asia Pacific region.

Additional information regarding the Company’s reportable segments is included in NOTE 11 – BUSINESS SEGMENTS of the Notes to the condensed consolidated financial statements included in Item 1.

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

1 unchanged sentence

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

The increase in inventory levels at March 31, 2025 compared to December 31, 2024 was due to preemptive measures taken in anticipation of, and designed to mitigate, the impact of the tariffs that went into effective in April 2025.

Consistent with the seasonality of the Company’s net sales and inventory levels, the Company also experiences seasonality in its inventory turnover and turnover days from one quarter to the next.

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Net sales 100.0 % 100.0 %

3 unchanged sentences

Selling, general and administrative expenses 22.4 27.8

Restructuring expenses — — — 0.1

Income from operations

4.7 7.1 2.5 3.4

Interest expense (3.5) (3.9)

Mark to market loss on interest rate derivatives

(0.5) (0.1) (0.3) —

Gain on extinguishments of debt, net

Loss on equity securities

Income (loss) before income taxes and equity in losses

1.0 4.3 (4.3) 0.3

Income tax provision

(0.8) (1.6) (0.4) (0.6)

Loss before income taxes and equity in losses

Income tax benefit (provision)

Equity in losses, net of taxes

(3.0) % (4.4) %

Net income (loss)

0.2 % 2.2 % (5.1) % (2.3) %

MANAGEMENT’S DISCUSSION AND ANALYSIS

THREE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED TO THE THREE MONTHS ENDED

SEPTEMBER 30, 2023

Consolidated net sales for the three months ended September 30, 2024 were $183.8 million, representing a decrease of $7.9 million, or 4.1%, as compared to net sales of $191.7 million for the corresponding period in 2023.

THREE MONTHS ENDED MARCH 31, 2025 COMPARED TO THE THREE MONTHS ENDED

MARCH 31, 2024

Consolidated net sales for the three months ended March 31, 2025 were $140.1 million, representing a decrease of $2.1 million, or 1.5%, as compared to net sales of $142.2 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2025 average rates to 2024 local currency amounts, consolidated net sales decreased by $2.0 million, or 1.4%, as compared to consolidated net sales in the corresponding period in 2024.

Net sales for the U.S.

segment for the three months ended September 30, 2024 were $170.2 million, a decrease of $9.2 million, or 5.1%, as compared to net sales of $179.4 million for the corresponding period in 2023.

segment for the three months ended March 31, 2025 were $128.5 million, a decrease of $2.0 million, or 1.5%, as compared to net sales of $130.5 million for the corresponding period in 2024.

Net sales for the U.S.

segment’s Kitchenware product category were $97.3 million for the three months ended September 30, 2024, a decrease of $0.4 million, or 0.4%, as compared to $97.7 million for the corresponding period in 2023.

The decrease was driven by a reduction in sales for kitchen tools and gadgets, partially offset by higher sales for bakeware and cutlery and boards.

segment’s Kitchenware product category were $79.5 million for the three months ended March 31, 2025, a decrease of $4.0 million, or 4.8%, as compared to $83.5 million for the corresponding period in 2024.

The decrease was driven by a reduction in sales for kitchen tools and cutlery and boards, partially offset by higher sales for bakeware.

Net sales for the U.S.

segment’s Tableware product category were $40.9 million for the three months ended September 30, 2024, a decrease of $8.0 million, or 16.4%, as compared to $48.9 million for the corresponding period in 2023.

The decrease was attributable to lower dinnerware sales due to the timing of warehouse club programs in 2024 compared to the prior period and lower sales to brick-and-mortar customers.

segment’s Tableware product category were $27.6 million for the three months ended March 31, 2025, an increase of $1.8 million, or 7.0%, as compared to $25.8 million for the corresponding period in 2024.

The increase was attributable to dinnerware sales in the dollar channel, partially offset by a flatware warehouse club program not repeated in Q1 2025.

Net sales for the U.S.

segment’s Home Solutions product category were $32.0 million for the three months ended September 30, 2024, a decrease of $0.8 million, or 2.4%, as compared to $32.8 million for the corresponding period in 2023.

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

The decrease was partially offset by higher sales for Home Décor products driven by sales for a new warehouse club program introduced in 2024.

Net sales for the International segment were $13.6 million for the three months ended September 30, 2024, an increase of $1.3 million, or 10.6%, as compared to net sales of $12.3 million for the corresponding period in 2023.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales increased $1.1 million, or 8.4%, as compared to consolidated net sales in the corresponding period in 2023.

The increase was driven by higher sales in the U.K.

segment’s Home Solutions product category were $21.4 million for the three months ended March 31, 2025, an increase of $0.2 million, or 0.9%, as compared to $21.2 million for the corresponding period in 2024.

The increase was attributable to higher sales for Home Décor products driven in the dollar channel and a new warehouse program.

The increase was partially offset by lower sales of bath measurement products.

Net sales for the International segment were $11.6 million for the three months ended March 31, 2025, a decrease of $0.1 million, or 0.9%, as compared to net sales of $11.7 million for the corresponding period in 2024.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales decreased by 0.2%, as compared to consolidated net sales in the corresponding period in 2024.

The decrease was driven by lower sales in the U.K.

and continental Europe.

Gross margin for the three months ended September 30, 2024 was $67.4 million, or 36.7%, as compared to $71.0 million, or 37.0%, for the corresponding period in 2023.

Gross margin for the three months ended March 31, 2025 was $50.6 million, or 36.1%, as compared to $57.5 million, or 40.5%, for the corresponding period in 2024.

Gross margin for the U.S.

segment was $62.7 million, or 36.8%, for the three months ended September 30, 2024, as compared to $67.0 million, or 37.3%, for the corresponding period in 2023.

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

Gross margin for the International segment was $4.7 million, or 34.6%, for the three months ended September 30, 2024, as compared to $4.0 million, or 32.5%, for the corresponding period in 2023.

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

segment was $46.5 million, or 36.2%, for the three months ended March 31, 2025, as compared to $53.3 million, or 40.8%, for the corresponding period in 2024.

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

Gross margin for the International segment was $4.1 million, or 35.3%, for the three months ended March 31, 2025, as compared to $4.2 million, or 35.9%, for the corresponding period in 2024.

The gross margin percentage remained consistent period over period.

Distribution expenses

Distribution expenses for the three months ended September 30, 2024 were $20.0 million, as compared to $17.1 million for the corresponding period in 2023.

Distribution expenses as a percentage of net sales were 10.9% for the three months ended September 30, 2024, as compared to 8.9% for the three months ended September 30, 2023.

Distribution expenses for the three months ended March 31, 2025 were $18.1 million, as compared to $16.2 million for the corresponding period in 2024.

Distribution expenses as a percentage of net sales were 12.9% for the three months ended March 31, 2025, as compared to 11.4% for the three months ended March 31, 2024.

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

segment were 9.7% and 7.8% for the three months ended September 30, 2024 and 2023, respectively.

Distribution expense during the three months ended September 30, 2024 and 2023 included $0.6 million and $0.2 million, respectively, for redesign costs related to the Company’s warehouse.

segment were 11.5% and 10.0% for the three months ended March 31, 2025 and 2024, respectively.

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

warehouses, excluding non-recurring expenses, distribution expenses were 10.1% and 9.1% for the three months ended September 30, 2024 and 2023, respectively.

The increase in expenses as a percentage of sales

was attributable to higher depreciation expense due to changes in asset retirement obligation estimates, higher software expenses due to the launch of a new warehouse management system at the Company's west coast distribution center, higher pallet expenses and higher labor rates.

warehouses, distribution expenses were 11.9% and 10.5% for the three months ended March 31, 2025 and 2024, respectively.

The increase in expenses as a percentage of sales was attributable to an increase in employee expenses as a result of less labor management efficiencies due to higher inventory levels, higher software expenses due to the launch of a new warehouse management system at the

Company's west coast distribution center in September 2024.

These increases were partially offset by lower freight-out expenses.

Distribution expenses as a percentage of net sales for the International segment were 25.4% for the three months ended September 30, 2024, compared to 26.1% for the corresponding period in 2023.

As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 24.2% and 22.4% for the three months ended September 30, 2024 and 2023, respectively.

The decrease in expenses as a percentage of net sales was primarily attributed to higher sales, partially offset by higher expenses for the distribution of the Company's products within its global trading business in Asia.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended September 30, 2024 were $38.8 million, a decrease of $1.4 million, or 3.5%, as compared to $40.2 million for the corresponding period in 2023.

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

segment were $30.0 million for the three months ended September 30, 2024, as compared to $31.6 million for the corresponding period in 2023.

As a percentage of net sales, selling, general and administrative expenses were 17.6% for both the three months ended September 30, 2024 and 2023.

The decrease in expenses was attributable to lower employee expenses, primarily due to lower incentive compensation, and a decrease in the provision for doubtful accounts in the current period.

This was partially offset by inflationary increases across several expense categories.

Selling, general and administrative expenses for the International segment were $4.5 million for the three months ended September 30, 2024, as compared to $3.7 million for the corresponding period in 2023.

As a percentage of net sales, selling, general and administrative expenses were 33.1% and 30.1% for the three months ended September 30, 2024 and 2023, respectively.

The increase in expenses was attributable to higher employee expenses and penalties related to tax filings incurred in the current period.

Unallocated corporate expenses for the three months ended September 30, 2024 were $4.3 million, as compared to $4.9 million for the corresponding period in 2023.

The current period decrease was driven by lower incentive compensation, partially offset by higher legal expenses and professional fees.

Interest expense

Interest expense was $5.8 million and $5.2 million for the three months ended September 30, 2024 and 2023, respectively.

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

Mark to market loss on interest rate derivatives

Mark to market loss on interest rate derivatives was $0.9 million for the three months ended September 30, 2024, as compared to a mark to market loss on interest rate derivatives of $0.1 million for the three months ended September 30, 2023.

The loss recognized for the three months ended September 30, 2024 and 2023, respectively, was attributable to the change in the fair value due to the change in the projected interest rate environment.

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

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

As of September 30, 2024, the intent of the Company is to hold these derivative contracts until their maturity.

Income tax provision of $1.5 million and $3.0 million for the three months ended September 30, 2024 and 2023, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax provision rate of 81.4% and 36.5%, respectively.

The effective tax rate for the three months ended September 30, 2024 and 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.

Equity in losses, net of taxes

Equity in losses of Vasconia, net of taxes, was $1.0 million for the three months ended September 30, 2023.

Equity in losses included a non-cash impairment charge of $0.3 million, to reduce the carrying value of the Company’s equity method investment in Vasconia to its fair value.

MANAGEMENT’S DISCUSSION AND ANALYSIS

NINE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED TO THE NINE MONTHS ENDED

SEPTEMBER 30, 2023

Consolidated net sales for the nine months ended September 30, 2024 were $467.7 million, a decrease of $15.8 million, or 3.3%, as compared to net sales of $483.5 million for the corresponding period in 2023.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2024 average rates to 2023 local currency amounts, consolidated net sales decreased by $16.5 million, or 3.4%, as compared to consolidated net sales in the corresponding period in 2023.

Net sales for the U.S.

segment for the nine months ended September 30, 2024 were $431.2 million, a decrease of $16.7 million, or 3.7%, as compared to net sales of $447.9 million for the corresponding period in 2023.

Net sales for the U.S.

segment’s Kitchenware product category were $261.7 million for the nine months ended September 30, 2024, a decrease of $5.7 million, or 2.1%, as compared to $267.4 million for the corresponding period in 2023.

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

Net sales for the U.S.

segment’s Tableware product category were $93.0 million for the nine months ended September 30, 2024, a decrease of $6.0 million, or 6.1%, as compared to $99.0 million for the corresponding period in 2023.

The decrease was across both dinnerware and flatware sales due to lower warehouse club programs in 2024 compared to 2023 and lower sales to brick-and-mortar customers.

Net sales for the U.S.

segment’s Home Solutions product category were $76.5 million for the nine months ended September 30, 2024, a decrease of $5.0 million, or 6.1%, as compared to $81.5 million for the corresponding period in 2023.

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

The decrease was partially offset by higher sales for Home Décor products driven by a new warehouse club program in 2024 and sales of a new licensed product brand.

Net sales for the International segment were $36.5 million for the nine months ended September 30, 2024, an increase of $0.9 million, or 2.5%, as compared to net sales of $35.6 million for the corresponding period in 2023.

In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales stayed flat, as compared to consolidated net sales in the corresponding period in 2023.

The increase was attributable to higher sales in Australia for the Company's global trading business in Asia and sales in continental Europe, partially offset by lower replenishment orders for e-commerce.

Gross margin for the nine months ended September 30, 2024 was $179.5 million, or 38.4%, as compared to $180.8 million, or 37.4%, for the corresponding period in 2023.

Gross margin for the U.S.

segment was $166.5 million, or 38.6%, for the nine months ended September 30, 2024, as compared to $167.6 million, or 37.4%, for the corresponding period in 2023.

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

Gross margin for the International segment was $13.0 million, or 35.6%, for the nine months ended September 30, 2024, as compared to $13.2 million, or 37.1%, for the corresponding period in 2023.

The decrease in gross margin percentage was driven by higher product costs due to unfavorable fluctuations in foreign currency exchange rates.

Distribution expenses

Distribution expenses for the nine months ended September 30, 2024 were $51.3 million, as compared to $49.7 million for the corresponding period in 2023.

Distribution expenses as a percentage of net sales were 11.0% for the nine months ended September 30, 2024, as compared to 10.3% for the nine months ended September 30, 2023.

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

segment were 9.6% and 8.9% for the nine months ended September 30, 2024 and 2023, respectively.

Distribution expenses during the nine months ended September 30, 2024 and 2023 included $0.7 million and $0.5 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 10.0% and 9.7% for the nine months ended September 30, 2024 and 2023, respectively.

The increase in expenses as a percentage of net sales was a result of higher depreciation expense due to changes in asset retirement obligation estimates, higher labor rates, and higher software expenses due to the launch of a new warehouse management system at the Company's west coast distribution center.

These increases were partially offset by 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 26.9% for the nine months ended September 30, 2024, compared to 27.2% for the corresponding period in 2023.

As a percentage of sales shipped from the Company’s international warehouse, distribution expenses were 24.3% and 23.8% for the nine months ended September 30, 2024 and 2023, respectively.

The decrease in expenses as a percentage of net sales was primarily attributed to lower freight out expenses, higher sales, partially offset by higher expenses for the distribution of the Company's products within its global trading business in Asia.

Distribution expenses as a percentage of net sales for the International segment were 28.3% for the three months ended March 31, 2025, compared to 27.2% for the corresponding period in 2024.

As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 25.0% and 23.6% for the three months ended March 31, 2025 and 2024, respectively.

The increase in expenses as a percentage of net sales was primarily attributed to an increase in warehouse rent expense, partially offset by lower freight out-expenses.

Selling, general and administrative expenses

Selling, general and administrative expenses for the nine months ended September 30, 2024 were $116.6 million, an increase of $2.6 million, or 2.3%, as compared to $114.0 million for the corresponding period in 2023.

Selling, general and administrative expenses for the three months ended March 31, 2025 were $31.5 million, a decrease of $8.0 million, or 20.3%, as compared to $39.5 million for the corresponding period in 2024.

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

segment were $90.2 million for the nine months ended September 30, 2024, as compared to $88.3 million for the corresponding period in 2023.

As a percentage of net sales, selling, general and administrative expenses were 20.9% and 19.7% for the nine months ended September 30, 2024 and 2023, respectively.

The increase in expenses was attributable to higher employee expenses, expenses related to the start-up of the Company’s manufacturing operations in Mexico, legal expenses, and inflationary increases across several expense categories.

This was partially offset by a decrease in the provision for doubtful accounts in the current period.

Selling, general and administrative expenses for the International segment were $12.5 million for the nine months ended September 30, 2024, as compared to $11.3 million for the corresponding period in 2023.

The increase was primarily attributable to higher employee expenses and penalties related to tax filings incurred in the current period.

Unallocated corporate expenses for the nine months ended September 30, 2024 were $13.9 million, as compared to $14.4 million for the corresponding period in 2023.

The decrease was driven by lower incentive compensation and insurance expenses.

Restructuring expenses

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.

segment were $30.0 million for the three months ended March 31, 2025, as compared to $30.8 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 23.3% and 23.6% for the three months ended March 31, 2025 and 2024, respectively.

The decrease in expenses was attributable to lower employee expenses, including incentive compensation, and legal expenses.

This was partially offset by an increase in the provision for doubtful accounts in the current period and an increase in amortization expense related to an indefinite-lived trade name, which was reclassified to a finite-lived trade name in the fourth quarter 2024.

Selling, general and administrative expenses for the International segment were $3.7 million for the three months ended March 31, 2025, as compared to $4.2 million for the corresponding period in 2024.

As a percentage of net sales, selling, general and administrative expenses were 31.9% and 35.9% for the three months ended March 31, 2025 and 2024, respectively.

The decrease in expenses was attributable to lower commission expenses, and foreign currency exchange gains.

Unallocated corporate income for the three months ended March 31, 2025 was $2.2 million, as compared to expenses of $4.5 million for the corresponding period in 2024.

The current period income was driven by the recognition of a net legal settlement gain of $6.4 million.

The remaining decrease compared to the prior period was due to lower incentive compensation and legal expenses, partially offset by an increase in stock compensation expense.

Interest expense

Interest expense was $16.6 million and $16.1 million for the nine months ended September 30, 2024 and 2023, respectively.

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

Interest expense was $4.9 million and $5.6 million for the three months ended March 31, 2025 and 2024, respectively.

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

Mark to market loss on interest rate derivatives

Mark to market loss on interest rate derivatives was $1.2 million for the nine months ended September 30, 2024, as compared to $0.1 million for the nine months ended September 30, 2023.

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

Mark to market loss on interest rate derivatives was $0.5 million for the three months ended March 31, 2025, as compared to a mark to market loss on interest rate derivatives of $0.2 million for the three months ended March 31, 2024.

The loss recognized for the three months ended March 31, 2025 and 2024, respectively, was attributable to the change in the fair value due to the change in the projected interest rate environment.

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

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

As of September 30, 2024, the intent of the Company is to hold these derivative contracts until their maturity.

Gain on extinguishments of debt

Gain on extinguishments 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 6 — DEBT for additional information.

Loss on equity securities

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

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

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

NOTE 4 —INVESTMENT for additional information.

Income tax provision of $1.7 million and $2.9 million for the nine months ended September 30, 2024 and 2023, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax provision rate of (8.2)% and 197.0%, respectively.

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

The effective tax rate for the nine months ended September 30, 2024 and 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.

As of March 31, 2025, the intent of the Company is to hold these derivative contracts until their maturity.

Income tax benefit of $0.1 million and provision of $0.2 million for the three months ended March 31, 2025 and 2024, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax benefit rate of 3.3% and provision rate of (5.3)%, respectively.

The negative rate for the three months ended March 31, 2024 reflects tax expense on a pretax financial reporting loss.

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

The effective tax rate for the three months ended March 31, 2024 differs from the federal statutory income tax rate of 21.0% primarily due to the expiration of non-qualified stock options and the vesting of equity-based awards, where the book expense exceeded the tax deduction upon vesting, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

Equity in losses, net of taxes

Equity in losses of Vasconia, net of taxes , was $2.1 million for the nine months ended September 30, 2024, as compared to $9.7 million for the nine months ended September 30, 2023.

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

Equity in losses of Vasconia, net of taxes, was $2.1 million for the three months ended March 31, 2024.

LIQUIDITY AND CAPITAL RESOURCES

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

At September 30, 2024, the Company had cash and cash equivalents of $6.0 million, compared to $16.2 million at December 31, 2023.

Working capital was $230.2 million at September 30, 2024, compared to $224.4 million at December 31, 2023.

Liquidity as of September 30, 2024 was $75.6 million, consisting of $6.0 million of cash and cash equivalents, $51.6 million of availability under the ABL Agreement, limited by the Term Loan financial covenant, and $18.0 million of available funding under the Receivables Purchase Agreement.

At March 31, 2025, the Company had cash and cash equivalents of $10.4 million, compared to $2.9 million at December 31, 2024.

Working capital was $216.4 million at March 31, 2025, compared to $221.8 million at December 31, 2024.

Liquidity as of March 31, 2025 was $89.6 million, consisting of $10.4 million of cash and cash equivalents, $63.2 million of availability under the ABL Agreement, limited by the Term Loan financial covenant, and $16.0 million of available funding under the Receivables Purchase Agreement.

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

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

For the three months ended September 30, 2024, inventory turnover was 2.1 times, or 175 days, as compared to 2.2 times, or 164 days, for the three months ended September 30, 2023.

For the three months ended March 31, 2025, inventory turnover was 1.8 times, or 208 days, as compared to 1.8 times, or 203 days, for the three months ended March 31, 2024.

Inventory turns have remained relatively consistent.

On February 7, 2024, in connection with the Wallace EPA Matter, the Company provided financial assurance of $5.6 million in the form of a letter of credit.

This reduced the availability under the revolving credit facility in the 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.

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The Term Loan has a principal amount of $150.0 million, and matures on August 26, 2027.

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

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

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

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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 3.25 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan but not to mature earlier than the maturity date of the then existing term loans.

As of September 30, 2024 and December 31, 2023, the total availability under the ABL Agreement were as follows (in thousands):

September 30, 2024

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

March 31, 2025

December 31, 2024

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

As of September 30, 2024, the availability under the ABL Agreement, limited by the Term Loan financial covenant, was $51.6 million.

As of March 31, 2025, the availability under the ABL Agreement, limited by the Term Loan financial covenant, was $63.2 million.

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

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Current portion of Term Loan:

Term Loan payment $ 7,500 $ 7,500

Estimated Excess Cash Flow principal payment 2,000 —

Estimated unamortized debt issuance costs (2,574) (2,609)

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Total Non-current portion of Term Loan $ 129,707 $ 130,949

The estimated Excess Cash Flow principal payment recorded at September 30, 2024 represents the Company’s estimate for the Excess Cash Flow Payment due in 2025.

There was no Excess Cash Flow payment due in 2024.

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

As of March 31, 2025, the Company estimates no excess cash flow payment will be due for 2025.

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

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subsidiary guarantors, subject to certain exceptions.

Such security interests consist of (1) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and certain of its 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 certain of its 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.

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.

Borrowings under the revolving credit facility bear interest, at the Company’s option, at one of the following rates:

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

The interest rate on outstanding borrowings under the ABL Agreement at September 30, 2024 was between 4.79% and 6.68%.

The Company paid a commitment fee of 0.25% on the unused portion of the ABL Agreement during the nine months ended September 30, 2024.

The interest rate on outstanding borrowings under the ABL Agreement at March 31, 2025 was between 3.79% and 5.86%.

The Company paid a commitment fee of 0.25% on the unused portion of the ABL Agreement during the three months ended March 31, 2025.

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

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

The interest rate on outstanding borrowings under the Term Loan at September 30, 2024 was 10.73%.

The interest rate on outstanding borrowings under the Term Loan at March 31, 2025 was 9.94%.

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

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Under the Term Loan, the Total Net Leverage Ratio is not permitted to be greater than 5.00 to 1.00 determined as of the end of each fiscal quarters.

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

The Company was in compliance with the covenants of the Debt Agreements at September 30, 2024.

On June 8, 2023, the Company completed the repurchase of $47.2 million in principal amount of the Term Loan, for $95 per $100 of principal.

The repurchase was executed by way of a reverse Dutch auction, pursuant to and in accordance with the terms and conditions provided for in the Term Loan.

In connection therewith, debt issuance costs of $0.5 million were written off and fees of $0.4 million were incurred.

The gain on the early retirement of the Term Loan of $1.5 million, net of fees and expenses, was recognized during the three and nine months ended September 30, 2023.

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 March 31, 2025.

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 for the trailing twelve months ended September 30, 2024 was $53.9 million.

Capital expenditures for the nine months ended September 30, 2024 were $1.6 million.

The Company’s adjusted EBITDA for the trailing twelve months ended March 31, 2025 was $51.0 million.

Capital expenditures for the three months ended March 31, 2025 were $1.6 million.

Non-GAAP financial measure

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Investors should consider this non-GAAP financial measure in addition to, and not as a substitute for, the Company’s financial performance measures prepared in accordance with U.S.

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

The following is a reconciliation of the net income (loss), as reported, to adjusted EBITDA, for each of the last four quarters and the 12 months ended September 30, 2024:

Quarter Ended Twelve Months Ended September 30, 2024

December 31, 2023 March 31,

2024 June 30,

2024 September 30,

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 March 31, 2025:

Quarter Ended Twelve Months Ended March 31, 2025

June 30, 2024 September 30,

2024 December 31,

2024 March 31,

(in thousands)

Net income (loss) as reported

Net (loss) income as reported

$ (18,167) $ 344 $ 8,918 $ (4,201) $ (13,106)

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14,152 — — — 14,152

Equity in losses, net

2,978 2,092 — — 5,070

Income tax provision (benefit)

Income tax (benefit) provision

(57) 1,507 1,671 (142) 2,979

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Depreciation and amortization 4,894 6,408 6,073 5,698 23,073

Mark to market loss on interest rate derivatives

Mark to market loss (gain) on interest rate derivatives

82 928 (718) 527 819

Stock compensation expense 1,037 1,042 1,034 1,062 4,175

Contingent consideration fair value adjustments (600) — — — (600)

Loss on extinguishments of debt

Legal settlement gain, net (1)

— — — (4,578) (4,578)

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$ 7,774 $ 16,935 $ 22,973 $ 3,281 $ 50,963

(1) For the twelve months ended September 30, 2024, the warehouse redesign expenses were related to the U.S.

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

(2) For the twelve months ended March 31, 2025, the warehouse redesign expenses were related to the U.S.

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

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

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

Accounts Receivable Purchase Agreement

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

The Company did not sell receivables to HSBC during the three and nine months ended September 30, 2024 and September 30, 2023.

At September 30, 2024, $18.0 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 months ended March 31, 2025 and March 31, 2024.

At March 31, 2025, $16.0 million of accounts receivables were available for sale to HSBC, net of applicable charges.

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

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

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

The Company’s derivatives expose it to credit risks from possible non-performance by counterparties.

The Company has limited its credit risk by entering into derivative transactions exclusively with investment-grade rated financial institutions and monitors the creditworthiness of these financial institutions on an ongoing basis.

The Company utilizes standard counterparty master netting agreements that net certain foreign currency and interest rate swap transactions in the event of the insolvency of

one of the parties to the transaction.

These master netting arrangements permit the Company to net amounts due from the Company to counterparty with amounts due to the Company from the same counterparty.

Although all of the Company’s recognized derivative assets and liabilities are subject to enforceable master netting arrangements, the Company has elected to present these assets and liabilities on a gross basis.

The Company does not anticipate non-performance by any of its counterparties.

Interest Rate Swaps

In June 2019 the Company entered into interest rate swap agreements, with an aggregate notional value of $25.0 million and expire in February 2025.

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

To manage its exposures to interest rate movements, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.

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

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

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

The Company’s total outstanding notional value of interest rate swaps was $50.0 million at September 30, 2024.

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 September 30, 2024.

The Company’s total outstanding notional value of interest rate swaps was $50.0 million at March 31, 2025.

Foreign Exchange Contracts

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 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 value of foreign exchange contracts at September 30, 2024 was $2.8 million.

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

The Company is exposed to market risks as well as changes in foreign currency exchange rates as measured against the USD and each other, and to changes to the credit risk of derivative counterparties.

The Company attempts to minimize these risks primarily by using foreign currency forward contracts and by maintaining counterparty credit limits.

These hedging activities provide only limited protection against currency exchange and credit risk.

Factors that could influence the effectiveness of the Company’s hedging programs include those impacting currency markets and the availability of hedging instruments and liquidity of the credit markets.

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 September 30, 2024, these foreign exchange contracts have been designated as hedges in to order to apply hedge accounting.

To reduce the impact of changes in foreign currency exchange rates on its results, from time to time the Company is a party to certain foreign exchange contracts, primarily to offset the earnings impact related to fluctuations in foreign currency exchange rates associated with inventory purchases.

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

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

The aggregate gross notional value of foreign exchange contracts at March 31, 2025 was $9.3 million.

Operating activities

Net cash used in operating activities was $1.7 million for the nine months ended September 30, 2024, as compared to net cash provided by operating activities of $17.0 million for the nine months ended September 30, 2023.

The decrease from 2024 compared to 2023 was attributable to increased use of cash related to inventory purchases and higher net loss, partially offset by timing of collections related to the Company's accounts receivables, and timing of payments for accounts payable and accrued expenses.

Net cash provided by operating activities was $16.7 million for the three months ended March 31, 2025, as compared to net cash provided by operating activities of $10.5 million for the three months ended March 31, 2024.

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

Investing activities

Net cash used in investing activities was $1.6 million and $1.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Net cash used in investing activities was $1.6 million and $0.6 million for the three months ended March 31, 2025 and 2024, respectively.

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

Financing activities

Net cash used in financing activities was $6.9 million for the nine months ended September 30, 2024, as compared to net cash used in financing activities of $32.4 million for the nine months ended September 30, 2023.

The change was attributable to the repurchase of a portion of the term loan and stock repurchases in the 2023 period, partially offset by lower net proceeds from revolving credit facility in the 2024 period.

Net cash used in financing activities was $7.8 million for the three months ended March 31, 2025, as compared to net cash used in financing activities of $21.4 million for the three months ended March 31, 2024.

The change was attributable to lower net repayments of revolving credit facility in the 2025 period, partially offset by the principal repayment of term loan due to timing.

Stock repurchase program

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

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

No repurchases were effected during the nine months ended September 30, 2024.

As of September 30, 2024, the remaining dollar amount available for repurchases under the Board authorized plan was $11.1 million.

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

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

No shares were repurchased during the three months ended March 31, 2025.

As of March 31, 2025, the remaining dollar amount available for repurchases under the Board of Directors’ authorized plan was $11.1 million.

Quantitative and Qualitative Disclosures About Market Risk

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis