LIFETIME BRANDS INC

Previous wording

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

Current wording

•Geopolitical conditions, including political instability in the U.S. and abroad, war, conflict, unrest and sanctions, including those related to the conflicts in Ukraine, Israel and surrounding areas;

Previous wording

The Company markets several product lines within each of its product categories and under most of the Company’s brands, primarily targeting moderate price points through virtually every major level of trade. 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®, and S'well®. 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. 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. A significant element of this strategy is the Company’s in-house design and development teams that create new products, packaging and merchandising concepts.

Current wording

The Company markets several product lines within each of its product categories and under most of the Company’s brands, primarily targeting moderate price points through virtually every major level of trade. 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. 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. A significant element of this strategy is the Company’s in-house design and development teams that create new products, packaging and merchandising concepts.

Previous wording

The global economy experienced relatively high inflation throughout 2023. As global inflation levels moderate, the impact of elevated inflation and high interest rates may 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 due to attacks on commercial vessels in the Red Sea, may adversely impact the Company’s results due to supply delays and an increase in transportation costs. The Company expects uncertainty as result of these trends in 2024.

Current wording

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 due to attacks on commercial vessels in the Red Sea, 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.

Previous wording

The Company has two reportable segments, U.S. and International. The Company has segmented its operations to reflect the manner in which management reviews and evaluates the results of its operations. The U.S. 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 (loss) 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.

Current wording

The Company has two reportable segments, U.S. and International. The Company has segmented its operations to reflect the manner in which management reviews and evaluates the results of its operations. The U.S. 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.

Previous wording

As of March 31, 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. The Company accounts for its investment in Vasconia using the equity method of accounting and records its proportionate share of Vasconia’s net loss in the Company’s condensed consolidated statements of operations. Accordingly, the Company has recorded its proportionate share of Vasconia’s net loss for the three months ended March 31, 2024 and 2023 in the accompanying unaudited condensed consolidated statements of operations. Pursuant to a Shares Subscription Agreement, the Company may designate

Current wording

As of June 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

Previous wording

Consolidated net sales for the three months ended March 31, 2024 were $142.2 million, representing a decrease of $3.2 million, or 2.2%, as compared to net sales of $145.4 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 $3.7 million, or 2.5%, as compared to consolidated net sales in the corresponding period in 2023.

Current wording

Consolidated net sales for the three months ended June 30, 2024 were $141.7 million, representing a decrease of $4.7 million, or 3.2%, as compared to net sales of $146.4 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 $4.8 million, or 3.3%, as compared to consolidated net sales in the corresponding period in 2023.

Previous wording

Net sales for the U.S. segment for the three months ended March 31, 2024 were $130.5 million, a decrease of $3.0 million, or 2.2%, as compared to net sales of $133.5 million for the corresponding period in 2023.

Current wording

Net sales for the U.S. segment for the three months ended June 30, 2024 were $130.5 million, a decrease of $4.5 million, or 3.3%, as compared to net sales of $135.0 million for the corresponding period in 2023.

Previous wording

Net sales for the U.S. segment’s Tableware product category were $25.8 million for the three months ended March 31, 2024, an increase of $1.8 million, or 7.5%, as compared to $24.0 million for the corresponding period in 2023. The increase was attributable to higher dinnerware sales due to a new warehouse club program in 2024.

Current wording

Net sales for the U.S. segment’s Tableware product category were $26.3 million for the three months ended June 30, 2024, an increase of $0.2 million, or 0.8%, as compared to $26.1 million for the corresponding period in 2023. The increase was attributable to higher dinnerware sales due to a new warehouse club program introduced in 2024.

Previous wording

Net sales for the U.S. segment’s Home Solutions product category were $21.2 million for the three months ended March 31, 2024, a decrease of $2.6 million, or 10.9%, as compared to $23.8 million for the corresponding period in 2023. The decrease was in hydration products and Taylor branded bath measurement products, partially offset by higher sales for Home Décor products.

Current wording

Net sales for the U.S. segment’s Home Solutions product category were $23.4 million for the three months ended June 30, 2024, a decrease of $1.5 million, or 6.0%, as compared to $24.9 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 sales of a new licensed product brand.

Previous wording

Net sales for the International segment were $11.7 million for the three months ended March 31, 2024, a decrease of $0.2 million, or 1.7%, as compared to net sales of $11.9 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 decreased $0.7 million, or 5.3%, as compared to consolidated net sales in the corresponding period in 2023. The decrease was attributable to lower replenishment orders for e-commerce and brick-and-mortar customers, partially offset by higher sales in Australia for the Company's global trading business in Asia.

Current wording

Net sales for the International segment were $11.2 million for the three months ended June 30, 2024, a decrease of $0.2 million, or 1.8%, as compared to net sales of $11.4 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 decreased $0.3 million, or 2.8%, as compared to consolidated net sales in the corresponding period in 2023. The decrease was attributable to lower replenishment orders for e-commerce and brick-and-mortar customers, partially offset by higher sales in Australia for the Company's global trading business in Asia.

Previous wording

Distribution expenses for the three months ended March 31, 2024 were $16.2 million, as compared to $16.9 million for the corresponding period in 2023. Distribution expenses as a percentage of net sales were 11.4% for the three months ended March 31, 2024, as compared to 11.6% for the three months ended March 31, 2023.

Current wording

Distribution expenses for the three months ended June 30, 2024 were $15.1 million, as compared to $15.7 million for the corresponding period in 2023. Distribution expenses as a percentage of net sales were 10.6% for the three months ended June 30, 2024, as compared to 10.7% for the three months ended June 30, 2023.

Previous wording

Distribution expenses as a percentage of net sales for the International segment were 27.2% for the three months ended March 31, 2024, compared to 28.0% for the corresponding period in 2023. As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 23.6% and 24.0% for the three months ended March 31, 2024 and 2023, respectively. The decrease in expenses as a percentage of sales was attributable to lower freight costs.

Current wording

Distribution expenses as a percentage of net sales for the International segment were 28.5% for the three months ended June 30, 2024, compared to 27.7% for the corresponding period in 2023. As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 25.1% for the three months ended June 30, 2024 and 2023. The increase in expenses as a percentage of net sales was primarily attributed to lower sales, partially offset by lower freight out expense rates.

Previous wording

Selling, general and administrative expenses for the U.S. segment were $30.8 million for the three months ended March 31, 2024, as compared to $29.3 million for the corresponding period in 2023. As a percentage of net sales, selling, general and administrative expenses were 23.6% and 21.9% for the three months ended March 31, 2024 and 2023, respectively. The increase in expenses was attributable to higher employee expenses, including incentive compensation, legal expenses, expenses related to the start-up of the Company's manufacturing operations in Mexico, and inflationary increases across several expense categories. This was partially offset by a decrease in the provision for doubtful accounts in the current period.

Current wording

Selling, general and administrative expenses for the U.S. segment were $29.4 million for the three months ended June 30, 2024, as compared to $27.4 million for the corresponding period in 2023. As a percentage of net sales, selling, general and administrative expenses were 22.5% and 20.3% for the three months ended June 30, 2024 and 2023, respectively. The increase in expenses was attributable to higher employee expenses, including incentive compensation, expenses related to the start-up of the Company's manufacturing operations in Mexico, and inflationary increases across several expense categories. This was partially offset by a decrease in the provision for doubtful accounts in the current period.

Previous wording

Interest expense was $5.6 million and $5.3 million for the three months ended March 31, 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.

Current wording

Interest expense was $5.2 million and $5.5 million for the three months ended June 30, 2024 and 2023, respectively. The decrease in expense was a result of lower average outstanding borrowings, partially offset by higher interest rates on outstanding borrowings.

Previous wording

Mark to market loss on interest rate derivatives

Current wording

Mark to market (loss) gain on interest rate derivatives

Previous wording

Mark to market loss on interest rate derivatives was $0.2 million for the three months ended March 31, 2024 and 2023. The loss recognized for the three months ended March 31, 2024 and 2023 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 March 31, 2024, the intent of the Company is to hold these derivative contracts until their maturity.

Current wording

Mark to market loss on interest rate derivatives was $0.1 million for the three months ended June 30, 2024, as compared to a mark to market gain on interest rate derivatives of $0.2 million for the three months ended June 30, 2023. The loss and gain recognized for the three months ended June 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 June 30, 2024, the intent of the Company is to hold these derivative contracts until their maturity.

Previous wording

Income tax provision of $0.2 million and income tax benefit of $1.3 million for the three months ended March 31, 2024 and 2023, respectively, represent taxes on both U.S. and foreign earnings at a combined effective income tax provision rate of (5.3)% and benefit rate of 18.3%, 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, 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. The effective tax rate for the three months ended March 31, 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.

Current wording

Income tax benefit of $0.1 million and income tax provision of $1.2 million for the three months ended June 30, 2024 and 2023, respectively, represent taxes on both U.S. and foreign earnings at a combined effective income tax benefit rate of 0.3% and provision rate of 212.3%, respectively. The effective tax rate for the three months ended June 30, 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. 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.

Previous wording

March 31, 2023, equity in losses included a non-cash impairment charge of $2.1 million, to reduce the carrying value of the Company’s investment in Vasconia to its fair value.

Current wording

Equity in losses of Vasconia, net of taxes, was $5.9 million 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 equity method investment in Vasconia to its fair value.

Previous wording

Net sales for the U.S. segment’s Kitchenware product category were $83.5 million for the three months ended March 31, 2024, a decrease of $2.2 million, or 2.6%, as compared to $85.7 million for the corresponding period in 2023. The decrease was driven by sales for kitchen tools and gadgets and barware products, partially offset by higher sales for cutlery and boards.

Current wording

Net sales for the U.S. segment’s Kitchenware product category were $164.3 million for the six months ended June 30, 2024, a decrease of $5.4 million, or 3.2%, as compared to $169.7 million for the corresponding period in 2023. The decrease was mainly driven by lower consumer demand for kitchen tools and gadgets and barware products, partially offset by higher sales for cutlery & boards and bakeware products.

Previous wording

Gross margin for the U.S. segment was $53.3 million, or 40.8%, for the three months ended March 31, 2024, as compared to $48.9 million, or 36.6%, for the corresponding period in 2023. The increase in gross margin percentage was due to lower inbound freight costs and favorable product mix.

Current wording

Gross margin for the U.S. segment was $103.8 million, or 39.8%, for the six months ended June 30, 2024, as compared to $100.6 million, or 37.5%, for the corresponding period in 2023. The improvement in gross margin percentage was due to lower inbound freight costs and product mix.

Previous wording

Gross margin for the International segment was $4.2 million, or 35.9%, for the three months ended March 31, 2024, as compared to $5.0 million, or 42.0%, for the corresponding period in 2023. The decrease in the gross margin percentage was driven by higher product costs due to unfavorable fluctuations in foreign currency exchange rates.

Current wording

Gross margin for the International segment was $8.3 million, or 36.2%, for the six months ended June 30, 2024, as compared to $9.2 million, or 39.3%, for the corresponding period in 2023. The decrease in gross margin was driven by lower sales. The decrease in gross margin percentage was driven by higher product costs due to unfavorable fluctuations in foreign currency exchange rates.

Previous wording

Distribution expenses as a percentage of net sales for the U.S. segment were approximately 10.0% and 10.2% for the three months ended March 31, 2024 and 2023, respectively. As a percentage of sales shipped from the Company’s U.S. warehouses, distribution expenses were 10.5% for the three months ended March 31, 2024 and 2023, respectively. The expenses as a percentage of sales were impacted by improved labor management efficiencies resulting in a decrease of employee expenses and lower storage expenses from lower inventory levels, offset by higher freight out and facility expenses.

Current wording

Distribution expenses as a percentage of net sales for the U.S. segment were 9.5% and 9.7% for the six months ended June 30, 2024 and 2023, respectively. Distribution expenses during the six months ended June 30, 2024 and 2023 include $0.1 million and $0.4 million, respectively, for redesign costs related to upgrading the Company's U.S. warehouse management system. As a percentage of sales shipped from the Company’s U.S. warehouses, excluding non-recurring expenses, distribution expenses were 10.0% and for the six months ended June 30, 2024 and 2023. The decrease in expenses as a percentage of net sales was a result of improved labor management efficiencies resulting in a decrease of employee expenses, lower storage expenses from lower inventory levels, and lower pallet expenses, partially offset by higher labor rates and software maintenance expenses.

Previous wording

Unallocated corporate expenses for the three months ended March 31, 2024 were $4.5 million, as compared to $5.0 million for the corresponding period in 2023. The current period decrease was driven by lower professional services and legal expenses.

Current wording

Unallocated corporate expenses for the six months ended June 30, 2024 were $9.6 million, as compared to $9.5 million for the corresponding period in 2023. The increase was driven by higher incentive compensation, legal expenses, partially offset by lower professional services.

Previous wording

For the three months ended March 31, 2023, the Company incurred $0.8 million of unallocated corporate expense related to the termination payment with its former Executive Chairman.

Current wording

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.

Previous wording

Equity in losses of Vasconia, net of taxes, was $2.1 million for the three months ended March 31, 2024, as compared to equity in losses of Vasconia, net of taxes, of $0.7 million for the three months ended March 31, 2023. For the three months ended

Current wording

Equity in losses of Vasconia, net of taxes, was $2.1 million for the six months ended June 30, 2024, as compared to $8.6 million for the six months ended June 30, 2023. 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 equity method investment in Vasconia to its fair value.

Previous wording

At March 31, 2024, the Company had cash and cash equivalents of $4.6 million, compared to$16.2 million at December 31, 2023. Working capital was $199.0 million at March 31, 2024, compared to $224.4 million at December 31, 2023. Liquidity as of March 31, 2024 was $125.1 million, consisting of $4.6 million of cash and cash equivalents,$96.7 million of availability under the ABL Agreement, and $23.8 million of available funding under the Receivables Purchase Agreement.

Current wording

At June 30, 2024, the Company had cash and cash equivalents of $3.4 million, compared to$16.2 million at December 31, 2023. Working capital was $197.5 million at June 30, 2024, compared to $224.4 million at December 31, 2023. Liquidity as of June 30, 2024 was $119.3 million, consisting of $3.4 million of cash and cash equivalents, $97.2 million of availability under the ABL Agreement, limited by the Term Loan financial covenant, and $18.7 million of available funding under the Receivables Purchase Agreement.

Previous wording

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. The Company also expects inventory turnover to fluctuate from period to period based on product and customer mix. Certain product categories have lower inventory turnover rates as a result of minimum order quantities from the Company’s vendors or customer replenishment needs. Certain other product categories experience higher inventory turns due to lower minimum order quantities or trending sale demands. For the three months ended March 31, 2024, inventory turnover was 1.8 times, or 203 days, as compared to 1.7 times, or 212 days, for the three months ended March 31, 2023. Inventory turns have remained relatively consistent.

Current wording

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. The Company also expects inventory turnover to fluctuate from period to period based on product and customer mix. Certain product categories have lower inventory turnover rates as a result of minimum order quantities from the Company’s vendors or customer replenishment needs. 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, 2024, inventory turnover was 1.8 times, or 208 days, as compared to 1.7 times, or 213 days, for the three months ended June 30, 2023. Inventory turns have remained relatively consistent.

Previous wording

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 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. The percentage applied to the Company’s excess cash flow is based on the Company’s Total Net Leverage Ratio (as defined in the

Current wording

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 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. The percentage applied to the Company’s Excess Cash Flow is based on the Company’s Total Net Leverage Ratio (as defined in the Debt Agreements). When an Excess Cash Flow payment is required, each lender has the option to decline a portion or all of the prepayment amount payable to it. Per the Term Loan, when the Company makes an Excess Cash Flow prepayment, the payment is first applied to satisfy the next eight (8) scheduled future quarterly required payments of the Term Loan in order of maturity and then to the remaining scheduled installments on a pro rata basis.

Previous wording

The maximum borrowing amount under the ABL Agreement may be increased to up to $250.0 million if certain conditions are met. One or more tranches of additional term loans (the “Incremental Term Facilities”) may be added under the Term Loan if certain conditions are met. The Incremental Facilities may not exceed the sum of (i) $50.0 million plus (ii) an unlimited amount so long as, in the case of (ii) only, the Company’s secured net leverage ratio, as defined in and computed on a pro forma basis pursuant to the Term Loan, after giving effect to such increase, is no greater than 3.25 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan but not to mature earlier than the maturity date of the then existing term loans.

Current wording

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

Previous wording

Availability under the ABL Agreement is limited to the lesser of the $200.0 million commitment thereunder and the borrowing base and therefore depends on the valuation of certain current assets comprising the borrowing base. The borrowing capacity under the ABL Agreement will depend, in part, on eligible levels of accounts receivable and inventory that fluctuate regularly. Due to the seasonality of the Company’s business, the Company may have greater borrowing availability during the third and fourth quarters of each year. Consequently, the $200.0 million commitment thereunder may not represent actual borrowing capacity. 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.

Current wording

Availability under the ABL Agreement is limited to the lesser of the $200.0 million commitment thereunder and the borrowing base and therefore depends on the valuation of certain current assets comprising the borrowing base. The borrowing capacity under the ABL Agreement will depend, in part, on eligible levels of accounts receivable and inventory that fluctuate regularly. Due to the seasonality of the Company’s business, the Company may have greater borrowing availability during the third and fourth quarters of each year. Consequently, the $200.0 million commitment thereunder may not represent actual borrowing capacity. 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 June 30, 2024, the availability under the ABL Agreement, limited by the Term Loan financial covenant, was $97.2 million.

Previous wording

The Company’s payment obligations under its Debt Agreements are unconditionally guaranteed by its existing and future U.S. 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. 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. subsidiary guarantors, subject to certain exceptions. Such security

Current wording

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

Previous wording

Borrowings under the revolving credit facility bear interest, at the Company’s option, at one of the following rates: (i) an alternate base rate, defined, for any day, as the greater of the prime rate, a federal funds and overnight bank funding based rate plus 0.5% or one-month Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 1.0% as of a specified date in advance of the determination, but in each case not less than 1.0%, plus a margin of 0.25% to 0.50%, or (ii) Adjusted Term SOFR, which is the Term SOFR Rate for the selected 1, 3 or 6 month interest period plus 0.10% (or Euro Interbank Offered Rate “EURIBOR” for borrowings denominated in Euro; or Sterling Overnight Index Average “SONIA” for borrowings denominated in Pounds Sterling), but in each case not less than zero, plus a margin of 1.25% to 1.50%. The respective margins are based upon average quarterly availability, as defined in and computed pursuant to the ABL Agreement. 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 March 31, 2024 was between 6.44% and 8.75%. The Company paid a commitment fee of 0.25% on the unused portion of the ABL Agreement during the three months ended March 31, 2024.

Current wording

Borrowings under the revolving credit facility bear interest, at the Company’s option, at one of the following rates: (i) an alternate base rate, defined, for any day, as the greater of the prime rate, a federal funds and overnight bank funding based rate plus 0.5% or one-month Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 1.0% as of a specified date in advance of the determination, but in each case not less than 1.0%, plus a margin of 0.25% to 0.50%, or (ii) Adjusted Term SOFR, which is the Term SOFR Rate for the selected 1, 3 or 6 month interest period plus 0.10% (or Euro Interbank Offered Rate “EURIBOR” for borrowings denominated in Euro; or Sterling Overnight Index Average “SONIA” for borrowings denominated in Pounds Sterling), but in each case not less than zero, plus a margin of 1.25% to 1.50%. The respective margins are based upon average quarterly availability, as defined in and computed pursuant to the ABL Agreement. 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, 2024 was between 4.91% and 8.75%. The Company paid a commitment fee of 0.25% on the unused portion of the ABL Agreement during the six months ended June 30, 2024.

Previous wording

The Company’s adjusted EBITDA for the trailing twelve months ended March 31, 2024 was $59.5 million.

Current wording

The Company’s adjusted EBITDA for the trailing twelve months ended June 30, 2024 was $56.6 million.

Previous wording

Capital expenditures for the three months ended March 31, 2024 were $0.6 million.

Current wording

Capital expenditures for the six months ended June 30, 2024 were $1.1 million.

Previous wording

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, 2024:

Current wording

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 June 30, 2024:

Previous wording

(2) 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, interest expense, depreciation and amortization, mark to market (gain) loss on interest rate derivatives, stock compensation expense, (gain) loss on extinguishments of debt, net, and other items detailed in the table above that are consistent with exclusions permitted by our debt agreements.

Current wording

(2) 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.

Previous wording

The Company did not sell receivables to HSBC during the three months ended March 31, 2024 and March 31, 2023. At March 31, 2024, $23.8 million of accounts receivables were available for sale to HSBC, net of applicable charges.

Current wording

The Company did not sell receivables to HSBC during the three and six months ended June 30, 2024 and June 30, 2023. At June 30, 2024, $18.7 million of accounts receivables were available for sale to HSBC, net of applicable charges.

Previous wording

The aggregate gross notional value of foreign exchange contracts at March 31, 2024 was $7.0 million. These foreign exchange contracts have been designated as hedges in order to apply hedge accounting.

Current wording

The aggregate gross notional value of foreign exchange contracts at June 30, 2024 was $5.2 million. These foreign exchange contracts have been designated as hedges in order to apply hedge accounting.

Previous wording

Net cash provided by operating activities was $10.5 million for the three months ended March 31, 2024, as compared to net cash provided by operating activities of $12.1 million for the three months ended March 31, 2023. The decrease from 2024 compared to 2023 was attributable to higher use of cash related to inventory purchases, partially offset by timing of collections related to the Company's accounts receivables.

Current wording

Net cash provided by operating activities was $20.9 million for the six months ended June 30, 2024, as compared to net cash provided by operating activities of $29.0 million for the six months ended June 30, 2023. The decrease from 2024 compared to 2023 was attributable to higher use of cash related to inventory purchases, partially offset by timing of collections related to the Company's accounts receivables.

Previous wording

Net cash used in investing activities was $0.6 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Net cash used in investing activities was $1.1 million and $1.0 million for the six months ended June 30, 2024 and 2023, respectively.