LIFETIME BRANDS, INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

The following discussion should be read in conjunction with the consolidated
financial statements for the Company and Notes thereto set forth in Item 15.
This discussion contains forward-looking statements relating to future events
and the future performance of the Company based on the Company's current
expectations, assumptions, estimates and projections about it and the Company's
industry. These forward-looking statements involve risks and uncertainties. The
Company's actual results and timing of various events could differ materially
from those anticipated in such forward-looking statements as a result of a
variety of factors, as more fully described in this section and elsewhere in
this Annual Report including those discussed under "Disclosures Regarding
Forward-Looking Statements," "Risk Factors Summary" under Item 1A "Risk Factors"
and under Item 7A "Quantitative and Qualitative Disclosures Regarding Market
Risk." The Company undertakes no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future, other than as required by law.

ABOUT THE COMPANY

The Company designs, sources and sells branded kitchenware, tableware and other
products used in the home. 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); 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). In 2022, Kitchenware products and Tableware products
accounted for approximately 82% of the Company's U.S. net sales and 84% of the
Company's consolidated net sales. In 2021, Kitchenware products and Tableware
products accounted for approximately 85% of the Company's U.S. net sales and 87%
of the Company's consolidated net sales.

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, 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. A
significant element of this strategy is the Company's in-house design and
development teams that create new products, packaging and merchandising
concepts.

BUSINESS SEGMENTS

The Company operates in two reportable segments: U.S. and International. The
U.S. segment is the Company's primary 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. The
International segment consists of certain business operations conducted outside
the U.S. The Company has segmented its operations to reflect the manner in which
management reviews and evaluates its results of operations.

EQUITY INVESTMENTS

The Company owns 24.7% interest in Grupo Vasconia S.A.B ("Vasconia"), an
integrated manufacturer of aluminum products and one of Mexico's largest
housewares companies. 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 income in the
Company's consolidated statements of operations. Accordingly, the Company has
recorded its proportionate share of Vasconia's net income (reduced for
amortization expense related to the customer relationships acquired) for the
years ended December 31, 2022, 2021, and 2020 in the accompanying consolidated
statements of operations. Pursuant to a Shares Subscription Agreement, the
Company may designate four persons to be nominated as members of Vasconia's
Board of Directors. As of December 31, 2022, Vasconia's Board of Directors is
comprised of 11 members of whom the Company has designated two members.

On June 30, 2021, Vasconia issued additional shares of its stock, which diluted
the Company's investment ownership from approximately 30% to approximately 27%.
The Company recorded a non-cash gain of $1.7 million, increasing the Company's
investment balance. Additionally, a loss of $2.0 million was recognized for the
proportionate share of the diluted ownership for amounts previously recognized
in accumulated other comprehensive loss. The net loss of $0.3 million was
included in equity in earnings, net of taxes, in the accompanying consolidated
statements of operations for the year ended December 31, 2021.
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On July 29, 2021, the Company sold 2.2 million shares further reducing its
ownership from approximately 27% to 24.7% in Vasconia for net cash proceeds of
approximately $3.1 million, as a result the Company recorded a gain of $1.0
million, after decreasing the Company's investment balance. The gain on the sale
resulted in a tax expense of $0.1 million. Additionally, a loss of $1.4 million
was recognized for the proportionate share of the reduced ownership for amounts
previously recognized in accumulated other comprehensive loss. The net loss,
including taxes, of $0.5 million was included in equity in earnings, net of
taxes, in the accompanying consolidated statements of operations for the year
ended December 31, 2021. The Company continues to apply the equity method of
accounting.

The Company recorded equity in (losses) earnings of Vasconia, net of taxes, of
$(3.3) million, $1.8 million and $1.5 million for the years ended December 31,
2022, 2021 and 2020, respectively.

SEASONALITY

The Company's business and working capital needs are seasonal, with a majority
of sales occurring in the third and fourth quarters. In 2022, 2021 and 2020, net
sales for the third and fourth quarters accounted for 54%, 56% and 62% of total
annual net sales, respectively. The current market conditions and shifts in both
consumer and retailer purchasing patterns has impacted the seasonality of the
Company's net sales compared to historical trend. In anticipation of the
pre-holiday shipping season, inventory levels increase primarily in the June
through October time period. The decrease in inventory levels at December 31,
2022 compared to the prior year was a result of the Company's response to
changes in retailer purchasing patterns. The Company's inventory trends may
deviate from historical trends due to a change in inventory strategy to react to
current market conditions impacting the Company and retailers.

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.

RESTRUCTURING

In 2022, the Company's international segment incurred $0.4 million of
restructuring expenses related to severance associated with the reorganization
of the International segment's workforce. The reorganization was the result of
the Company's efforts to realign the management and operating structure of the
European business in response to changing market conditions. The Company expects
annual savings of $2.3 million associated with the reorganization.

In 2022, the Company's U.S. segment accrued $0.4 million related to severance
associated with the reorganization of the U.S. segment's sales management
structure. The Company accrued $0.6 million of unallocated expense related to
the termination payment with its Executive Chairman, Jeffrey Siegel. On November
1, 2022, the Company entered into a transition agreement with Jeffrey Siegel,
which provides for termination of his employment with the Company, effective
March 31, 2023. The transition agreement amends Mr. Siegel's employment
agreement which was to expire on December 31, 2022. The employment agreement
provides for a one-time payment which will be paid upon the expiration of the
transition agreement. The Company estimates the one-time payment to be
approximately $1.4 million, of which $0.6 million was accrued as a restructuring
expense in 2022. The remaining $0.8 million is expected to be recorded over the
remaining employment period. The Company expects annual savings of $1.3 million
due to these actions.

During the year ended December 31, 2020, the Company's International segment
incurred $0.2 million of restructuring expenses related to severance associated
with the strategic reorganization of the International segment's product
development and sales workforce. The strategic reorganization was the result of
the Company's efforts for product development efficiencies and an international
sales approach tailored to countries.

RECENT DEVELOPMENTS

The global economy is experiencing accelerated inflation, which has in part been
caused by supply chain disruptions and higher consumer spending. The rise in
inflation is contributing to higher prices, which may result in higher input
cost for products, increased transportation and labor cost and impact consumer
spending and buying patterns. Retailers have responded to the economic
challenges by rightsizing inventory levels that were built up by supply chain
distributions, and further reducing safety stock and weekly supply on hand. The
Company has been adversely impacted by these trends in 2022 and expects that
these trends may continue into 2023.

The Company has experienced an increase in delivery times and cost for products
shipped from the U.K. warehouse to continental Europe. To remain competitive in
the distribution of products within continental Europe, the Company expanded its
distribution and warehouse capacity through a third-party operated distribution
provider located in the Netherlands in the first quarter of 2022. The Company
began shipments from this location in the second quarter of 2022.
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On March 23 2022, the United States Trade Representative ("USTR") announced it
had reinstated exclusions on certain product categories or harmonized tariff
codes retroactive to October 12, 2021. The exclusion is effective through
December 31, 2023.

The uncertainty surrounding the consequences of the U.K.'s exit could adversely
impact the U.K. economy, customers and investor confidence. The U.K.'s exit also
could adversely impact the export of products between the U.K. and the European
Union. Such uncertainty may contribute to additional market volatility,
including volatility in the value of the U.K. pound and European euro, and may
adversely affect the Company's businesses, results of operations, and financial
condition. Further, the United Kingdom economy has been facing unfavorable
economic and market conditions, with high inflation and low consumer confidence
due to uncertain geopolitical and economic outlooks. Net sales attributable to
U.K. domiciled businesses were $45.7 million for the year ended December 31,
2022, and represent approximately 6% of the Company's consolidated net sales for
the period.

The U.K Finance Act 2021 included an increase to the U.K. corporate tax rate
from 19% to 25% effective April 1, 2023, which was enacted into law in 2021. The
Company expects the higher tax rate could negatively impact the Company's
operating results.

EFFECT OF ADOPTION OF ACCOUNTING PRINCIPLES

Adopted accounting pronouncements

Effective January 1, 2022, the Company adopted ASU No. 2021-08, Business
Combinations (Topic 805): Accounting for Contract Assets and Contract
Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an
acquirer of a business should recognize and measure contract assets and contract
liabilities in a business combination in accordance with Accounting Standards
Codification (ASC) Topic 606, Revenue from Contracts with Customers. The
adoption did not have a material impact on the Company's consolidated financial
statements.

In connection with the Amendment No.1 of the Term Loan, effective December 29,
2022, the Company adopted ASU 2020-04 and 2022-06, Reference Rate Reform (Topic
848): Facilitation of the Effects of Reference Rate Reform on Financial
Reporting, which provides optional expedients and exceptions to account for
contract modifications, hedging relationships and other transactions that
reference the London Inter-Bank Offered Rate ("LIBOR") or another reference rate
that is expected to be discontinued as a result of reference rate reform. The
guidance may be applied to contract modifications and hedging relationships as
of any date from March 12, 2020 but no later than December 31, 2024 and should
be applied on a prospective basis. The Company applied available practical
expedients under Topic 848 to account for modifications, changes in critical
terms, and updates to the designated hedged risks as qualifying changes have
been made to applicable debt modifications as if they were not substantial.
Application of these practical expedients allowed us to maintain hedge
accounting for our interest rate swap contracts. The adoption did not have a
material impact on the Company's consolidated financial statements.

New accounting pronouncements

Updates not listed below were assessed and either determined to not be
applicable or are expected to have a minimal effect on the Company’s financial
position, results of operations, and disclosures.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on
Financial Instruments. This guidance introduces a new model for recognizing
credit losses on financial instruments based on an estimate of current expected
credit losses. ASU 2016-13 also provides updated guidance regarding the
impairment of available-for-sale debt securities and includes additional
disclosure requirements. The new guidance is effective for public business
entities that meet the definition of a Smaller Reporting Company as defined by
the Securities and Exchange Commission for interim and annual periods beginning
after December 15, 2022. The Company met the definition of a Smaller Reporting
Company as of the one-time determination date of November 15, 2019. Early
adoption is permitted. Management expects the adoption of ASU 2016-13 will not
have a material impact on the Company's consolidated financial statements.
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RESULTS OF OPERATIONS

The results of operations below focuses on the results of the year ended
December 31, 2022 compared to the year ended December 31, 2021. For a discussion
of 2021 compared to 2020 refer to “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”, in Part II, Item 7 of the
Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The following table sets forth statement of operations data of the Company as a
percentage of net sales for the periods indicated below.

                                                                                 Year Ended December 31,
                                                                   2022                     2021                   2020
Net sales                                                              100.0  %               100.0  %               100.0  %
Cost of sales                                                           64.2                   64.8                   64.4
Gross margin                                                            35.8                   35.2                   35.6
Distribution expenses                                                   10.3                    9.4                    9.5
Selling, general and administrative expenses                            21.3                   18.1                   20.3
Wallace facility remediation expense                                     0.7                    0.1                      -
Goodwill and other intangible asset impairments                            -                    1.7                    2.6
Restructuring expenses                                                   0.2                      -                      -
Income from operations                                                   3.3                    5.9                    3.2
Interest expense                                                        (2.4)                  (1.8)                  (2.2)

Mark to market gain (loss) on interest rate derivatives                  0.3                    0.1                   (0.3)

Income before income taxes and equity in (losses) earnings               1.2                    4.2                    0.7
Income tax provision                                                    (0.8)                  (1.9)                  (1.3)
Equity in (losses) earnings, net of taxes                               (1.2)                   0.1                    0.2
Net (loss) income                                                       (0.8) %                 2.4  %                (0.4) %


                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                             2022 COMPARED TO 2021

Net Sales

Net sales for the year ended December 31, 2022 were $727.7 million, a decrease
of $135.2 million, or 15.7%, compared to net sales of $862.9 million in 2021. In
constant currency, a non-GAAP financial measure, which excludes the impact of
foreign exchange fluctuations and was determined by applying 2022 average rates
to 2021 local currency amounts, net sales decreased $127.7 million, or 14.9%, as
compared to consolidated net sales in the corresponding period in 2021.

Net sales for the U.S. segment in 2022 were $669.2 million, a decrease of $101.4
million, or 13.2%, compared to net sales of $770.6 million in 2021.

Net sales for the U.S. segment's Kitchenware product category in 2022 were
$402.9 million, a decrease of $84.9 million, or 17.4%, compared to net sales of
$487.8 million in 2021. The net sales decrease in the U.S. segment's Kitchenware
product category was driven by lower sales for kitchen tools and gadgets,
cutlery and board, and bakeware products.

Net sales for the U.S. segment's Tableware product category in 2022 were $148.8
million, a decrease of $18.4 million, or 11.0%, compared to net sales of $167.2
million for 2021. The decrease was across both tableware and flatware sales.

Net sales for the U.S. segment's Home Solutions products category in 2022 were
$117.5 million, an increase of $1.9 million, or 1.6%, compared to net sales of
$115.6 million in 2021. The increase was due to hydration product sales
primarily attributable to S'well products, which was acquired on March 2, 2022,
and added net sales of $16.9 million, offset by a decrease in home décor sales.

The decrease in the Company's U.S. segment's net sales occurred in all
distribution channels. This was attributable to inventory buildup at retailers,
primarily in the first half of 2022, resulting in a slowing of replenishment
orders as retailers reduced safety stock and weeks of supply. In addition,
retail sales declined as consumers shifted their spending toward services and
away from goods, including housewares, which surged during the pandemic
lock-down period.
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Net sales for the International segment in 2022 were $58.5 million, a decrease
of $33.8 million, or 36.6%, compared to net sales of $92.3 million for 2021. In
constant currency, a non-GAAP financial measure, which excludes the impact of
foreign exchange fluctuations and was determined by applying 2022 average
exchange rates to 2021 local currency amounts, net sales decreased approximately
31.1%. The decrease was due to similar factors as was experienced in the U.S.
segment. However, it was further exacerbated by the impact of higher food and
energy inflation in Europe. In addition, a decrease in the Company's global
trading business in Asia driven by lower sales to an Australian distributor.

Gross margin

Gross margin for 2022 was $260.3 million, or 35.8%, compared to $303.3 million,
or 35.2%, for the corresponding period in 2021.

Gross margin for the U.S. segment was $241.1 million, or 36.0%, for 2022,
compared to $274.1 million, or 35.6%, for 2021. The decrease in gross margin for
the U.S. was due to lower sales. The improvement in gross margin percentage was
due to product mix and a tariff reduction on certain product categories.

Gross margin for the International segment was $19.2 million, or 32.8%, for
2022, compared to $29.2 million, or 31.6%, for 2021. The decrease in gross
margin was due to lower sales. The increase in gross margin percentage was
attributable to customer mix and sales price increases, partially offset by the
impact of fixed overhead costs on lower sales volume in 2022.

Distribution expenses

Distribution expenses were $74.9 million for the 2022 period as compared to
$80.8 million for the 2021 period. Distribution expenses as a percentage of net
sales were 10.3% and 9.4% in 2022 and 2021.

Distribution expenses as a percentage of net sales for the U.S. segment were
approximately 9.1% in 2022 and 8.0% in 2021. Distribution expenses in 2022
include $0.1 million for the Company's distribution operation redesign costs. As
a percentage of sales shipped from the Company's warehouses, excluding
non-recurring expenses, distribution expenses were 10.1% and 8.7% for 2022 and
2021. The increase in the expenses as a percentage of sales was a result of
lower shipment volume resulting in an unfavorable impact on fixed expenses,
increase in storage fees due to high inventory levels through the third quarter
of 2022 and higher labor rates, partially offset by lower warehouse equipment
and supply expenses.

Distribution expenses as a percentage of net sales for the International segment
were approximately 23.8% in 2022 and 20.3% in 2021, respectively. Distribution
expenses in 2022 include $0.5 million for the Company's relocation costs for its
new warehouse distribution facility in the Netherlands. As a percentage of sales
shipped from the Company's warehouses, excluding non-recurring expenses,
distribution expenses, were 21.5% and 17.4% for 2022 and 2021, respectively. The
increase was primarily attributed to lower shipment volume resulting in an
unfavorable impact on fixed expenses and higher warehouse supply expenses.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses for 2022 were $154.5
million, a decrease of $1.9 million, or 1.2%, as compared to $156.4 million for
2021.

SG&A expenses for 2022 for the U.S. segment were $118.2 million, an increase of
$6.4 million, or 5.7%, compared to $111.8 million for 2021. As a percentage of
net sales, SG&A expenses were 17.7% for 2022, compared to 14.5% for 2021. The
increase in the expense was attributable to integration costs related to the
S'well acquisition, bad debt expense related to significant declines in
financial condition of certain customers due to sales declines and very high
debt levels, and an increase in advertising expenses. This was partially offset
by lower compensation expense. The increase in selling, general and
administrative expense as a percentage of net sales is due to the unfavorable
impact of fixed costs on lower sales volume.

SG&A expenses for 2022 for the International segment were $17.0 million, a
decrease of $3.7 million, or 17.9%, compared to $20.7 million for 2021. As a
percentage of net sales, SG&A expenses increased to 29.1% for 2022, compared to
22.4% for 2021. The international segment expense decreased primarily due to
lower amortization expense on intangible assets as a result of the prior year
impairment and a decrease in employee expenses.

Unallocated corporate expenses for 2022 were $19.3 million, compared to
$23.9 million for 2021. The decrease was driven by lower incentive compensation
expense and stock compensation expense, partially offset by an increase in legal
and professional fees related to the S'well acquisition.


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Wallace facility remediation expense

In connection with the Wallace EPA Matter (as described in NOTE 14 - COMMITMENTS
AND CONTINGENCIES, the "Wallace EPA Matter"), the Company recorded an additional
expense of $5.1 million in 2022, for the estimated liability for remediation
cost related to the Wallace facility. In 2021, the Company recorded an initial
estimate of $0.5 million, related to remedial design portion of the liability.
Refer to NOTE 14 - COMMITMENTS AND CONTINGENCIES for further discussion on this
matter.

Goodwill and other intangible asset impairments

Due to the current operating results for the International segment as a result
of low consumer confidence in the region, impairment indicators were identified
for the International asset group. The Company tested the recoverability of the
asset group, concluding it was not recoverable and performed an analysis of the
fair value of the international long-lived assets. The Company tested the
International segment's long-lived assets for impairment and concluded that the
fair value exceeded the carrying value of the long-lived assets, concluding no
impairment as of December 31, 2022.

In the fourth quarter of 2021, due to lower than expected operating results for
the International segment caused by continuing impacts of COVID-19 and the exit
of the U.K. from the European Union, impairment indicators were identified for
the International asset group. The Company tested the recoverability of the
asset group, concluding it was not recoverable and performed an analysis of the
fair value of the international long-lived assets. For the finite-lived
intangible assets, the Company performed discounted cash flow analysis and
recorded an impairment of $14.8 million within the International segment.

Restructuring expenses

In 2022, the Company's international segment incurred $0.4 million of
restructuring expenses related to severance associated with the reorganization
of the International segment's workforce. The reorganization was the result of
the Company's efforts to realign the management and operating structure of the
European business in response to changing market conditions. The Company expects
annual savings of $2.3 million associated with the reorganization.

In 2022, the Company's U.S. segment accrued $0.4 million related to severance
associated with the reorganization of the U.S. segment's sales management
structure. The Company accrued $0.6 million of unallocated expense related to
the termination payment with its Executive Chairman, Jeffrey Siegel. On November
1, 2022, the Company entered into a transition agreement with Jeffrey Siegel,
which provides for termination of his employment with the Company, effective
March 31, 2023. The transition agreement amends Mr. Siegel's employment
agreement which was to expire on December 31, 2022. The employment agreement
provides for a one-time payment which will be paid upon the expiration of the
transition agreement. The Company estimates the one-time payment to be
approximately $1.4 million, of which $0.6 million was accrued as a restructuring
expense in 2022. The remaining $0.8 million is expected to be recorded over the
remaining employment period. The Company expects annual savings of $1.3 million
due to these actions.

Interest expense

Interest expense for 2022 was $17.2 million, compared to $15.5 million for 2021.
The increase was a result of higher interest rates on outstanding borrowings in
the current period.

Mark to market gain (loss) on interest rate derivatives

Mark to market gain on interest rate derivatives was $2.0 million for the year
ended December 31, 2022, as compared to a mark to market gain on interest rate
derivatives of $1.1 million for the year ended December 31, 2021. The mark to
market amount represents the change in the 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 the Company's variable interest rate debt. The increase in gain was a result
of increases in interest rates during 2022. As of December 31, 2022, the intent
of the Company is to hold these derivative contracts until their maturity.

Income tax provision

The income tax provision was $5.7 million in 2022 and $16.5 million in 2021. The
Company's effective tax rate for 2022 was 63.4%, compared to 45.5% for 2021. The
effective tax rate in 2022 and 2021 was driven primarily by state and local tax
expenses, nondeductible expenses, and foreign losses for which no tax benefit is
recognized as such amounts are fully offset with a valuation allowance.


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Equity in (losses) earnings

The Company's equity in earnings, net of tax, for 2022 and 2021 are as follows:
                                                                           Year Ended December 31,
                                                                            2022                2021
                                                                               (in thousands)

Vasconia equity in earnings, net of taxes                             $      (3,300)         $ 1,769
Net loss on dilution in Vasconia ownership                                        -             (297)
Net loss on partial sale of Vasconia ownership, net of taxes                      -             (510)
Impairment on investment in Vasconia                                         (6,167)               -
Equity in earnings (losses), net of taxes                             $     

(9,467) $ 962

Vasconia reported loss from operations for 2022 of $1.6 million, as compared to
income of $15.5 million for 2021 and reported net loss of $13.2 million in 2022
and net income of $7.0 million in 2021. The decrease in income from operations
was primarily attributable to Vasconia's aluminum division as a result of
increases in the price of commodities.

The effect of the translation of the Company’s investment, as well as the
translation of Vasconia’s balance sheet, resulted in a decrease of the
investment of $0.3 million during the year ended December 31, 2022 and an
increase of the investment of $1.0 million during the year ended December 31,
2021.

During the year ended December 31, 2022, the Company recorded an impairment
charge of $6.2 million to reduce the carrying value of the Company's investment
in Vasconia to its fair value. The decline in the fair value was determined to
be other than temporary due to the decline in the quoted stock price and the
decline in the operating results of Vasconia.

During the year ended December 31, 2021, the Company's ownership in its equity
method investment decreased as a result of a dilution of its investment in
Vasconia and a subsequent partial sale of its investment. The Company recognized
a net loss of $0.3 million related to the dilution of the Company's ownership in
its Vasconia investment. The net loss was comprised of a loss of $2.0 million,
related to amounts that were previously recognized in accumulated other
comprehensive loss, net of a non-cash gain of $1.7 million for the difference
between the selling price and the Company's basis in the diluted shares.

Additionally, the Company recognized a net loss of $0.5 million related to a
partial sale of the Company's ownership in its Vasconia investment. The net loss
was comprised of a gain of $1.0 million, for the difference between the selling
price and the Company's basis in the sale of shares, offset by tax expense of
$0.1 million and a loss of $1.4 million, related to amounts previously
recognized in accumulated other comprehensive loss.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the Company's audited consolidated financial statements
which have been prepared in accordance with GAAP and with the instructions to
Form 10-K and Article 10 of Regulation S-X. The preparation of these financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. On an on-going basis,
management evaluates its estimates and judgments based on historical experience
and on various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. The Company evaluates these estimates including those related to
revenue recognition, allowances for doubtful accounts, reserves for sales
returns and allowances and customer chargebacks, inventory mark-down provisions,
estimates for unpaid healthcare claims, impairment of goodwill, tangible and
intangible assets, stock compensation expense, accruals related to the Company's
tax positions and tax valuation allowances. Actual results may differ from these
estimates using different assumptions and under different conditions and changes
in these estimates are recorded when known. The Company's significant accounting
policies are more fully described in NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES in
the Notes to the consolidated financial statements included in Item 15. The
Company believes that the following discussion addresses its most critical
accounting policies, which are those that are most important to the portrayal of
the Company's consolidated financial condition and results of operations and
require management's most difficult, subjective and complex judgments.


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Goodwill, intangible assets and long-lived assets

Goodwill and intangible assets deemed to have indefinite lives are not amortized
but, instead, are subject to an annual impairment assessment. Additionally, if
events or conditions were to indicate the carrying value of a reporting unit may
not be recoverable, the Company would evaluate goodwill and other intangible
assets for impairment at that time.

As it relates to the goodwill assessment, the Company first assesses qualitative
factors to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying amount as a basis for determining
whether it is necessary to perform the quantitative goodwill impairment testing
described in the FASB's ASU Topic 350, Intangibles - Goodwill and Other. If,
after assessing qualitative factors, the Company determines that it is not more
likely than not that the fair value of a reporting unit is less than its
carrying amount, then performing the quantitative test is unnecessary and the
Company's goodwill is not considered to be impaired. However, if based on the
Company's qualitative assessment it concludes that it is more likely than not
that the fair value of the reporting unit is less than its carrying amount, or
if the Company elects to bypass the qualitative assessment, the Company will
proceed with performing the quantitative impairment test.

The Company reviews goodwill and other intangibles that have indefinite lives
for impairment annually as of October 1st or when events or changes in
circumstances indicate the carrying value of these assets might exceed their
current fair values. For goodwill, impairment testing is based upon the best
information available using a combination of the discounted cash flow method, a
form of the income approach, and the guideline public company method, a form of
the market approach.

The significant assumptions used under the income approach, or discounted cash
flow method, are projected net sales, projected earnings before interest, tax,
depreciation and amortization ("EBITDA"), terminal growth rates, and the cost of
capital. Projected net sales, projected EBITDA and terminal growth rates were
determined to be significant assumptions because they are three primary drivers
of the projected cash flows in the discounted cash flow fair value model. Cost
of capital was also determined to be a significant assumption as it is the
discount rate used to calculate the current fair value of those projected cash
flows. For the guideline public company method, significant assumptions relate
to the selection of appropriate guideline companies and related valuation
multiples used in the market analysis.

Although the Company believes the assumptions and estimates made are reasonable
and appropriate, different assumptions and estimates could materially impact its
reported financial results. In addition, sustained declines in the Company's
stock price and related market capitalization could impact key assumptions in
the overall estimated fair values of its reporting units and could result in
non-cash impairment charges that could be material to the Company's consolidated
balance sheet or results of operations. Should the carrying value of a reporting
unit be in excess of the estimated fair value of that reporting unit, an
impairment charge will be recorded to reduce the reporting unit to fair value.
The Company also evaluates qualitative factors to determine whether or not its
indefinite lived intangibles have been impaired and then performs quantitative
tests if required. These tests can include the relief from royalty model or
other valuation models. The significant assumptions used in the relief from
royalty model are future net sales for the related brands, royalty rates and the
cost of capital to determine the fair value of the indefinite lived intangibles.

The Company performed its annual impairment assessment of its U.S. reporting
unit as of October 1, 2022 by comparing the fair value of the reporting unit
with its carrying value. The Company performed the analysis using a discounted
cash flow and market multiple method. As of October 1, 2022, the fair value of
the U.S. reporting unit exceeded the carrying value of goodwill by 10%.

The Company completed the quantitative impairment analysis for its
indefinite-lived assets as of October 1, 2022, by comparing the fair value of
the indefinite-lived trade names to their respective carrying value using a
relief from royalty method. As of October 1, 2022, the fair value of the
Company's indefinite-lived trade names exceeded their respective carrying values
by 12%.

Long-lived assets, including intangible assets deemed to have finite lives, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Impairment
indicators include, among other conditions, cash flow deficits, historic or
anticipated declines in revenue or operating profit or material adverse changes
in the business climate that indicate that the carrying amount of an asset may
be impaired. When impairment indicators are present, the recoverability of the
asset is measured by comparing the carrying value of the asset to the estimated
undiscounted future cash flows expected to be generated by the asset. If the
carrying amount of the asset is not recoverable, the impairment to be recognized
is measured by the amount by which the carrying amount of each long-lived asset
exceeds the fair value of the asset.

Revenue recognition

The Company sells products wholesale, to retailers and distributors, and sells
products retail, directly to consumers. Wholesale sales and retail sales are
recognized at the point in time the customer obtains control of the products in
an amount that reflects the consideration the Company expects to be entitled to
in exchange for those products. To indicate the transfer of control, the Company
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must have a present right to payment, legal title must have passed to the
customer, the customer must have the significant risks and rewards of ownership,
and where acceptance is not a formality, the customer must have accepted the
product or service. The Company's principal terms of sale are Free on Board
("FOB") Shipping Point, or equivalent, and, as such, the Company primarily
transfers control and records revenue for product sales upon shipment. Sales
arrangements with delivery terms that are not FOB Shipping Point are not
recognized upon shipment and the transfer of control for revenue recognition is
evaluated based on the associated shipping terms and customer obligations.
Shipping and handling fees that are billed to customers in sales transactions
are included in net sales. Net sales exclude taxes that are collected from
customers and remitted to the taxing authorities.

The Company offers various sales incentives and promotional programs to its
wholesale customers from time to time in the normal course of business. These
incentives and promotions typically include arrangements such as cooperative
advertising, buydowns, volume rebates and discounts. These arrangements
represent forms of variable consideration, and an estimate of sales returns are
reflected as reductions in net sales in the Company's consolidated statements of
operations. These estimates are based on historical experience and other known
factors or as the most likely amount in a range of possible outcomes. On a
quarterly basis, variable consideration is assessed on a portfolio approach in
estimating the extent to which the components of variable consideration are
constrained.

Payment terms vary by customer, but generally range from 30 to 90 days or at the
point of sale for the Company’s retail direct sales.

The Company incurs certain direct incremental costs to obtain contracts with
customers, such as sales-related commissions, where the recognition period for
the related revenue is less than one year. These costs are expensed as incurred
and recorded within selling, general and administrative expenses in the
consolidated statement of operations. Incidental items that are immaterial in
the context of the contract are expensed as incurred.
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LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of funds consists of cash provided by operating
activities, borrowings available under its revolving credit facility and from
time-to-time working capital reductions. The Company's primary uses of funds
consist of payments of principal and interest on its debt, working capital
requirements, capital expenditures and dividends, From time-to-time uses also
include acquisitions and repurchases of its common stock.

At December 31, 2022 and 2021, the Company had cash and cash equivalents of
$23.6 million and $28.0 million, respectively, and working capital of $270.4
million at December 31, 2022, compared to $270.8 million at December 31, 2021.
The current ratio (current assets to current liabilities) was 3.1 to 1.0 at
December 31, 2022, compared to 2.3 to 1.0 at December 31, 2021. The increase in
the current ratio was primarily due to operating cash flow used to reduce
current obligations.

At December 31, 2022, borrowings under the Company's ABL Agreement were $10.4
million and $245.9 million was outstanding under the Term Loan. At December 31,
2021, borrowings under the Company's ABL Agreement were nil and $252.1 million
was outstanding under the Term Loan. Liquidity, which includes cash and cash
equivalents and availability under the ABL Agreement, was approximately $199.8
million at December 31, 2022.

Inventory, a large component of the Company's working capital, is expected to
fluctuate from period to period, with inventory levels higher primarily in the
June through October time period. The decrease in inventory levels at
December 31, 2022 compared to the prior year was a result of the Company's
response to changes in retailer purchasing patterns. 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 December 31, 2022 inventory turnover was 2.1 times,
or 170 days, as compared to 2.5 times, or 145 days, for the three months ended
December 31, 2021. Inventory turns have slowed due to macroeconomic challenges
that companies across industries and retailers in particular faced. Inflation
has led to weaker end market demand.

In connection with the Wallace EPA Matter, the Company expects it will be
required to provide financial assurance of $5.6 million in the next 12 months,
which it expects to provide in the form of a letter of credit. This would reduce
availability under the revolving credit facility by the same amount.

The Company believes that availability under the revolving credit facility under
its ABL Agreement and cash flows from operations are sufficient to fund the
Company's operations for the next 12 months. However, if circumstances were to
adversely change, the Company may seek alternative sources of liquidity
including debt and/or equity financing. However, there can be no assurance that
any such alternative sources would be available or sufficient.

The Company closely monitors the creditworthiness of its customers. Based upon
its evaluation of changes in customers' creditworthiness, the Company may modify
credit limits and/or terms of sale. However, notwithstanding the Company's
efforts to monitor its customers' financial condition, the Company could be
materially affected by future changes in these conditions.

Credit Facilities

On August 26, 2022, the Company entered into Amendment No. 2 (the "Amendment")
to the ABL Agreement among the Company, as a Borrower, certain subsidiaries of
the Company, as Borrowers and/or Loan Parties, JPMorgan Chase Bank, N.A., as
Administrative Agent and a Lender, HSBC Bank USA, National Association and Wells
Fargo Bank, National Association, as Co-Documentation Agents and Lenders, and
Manufacturers and Traders Trust Company. The ABL Agreement provides for a senior
secured asset-based revolving credit facility in the maximum aggregate principal
amount of $200.0 million, which facility will mature on August 26, 2027 (subject
to an earlier springing maturity date that is 90 days prior to the Term Loan
maturity date of February 28, 2025 if the Company's Term Loan has not been
repaid or refinanced by such date).

The Term Loan provides for a senior secured term loan credit facility in the
original principal amount of $275.0 million, which matures on February 28, 2025.
On December 29, 2022, the Company entered into Amendment No. 1 to the Term Loan,
which replaces the LIBOR-based interest rates with SOFR-based interest rates and
modifies the provisions for determining the alternative rate of interest upon
the occurrence of certain events relating to the availability of interest rate
benchmarks. The Term Loan requires the Company to make an annual prepayment of
principal based upon a percentage of the Company's excess cash flow ("Excess
Cash Flow"), if any. The percentage applied to the Company's excess cash flow is
based on the Company's Total Net Leverage Ratio (as defined in 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. An
estimate of the amount of the Excess Cash Flow payment is recorded in current
maturity of term loan on the consolidated balance sheets. Additionally, the Term
Loan requires quarterly payments, which commenced on June 30, 2018, of principal
equal to 0.25%, of the original aggregate principal amount of the Term Loan
facility, which payments are to be adjusted from time to time to account for
prepayments made. Per the Term Loan, when the Company makes an Excess Cash
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Flow payment, the payment is first applied to satisfy the next eight scheduled
future quarterly required payments of the Term Loan in order of maturity and
then to the remaining scheduled installments on a pro rata basis. The quarterly
principal payments have been satisfied through maturity of the Term Loan by the
annual Excess Cash Flow payments made to date.

The maximum borrowing amount under the ABL Agreement may be increased to up to
$250.0 million if certain conditions are met but limited to $220.0 million
pursuant to the Term Loan. 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 3.75 to 1.00, subject to certain limitations and
for the period defined pursuant to the Term Loan but not to mature earlier than
the maturity date of the then existing term loans.

As of December 31, 2022 and 2021, the total availability under the ABL Agreement
were as follows (in thousands):

                                                                   December 31, 2022           December 31, 2021
Maximum aggregate principal allowed                              $          189,411          $          150,000
Outstanding borrowings under the ABL Agreement                              (10,424)                          -
Standby letters of credit                                                    (2,765)                     (3,659)
Total availability under the ABL agreement                       $          

176,222 $ 146,341

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, this mean that 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 current and non-current portions of the Company’s Term Loan facility
included in the consolidated balance sheets are presented as follows (in
thousands):

                                                           December 31, 2022           December 31, 2021

Current portion of Term Loan facility:

Estimated Excess Cash Flow principal payment             $                -          $            7,200
Estimated unamortized debt issuance costs                                 -                      (1,429)
Total Current portion of Term Loan facility              $                -          $            5,771

Non-current portion of Term Loan facility:
Term Loan facility, net of current portion               $          245,911          $          244,927
Estimated unamortized debt issuance costs                            (3,054)                     (3,054)

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

$ 241,873

As of December 31, 2022, there is no Excess Cash Flow Payment due for 2023. The
2022 Excess Cash Flow payment, paid on March 30, 2022, totaled $6.2 million. The
Excess Cash Flow payment differs from the estimated amount at December 31, 2021
of $7.2 million as certain lenders opted to decline their payments per the terms
of the Term Loan.

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 consists 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
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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.

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 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 0.5%, 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 December 31, 2022 was
3.43%. In addition, the Company paid a commitment fee of 0.25% to 0.375% on the
unused portion of the ABL Agreement during the year ended December 31, 2022.

The Term Loan facility 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 0.50% or (z) one-month Adjusted Term SOFR, but not less than 1.0% plus
1.0%, plus a margin of 2.5% or (ii) SOFR for the applicable interest period,
multiplied by any statutory reserve rate, but not less than 1.0%, plus a margin
of 3.5%. The interest rate on outstanding borrowings under the Term Loan at
December 31, 2022 was 7.9%.

The Debt Agreements provide for customary restrictions and events of default.
Restrictions include limitations on additional indebtedness, liens,
acquisitions, investments and payment of dividends, among other things. 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
December 31, 2022.

Prior to the amendment of the credit agreement, the Company's ABL provided for
an aggregate principal amount of $150.0 million. Upon entering into the
Amendment to the ABL Agreement the Company repaid its outstanding ABL borrowing
in the amount of $32.0 million and re-borrowed such amounts under the ABL
Agreement, as amended. Unamortized debt issuance costs that were written off
were immaterial.

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.

Covenant Calculations

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.

Non-GAAP financial measure

Adjusted EBITDA is a non-GAAP financial measure within the meaning of Regulation
G and Item 10(e) of Regulation S-K, each promulgated by the SEC. This measure is
provided because management of the Company uses this financial measure in
evaluating the Company's on-going financial results and trends. Management also
uses this non-GAAP information as an indicator of business performance. Adjusted
EBITDA, as discussed above, is also one of the measures used to calculate
financial covenants required to be provided to the Company's lenders pursuant to
its Debt Agreements.

Investors should consider these non-GAAP financial measures in addition to, and
not as a substitute for, the Company's financial performance measures prepared
in accordance with GAAP. 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.

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The following is a reconciliation of net income (loss) as reported to adjusted
EBITDA for the years ended December 31, 2022 and 2021 and each fiscal quarter of
2022 and 2021:

                                                                       Three Months Ended                                             Year Ended
                                       March 31,                                 September 30,
                                          2022             June 30, 2022             2022              December 31, 2022           December 31, 2022
                                                                                      (in
                                                                                  thousands)
Net income (loss) as reported         $     380          $       (3,460)             (6,358)         $            3,272          $           (6,166)

Undistributed equity (earnings)
losses, net                                (416)                   (334)              8,159                       2,058                       9,467

Income tax provision (benefit)            1,673                     (98)              1,845                       2,308                       5,728
Interest expense                          3,767                   3,732               4,581                       5,125                      17,205

Depreciation and amortization             4,899                   5,038               4,598                       5,001                      19,536
Mark to market (gain) loss on
interest rate derivatives                (1,049)                   (304)               (637)                         19                      (1,971)

Stock compensation expense                1,174                   1,365               1,026                         281                       3,846

Acquisition related expenses              1,119                      75                 109                         170                       1,473
Restructuring expenses                        -                       -                   -                       1,420                       1,420
Warehouse relocation and redesign
expenses(1)                                 497                      73                  59                           -                         629
S'well integration costs(2)                 781                     864                 250                           -                       1,895
Wallace facility remediation expense          -                       -               5,140                           -                       5,140

Adjusted EBITDA, before limitation $ 12,825 $ 6,951

      $   18,772          $           19,654          $           58,202
Pro forma projected synergies
adjustment(3)                                                                                                                                 3,590
Pro forma adjusted EBITDA, before
limitation(5)                                                                                                                                61,792
Permitted non-recurring charge
limitation (4)                                                                                                                               (3,589)
Pro forma Adjusted EBITDA(5)          $  12,825          $        6,951          $   18,772          $           19,654          $           58,203


(1) For the year ended December 31, 2022, the warehouse relocation and redesign
expenses included $0.5 million of expenses related to the International segment
and $0.1 million of expenses related to the U.S. segment.

(2) For the year ended December 31, 2022, S'well integration costs included $0.5
million of expenses related to inventory step up adjustment in connection with
S'well acquisition.

(3) Pro forma projected synergies represents the projected cost savings of $2.3
million associated with the reorganization of the International segment's
workforce, $0.9 million associated with the retirement of the Executive
Chairman, and $0.4 million associated with reorganization of the U.S. segment's
sales management structure.

(4) Permitted non-recurring charges include restructuring expenses, integration
charges, Wallace facility remediation expense, and warehouse relocation and
redesign expenses. These are permitted exclusions from the Company's adjusted
EBITDA, subject to limitations, pursuant to the Company's Debt Agreements.

(5) Adjusted EBITDA is a non-GAAP financial measure which is defined in the
Company's debt agreements. Adjusted EBITDA is defined as net income (loss),
adjusted to exclude undistributed equity in (earnings) losses, income tax
provision (benefit), interest expense, depreciation and amortization, mark to
market (gain) loss on interest rate derivatives, stock compensation expense, and
other items detailed in the table above that are consistent with exclusions
permitted by our debt agreements.









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                                                                   Three Months Ended                                      Year Ended
                                       March 31,                                 September 30,       December 31,         December 31,
                                          2021             June 30, 2021             2021                2021                 2021
                                                                                      (in
                                                                                  thousands)

Net income (loss) as reported $ 3,067 $ 5,789

     $   12,571          $     (626)         $    20,801

Undistributed equity losses
(earnings), net                             247                    (393)               (195)               (466)                (807)

Income tax provision                      2,416                   1,832               5,589               6,704               16,541
Interest expense                          4,014                   3,819               3,835               3,856               15,524

Depreciation and amortization             5,958                   5,765               5,837               4,960               22,520
Mark to market gain on interest rate
derivatives                                (498)                    (46)               (120)               (398)              (1,062)
Intangible asset impairments                  -                       -                   -              14,760               14,760
Stock compensation expense                1,444                   1,328               1,201               1,244                5,217

Acquisition related expenses                182                      72                  41                 378                  673

Warehouse relocation expenses (1)             -                       -                   -                 450                  450
Wallace facility remediation expense          -                       -                 500                   -                  500

Adjusted EBITDA(2)                    $  16,830          $       18,166          $   29,259          $   30,862          $    95,117

(1) Warehouse relocation expenses included $0.1 million of expenses related to
the International segment and $0.3 million of expenses related to the U.S.
segment.

(2) Adjusted EBITDA is a non-GAAP financial measure which is defined in the
Company's debt agreements. Adjusted EBITDA is defined as net income (loss),
adjusted to exclude undistributed equity in losses (earnings), income tax
provision, interest expense, depreciation and amortization, mark to market gain
on interest rate derivatives, intangible asset impairments, stock compensation
expense, and other items detailed in the table above that are consistent with
exclusions permitted by our debt agreements.

Capital expenditures

Capital expenditures for the year ended December 31, 2022 were $3.0 million.

Derivatives

Interest Rate Swap Agreements

The Company’s net total outstanding notional value of interest rate swaps was
$50 million at December 31, 2022.

The Company designated a portion of these interest rate swaps as cash flow
hedges of the Company's exposure to the variability of the payment of interest
on a portion of its Term Loan borrowings. The hedge periods of these agreements
commenced in April 2018 and expire in March 2023. The original notional values
are reduced over these periods. The aggregate notional value was $25.0 million
at December 31, 2022.

In June 2019, the Company entered into additional interest rate swap agreements,
with an aggregate notional value of $25.0 million at December 31, 2022. These
non-designated interest rate swaps serve as cash flow hedges of the Company's
exposure to the variability of the payment of interest on a portion of its Term
Loan borrowings and expire in February 2025.

Foreign Exchange Contracts

The Company is a party from time to time to certain foreign exchange contracts,
primarily to offset the earnings impact related to fluctuations in foreign
currency exchange rates associated with inventory purchases denominated in
foreign currencies. Fluctuations in the value of certain foreign currencies as
compared to the 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 values of foreign exchange contracts at December 31, 2022 and 2021 was
$6.3 million and $22.6 million, respectively.

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 changes to
credit risk of derivative counterparties. The Company attempts to minimize these
risks by primarily 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 currency
markets and availability of hedging instruments and liquidity of the credit
markets. All foreign currency
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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 December 31, 2022, the Company does not have
any foreign currency forward contract derivatives that are not designated as
hedges. These foreign exchange contracts have been designated as hedges in to
order to apply hedge accounting.

Dividends

Dividends were declared in 2022 and 2021 as follows:
Dividend per share        Date declared         Date of record         Payment date
$0.0425                 March 9, 2021         May 3, 2021           May 17, 2021
$0.0425                 June 24, 2021         August 2, 2021        August 16, 2021
$0.0425                 August 3, 2021        November 1, 2021      November 15, 2021
$0.0425                 November 2, 2021      January 31, 2022      February 14, 2022
$0.0425                 March 8, 2022         May 2, 2022           May 16, 2022
$0.0425                 June 23, 2022         August 1, 2022        August 15, 2022
$0.0425                 August 2, 2022        November 1, 2022      November 15, 2022
$0.0425                 November 1, 2022      February 1, 2023      February 15, 2023

On March 8, 2023, the Board of Directors declared a quarterly dividend of
$0.0425 per share payable on May 15, 2023 to shareholders of record on May 1,
2023.

Cash provided by operating activities

Net cash provided by operating activities was $24.3 million in 2022, compared to
$37.0 million in 2021. The decrease from 2022 compared to 2021 was attributable
to lower net income generated in 2022 compared to 2021 and timing of payments
for accounts payable and accrued expenses, offset by a decrease in inventory
investment and the timing of collections related to the Company's accounts
receivable.

Cash used in investing activities

Net cash used in investing activities was $20.9 million in 2022, compared to
$1.1 million in 2021. The change from 2022 compared to 2021 was attributable to
the cash consideration of $18.0 million paid for the acquisition of S'well.

Cash used in financing activities

Net cash used in financing activities was $7.6 million in 2022 compared to $44.0
million in 2021. The change from 2022 compared to 2021 was attributable to
proceeds from the Company's revolving credit facility under its ABL Agreement in
the 2022 period, compared to repayments in the 2021 period, and lower Excess
Cash Flow principal payment on the term loan for the 2022 period compared to the
2021 period. This was partially offset by payments for stock repurchases in the
2022 period.

MATERIAL CASH REQUIREMENTS

The Company’s material cash requirements include the following:

Debt

As of December 31, 2022, the Company had outstanding Term Loan facility, which
matures on February 28, 2025, for an aggregate principal amount of $245.9
million, with no amounts due within 12 months. Future interest obligations
associated with debt and interest rate swaps total $40.7 million, with $18.8
million payable within 12 months. The future interest obligations are estimated
by assuming the amounts outstanding under the Company's debt agreements and the
interest rates as of December 31, 2022 remain consistent to the end of the debt
agreements. Actual amounts borrowed and interest rates may vary over time.

Leases

The Company has operating leases for corporate offices, distribution facilities,
manufacturing plants, and certain vehicles. As of December 31, 2022, the Company
had fixed lease payment obligations of $109.7 million, with $19.1 million
payable within 12 months. On January 20, 2023, the Company entered into the
third amendment to the existing Medford operating lease. The amendment will
reduce the leased square footage, reduce rent payments beginning in the second
quarter of 2023, and extend the lease term from December 2027 to December 2030.
This will increase the total lease payment obligation of approximately $2.0
million.


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Table of Contents

Royalties

The Company has license agreements that require the payment of royalties on
sales of licensed products which expire through 2048. As of December 31, 2022,
the estimated minimum royalties payable under these agreements amounted to $35.1
million, with $8.1 million payable within 12 months.

Post-retirement benefit

The Company assumed retirement benefit obligations, which are paid to certain
former executives of a business acquired in 2006. As of December 31, 2022, the
estimated discounted obligations under the agreements with the former executives
amounted to $5.7 million, with $0.5 million payable within 12 months.

Termination payment

The Company entered into a transition agreement with its Executive Chairman,
Jeffrey Siegel, which terminates his employment with the Company, effective
March 31, 2023. The Company estimates the one-time payment to be approximately
$1.4 million, which is payable upon his retirement on March 31, 2023.

Wallace EPA Matter

In connection with the Wallace EPA Matter, the Company expects it will be
required to provide financial assurance of $5.6 million in the next 12 months,
which it expects to provide in the form of a letter of credit. This would reduce
availability under the revolving credit facility by the same amount.

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