What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-05 compared with 2020-08-06 · 260 added, 187 removed, 735 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

2020 December 31,

1 unchanged sentence

Cash and cash equivalents $ 42,675 $ 11,370

Accounts receivable, less allowances of $ 13,040 at June 30, 2020 and $ 9,681 at December 31, 2019

Accounts receivable, less allowances of $ 14,782 at September 30, 2020 and $ 9,681 at December 31, 2019

180,289 128,639

14 unchanged sentences

Accrued expenses 81,167 52,060

Income taxes payable 1,522 —

Current portion of operating lease liabilities 11,329 10,661

11 unchanged sentences

Common stock, $ 0.01 par value, shares authorized:

50,000,000 at June 30, 2020 and December 31, 2019;

50,000,000 at September 30, 2020 and December 31, 2019;

shares issued and outstanding:

21,768,740 at June 30, 2020 and 21,255,660 at December 31, 2019

21,768,020 at September 30, 2020 and 21,255,660 at December 31, 2019

Paid-in capital 267,200 263,386

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

9 unchanged sentences

Interest expense ( 4,128 ) ( 5,539 ) ( 13,094 ) ( 15,505 )

Mark to market (loss) gain on interest rate derivatives

Mark to market gain (loss) on interest rate derivatives

99 367 ( 2,316 ) 717

Loss before income taxes and equity in losses

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

17,477 1,757 ( 14,853 ) ( 22,691 )

Income tax (provision) benefit

Income tax provision

( 3,711 ) ( 15,066 ) ( 3,013 ) ( 6,813 )

Equity in losses, net of taxes

Equity in earnings (losses), net of taxes

147 ( 210 ) ( 362 ) ( 395 )

NET INCOME (LOSS)

$ 13,913 $ ( 13,519 ) $ ( 18,228 ) $ ( 29,899 )

BASIC LOSS PER COMMON SHARE

BASIC INCOME (LOSS) PER COMMON SHARE

$ 0.66 $ ( 0.66 ) $ ( 0.87 ) $ ( 1.46 )

DILUTED LOSS PER COMMON SHARE

DILUTED INCOME (LOSS) PER COMMON SHARE

$ 0.65 $ ( 0.66 ) $ ( 0.87 ) $ ( 1.46 )

1 unchanged sentence

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net income (loss)

$ 13,913 $ ( 13,519 ) $ ( 18,228 ) $ ( 29,899 )

Other comprehensive loss, net of taxes:

Other comprehensive income (loss), net of taxes:

Translation adjustment 2,145 ( 2,385 ) ( 4,827 ) ( 4,032 )

1 unchanged sentence

Effect of retirement benefit obligations 20 13 59 38

Other comprehensive loss, net of taxes

Other comprehensive income (loss), net of taxes

2,381 ( 2,221 ) ( 7,328 ) ( 2,265 )

Comprehensive loss

Comprehensive income (loss)

$ 16,294 $ ( 15,740 ) $ ( 25,556 ) $ ( 32,164 )

34 unchanged sentences

BALANCE AT JUNE 30, 2019 21,255 $ 213 $ 260,461 $ 37,090 $ ( 34,660 ) $ 263,104

Comprehensive (loss) income

— — — ( 13,519 ) — ( 13,519 )

Translation adjustment — — — — ( 2,385 ) ( 2,385 )

Derivative fair value adjustment — — — — 151 151

Effect of retirement benefit obligations — — — — 13 13

Total comprehensive loss

Net issuance of restricted shares to employees 1 — — — — —

Stock compensation expense — — 1,498 — — 1,498

Dividends (1) — — — ( 937 ) — ( 937 )

BALANCE AT SEPTEMBER 30, 2019 21,256 $ 213 $ 261,959 $ 22,634 $ ( 36,881 ) $ 247,925

(1) Cash dividends declared per share of common stock were $ 0.1275 and $ 0.1275 in the nine months ended September 30, 2019 and 2020, respectively.

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Common stock Paid-in

capital Retained Earnings (Accumulated deficit) Accumulated other

capital Retained Earnings (Accumulated deficit)

Accumulated other

comprehensive

19 unchanged sentences

Effect of retirement benefit obligations — — — — 19 19

Total comprehensive income

Total comprehensive loss

Net issuance of restricted shares to employees 309 3 ( 3 ) — — —

3 unchanged sentences

BALANCE AT JUNE 30, 2020 21,769 $ 218 $ 265,630 $ ( 26,813 ) $ ( 44,164 ) $ 194,871

(1) Cash dividends declared per share of common stock were $ 0.085 and $ 0.085 in the six months ended June 30, 2019 and 2020, respectively.

Comprehensive income:

— — — 13,913 — 13,913

Translation adjustment — — — — 2,145 2,145

Net change in cash flow hedges — — — — 216 216

Effect of retirement benefit obligations — — — — 20 20

Total comprehensive income

Stock compensation expense — — 1,570 — — 1,570

Shares effectively repurchased for required employee withholding taxes ( 1 ) — — — — —

Dividends (1) — — — ( 942 ) — ( 942 )

BALANCE AT SEPTEMBER 30, 2020 21,768 $ 218 $ 267,200 $ ( 13,842 ) $ ( 41,783 ) $ 211,793

(1) Cash dividends declared per share of common stock were $ 0.1275 and $ 0.1275 in the nine months ended September 30, 2019 and 2020, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

OPERATING ACTIVITIES

$ ( 18,228 ) $ ( 29,899 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization 18,385 18,771

14 unchanged sentences

Income taxes receivable 1,577 1,442

NET CASH PROVIDED BY OPERATING ACTIVITIES

Income taxes payable 1,521 4,434

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

49,208 ( 39,959 )

INVESTING ACTIVITIES

10 unchanged sentences

Cash dividends paid ( 1,862 ) ( 2,693 )

NET CASH USED IN FINANCING ACTIVITIES

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

( 16,240 ) 44,879

Effect of foreign exchange on cash ( 18 ) ( 188 )

INCREASE IN CASH AND CASH EQUIVALENTS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

31,305 ( 2,886 )

Cash and cash equivalents at beginning of period 11,370 7,647

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

13 unchanged sentences

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

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

1 unchanged sentence

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

Although the Company’s current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from expectations, which could materially affect the Company’s results of operations and financial position.

In particular, a number of estimates have been and will continue to be affected by the ongoing COVID-19 pandemic.

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

In 2019, the Company implemented programs to improve the productivity of its inventory and simplify its U.S.

In connection therewith, it initiated a stock keeping unit rationalization (“SKU Rationalization”) initiative to identify inventory to discontinue from active status, consistent with the objectives of these programs.

During the three months ended June 30, 2019, the Company recorded an $ 8.5 million charge to cost of sales associated with the SKU Rationalization initiative.

During the nine months ended September 30, 2019, the Company recorded an $ 8.5 million charge to cost of sales associated with the SKU Rationalization initiative.

The inventory charge, which was recognized in cost of sales during the three months ended June 30, 2019, represented approximately 8 % of the Company's consolidated inventory at June 30, 2019.

12 unchanged sentences

The sale of accounts receivable, under the Receivables Purchase Agreement with HSBC, is excluded from the Company’s unaudited condensed consolidated balance sheets at the time of sale and the related sale expense is included in selling, general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations.

Pursuant to this agreement, the Company sold to HSBC $ 36.0 million a nd $ 73.9 million of receivables during the three and six months ended June 30, 2020, respectively, and $ 24.1 million and $ 49.2 million of receivables during the three and six months ended June 30, 2019, respectively.

Charges of $ 0.1 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2020 and June 30, 2019.

Charges of $ 0.3 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the six months ended June 30, 2020 and June 30, 2019.

At June 30, 2020 and 2019, $ 20.8 million and $ 14.8 million , respectively, of receivables sold were outstanding and due to HSBC from customers.

Pursuant to this agreement, the Company sold to HSBC $ 43.0 million a nd $ 116.9 million of receivables during the three and nine months ended September 30, 2020, respectively, and $ 32.5 million and $ 81.7 million of receivables during the three and nine months ended September 30, 2019, respectively.

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

Charges of $ 0.2 million and $ 0.4 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2019, respectively.

At September 30, 2020 and 2019, $ 26.7 million and $ 17.8 million, respectively, of receivables sold were outstanding and due to HSBC from customers.

Inventory consists principally of finished goods sourced from third-party suppliers.

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

The components of inventory were as follows (in thousands):

September 30,

2020 December 31, 2019

26 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

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.

26 unchanged sentences

A liability has been incurred at the point of closure for any remaining operating lease obligations and at the communication date for severance.

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

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

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

As of June 30, 2020, $ 0.2 million of severance was accrued.

As of September 30, 2020, $ 0.1 million of severance was accrued.

The Company does not expect to incur any additional restructuring charges for these strategic reorganization efforts for the remainder of 2020.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

During the three and six months ended June 30, 2019, the Company incurred $ 0.1 million and $ 0.4 million, respectively, of Filament restructuring charges, primarily related to severance.

During the three and six months ended June 30, 2019, the Company incurred $ 0.1 million and $ 0.4 million of restructuring expenses, primarily related to severance, for the integration of its legal entities operating in Europe.

September 30, 2020

During the nine months ended September 30, 2019, the Company incurred $ 0.4 million of Filament restructuring charges, primarily related to severance.

During the three and nine months ended September 30, 2019, the Company incurred $ 0.3 million and $ 0.7 million of restructuring expenses, primarily related to severance, for the integration of its legal entities operating in Europe.

In 2018, the Company finalized its integration plans for its European operations and took further steps to consolidate its operations.

16 unchanged sentences

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 LIBOR or another reference rate that is expected to be discontinued as a result of reference rate reform.

The ASU is effective for all entities as of March 12, 2020 through December 31, 2022 and should be applied on a prospective basis.

Management is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

The guidance in the ASU may be applied to contract modifications and hedging relationships as of any date from March 12, 2020 but no later than December 31, 2022 and should be applied on a prospective basis.

The Company has not yet applied the guidance in this ASU and is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

On April 10, 2020, the FASB staff issued a question-and-answer document to address stakeholder questions on the application of the lease accounting guidance for lease concessions related to the effects of the COVID-19 pandemic (the “Question-and-Answer Document”).

12 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

and six months ended June 30, 2020, respectively, and $ 0.6 million and $ 1.3 million for the three and six months ended June 30, 2019, respectively.

September 30, 2020

and nine months ended September 30, 2020, respectively, and $ 1.0 million and $ 2.3 million for the three and nine months ended September 30, 2019, respectively.

Net sales exclude taxes that are collected from customers and remitted to the taxing authorities.

11 unchanged sentences

Incidental items that are immaterial in the context of the contract are expensed as incurred.

The following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the three and six months ended June 30, 2020 and 2019 (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

The following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

14 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

NOTE 3 — LEASES

4 unchanged sentences

For these rent concessions the Company elected to account for these as if no changes to the lease were made and continued to recognize the straight-line lease expense for these leases in accordance with the FASB Question-and-Answer Document.

COVID-19 related deferred rent payments as of June 30, 2020, totaled $ 1.0 million and were recorded in accrued expenses in the unaudited condensed consolidated balance sheet as of June 30, 2020.

COVID-19-related deferred rent payments at September 30, 2020 were $ 1.4 million and were recorded in accrued expenses in the unaudited condensed consolidated balance sheet at September 30, 2020.

In addition, there were a limited number of rent concessions obtained by the Company in the form of rent abatement and changes in lease terms.

1 unchanged sentence

The remeasurement of the right-of-use and lease liability did not have a material effect on our consolidated financial statements or results of operations.

The Company continues to assess and hold ongoing conversations with landlords for various properties in seeking commercially reasonable lease concessions given the current environment.

The components of lease expense for the three and six months ended June 30, 2020 and 2019 were as follows (in thousands):

The Company continues to assess its leased properties in seeking commercially reasonable lease concessions given the current environment.

The components of lease expense for the three and nine months ended September 30, 2020 and 2019 were as follows (in thousands):

Three Months Ended

Six Months EndedJune 30,

September 30,

Nine Months Ended

September 30,

2020 2019 2020 2019

1 unchanged sentence

Fixed $ 4,450 $ 4,796 $ 13,755 $ 13,927

Supplemental cash flow information for lease related liabilities and assets for the six months ended June 30, 2020 and 2019 were as follows (in thousands):

Six Months Ended

Supplemental cash flow information for lease related liabilities and assets for the nine months ended September 30, 2020 and 2019 were as follows (in thousands):

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases $ 10,839 $ 12,877

Six Months Ended

Nine Months Ended

September 30,

Right-of-use assets obtained in exchange for new lease obligations:

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

The aggregate future lease payments for operating leases as of June 30, 2020 were as follows (in thousands):

2020 (excluding the six months ending June 30, 2020)

September 30, 2020

The aggregate future lease payments for operating leases as of September 30, 2020 were as follows (in thousands):

2020 (excluding the nine months ending September 30, 2020)

Thereafter 54,993

4 unchanged sentences

Average lease terms and discount rates were as follows:

June 30, 2020

September 30, 2020

Operating leases:

7 unchanged sentences

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

Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired) for the three and six months ended June 30, 2020 and 2019 in the accompanying unaudited condensed consolidated statements of operations.

Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired) for the three and nine months ended September 30, 2020 and 2019 in the accompanying unaudited condensed consolidated statements of operations.

The value of the Company's investment balance has been translated from Mexican Pesos ("MXN") to U.S.

Dollars ("USD") using the spot rates of MXN 23.07 and MXN 18.91 at June 30, 2020 and December 31, 2019, respectively.

The Company's proportionate share of Vasconia's net loss has been translated from MXN to USD using the following exchange rates:

Dollars ("USD") using the spot rates of MXN 22.26 and MXN 18.91 at September 30, 2020 and December 31, 2019, respectively.

The Company's proportionate share of Vasconia's net income (loss) has been translated from MXN to USD using the following exchange rates:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

2020 2019 2020 2019

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

The effect of the translation of the Company’s investment, as well as the translation of Vasconia's balance sheet, resulted in a decrease to the investment of $ 4.0 million and $ 1.5 million during the six months ended June 30, 2020 and 2019, respectively.

September 30, 2020

The effect of the translation of the Company’s investment, as well as the translation of Vasconia's balance sheet, resulted in a decrease to the investment of $ 3.4 million and $ 1.8 million during the nine months ended September 30, 2020 and 2019, respectively.

These translation effects are recorded in accumulated other comprehensive loss.

Summarized income statement information for the three and six months ended June 30, 2020 and 2019 for Vasconia in USD and MXN is as follows (in thousands):

Summarized income statement information for the three and nine months ended September 30, 2020 and 2019 for Vasconia in USD and MXN is as follows (in thousands):

Three Months Ended

September 30,

USD MXN USD MXN

1 unchanged sentence

9,556 210,770 5,572 108,205

Income from operations

Income (loss) from operations

2,957 65,229 ( 581 ) ( 11,288 )

Net income (loss)

536 11,812 ( 647 ) ( 12,571 )

Six Months Ended

Nine Months Ended

September 30,

USD MXN USD MXN

4 unchanged sentences

( 36 ) ( 6,344 ) ( 1,158 ) ( 22,384 )

The Company recorded equity in losses of Vasconia, net of taxes, of $ 0.6 million and $ 0.3 million for the three and six months ended June 30, 2020, respectively.

The Company recorded equity in losses of Vasconia, net of taxes, of $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2019, respectively.

The Company recorded equity in earnings (losses) of Vasconia, net of taxes, of $ 0.1 million and $( 0.2 ) million for the three and nine months ended September 30, 2020, respectively.

The Company recorded equity in losses of Vasconia, net of taxes, of $ 0.2 million and $ 0.4 million for the three and nine months ended September 30, 2019, respectively.

Included within the Company's unaudited condensed consolidated balance sheets were the following amounts due to and due from Vasconia (in thousands):

Vasconia due to and due from balances Balance Sheet

Location June 30, 2020 December 31, 2019

Location September 30, 2020 December 31, 2019

Amounts due from Vasconia Prepaid expenses and other current assets $ 75 $ 63

Amounts due to Vasconia Accrued expenses and Accounts payable ( 380 ) ( 77 )

As of June 30, 2020 and December 31, 2019, the fair value (based upon the quoted stock price) of the Company’s investment in Vasconia was $ 28.3 million and $ 34.7 million, respectively.

The carrying value of the Company’s investment in Vasconia was $ 17.0 million and $ 21.3 million as of June 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020 and December 31, 2019, the fair value (based upon the quoted stock price) of the Company’s investment in Vasconia was $ 29.3 million and $ 34.7 million, respectively.

The carrying value of the Company’s investment in Vasconia was $ 17.7 million and $ 21.3 million as of September 30, 2020 and December 31, 2019, respectively.

Lifetime Brands Do Brasil Participacoes Ltda., a 100 % owned subsidiary of Lifetime Brands, Inc., was dissolved on May 5, 2020.

1 unchanged sentence

The final installment due on the note receivable was received prior to dissolution of the subsidiary.

Foreign currency translation losses of $ 0.2 million, which were previously recorded as a component of stockholder’s equity within accumulated other comprehensive loss, were recognized in earnings upon dissolution of this subsidiary for the period ended June 30, 2020.

The Company included this loss within equity in losses, net of taxes.

The Company included this loss within equity in earnings (losses), net of taxes.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

NOTE 5 — INTANGIBLE ASSETS

Intangible assets consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):

June 30, 2020 December 31, 2019

Intangible assets consisted of the following as of September 30, 2020 and December 31, 2019 (in thousands):

September 30, 2020 December 31, 2019

Gross Impairment Accumulated

19 unchanged sentences

segment in the first quarter of 2020.

The Company has determined that as of June 30, 2020 a triggering event has not occurred which would require an interim impairment test to be performed.

The Company believes the circumstances and global disruption caused by COVID-19 may have an adverse effect on its sales, operating results, cash flows and financial condition.

In addition, there are some inherent estimates and assumptions used in determining fair value of indefinite-lived intangible assets and reporting units that are outside the control of management, such as interest rates, cost of capital, tax rates, industry growth, credit ratings, foreign exchange rates, labor inflation and tariffs including the current trade negotiations with China.

The Company has determined that as of September 30, 2020 a triggering event has not occurred which would require an interim impairment test to be performed.

There are some inherent estimates and assumptions used in determining fair value of indefinite-lived intangible assets and reporting units that are outside the control of management, such as interest rates, cost of capital, tax rates, industry growth, credit ratings, foreign exchange rates, labor inflation and tariffs including the current trade negotiations with China.

Accordingly, the Company may be required to perform additional impairment testing based on further deterioration of the global economic environment, disruptions to the Company’s business, declines in operating results of the Company’s reporting units and/or trade names, further sustained deterioration of the Company’s market capitalization, and other factors, which could result in impairment charges in the future.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

NOTE 6 — DEBT

The Company’s credit agreement (the “ABL Agreement”) with JPMorgan Chase Bank, N.A.

(“JPMorgan”), includes a senior secured asset-based revolving credit facility in the maximum aggregate principal amount of $ 150.0 million, which facility will mature on March 2, 2023, and a loan agreement (the “Term Loan” and together with the ABL Agreement, the “Debt Agreements”) which provides for a senior secured term loan credit facility in the original principal amount of $ 275.0 million, which matures on February 28, 2025.

The Company’s credit agreement, dated as of March 2, 2018 (the “ABL Agreement”) with JPMorgan Chase Bank, N.A.

(“JPMorgan”), includes a senior secured asset-based revolving credit facility in the maximum aggregate principal amount of $ 150.0 million, which facility will mature on March 2, 2023, and a loan agreement (the “Term Loan” and together with the ABL Agreement, the “Debt Agreements”) that provides for a senior secured term loan credit facility in the original principal amount of $ 275.0 million, which matures on February 28, 2025.

The Term Loan requires the Company to make an annual prepayment of principal based upon excess cash flow (“Excess Cash Flow”), if any.

This estimated amount is recorded in current maturity of term loan on the unaudited condensed consolidated balance sheets.

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

Per the Debt Agreements, when an Excess Cash Flow payment is made by the Company, the payment is first applied to satisfy the future quarterly required payments in order of maturity.

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

Per the Debt Agreements, when the Company makes an Excess Cash Flow payment, the payment is first applied to satisfy the future quarterly required payments in order of maturity.

The maximum borrowing amount under the ABL Agreement may be increased to up to $ 200.0 million if certain conditions are met.

1 unchanged sentence

The Incremental Facilities may not exceed the sum of (i) $ 50.0 million plus (ii) an unlimited amount so long as, in the case of (ii) only, the Company’s secured net leverage ratio, as defined in and computed pursuant to the Term Loan, is no greater than 3.75 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan.

As of June 30, 2020 and December 31, 2019, the total availability under the ABL Agreement was as follows (in thousands):

June 30, 2020

As of September 30, 2020 and December 31, 2019, the total availability under the ABL Agreement was as follows (in thousands):

September 30, 2020

December 31, 2019

4 unchanged sentences

Availability under the ABL Agreement depends on the valuation of certain current assets comprising the borrowing base.

Due to the seasonality of the Company’s business, this may mean that the Company will have greater borrowing availability during the third and fourth quarters of each year.

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 may mean that the Company will have greater borrowing availability during the third and fourth quarters of each year.

Consequently, the $ 150.0 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 condensed consolidated balance sheets were as follows (in thousands):

June 30, 2020 December 31, 2019

September 30, 2020 December 31, 2019

Current portion of Term Loan facility:

Term Loan facility payment $ — $ 2,750

Excess Cash Flow principal payment 15,000 7,145

Estimated Excess Cash Flow principal payment 20,000 7,145

Estimated unamortized debt issuance costs ( 1,478 ) ( 1,482 )

1 unchanged sentence

Non-current portion of Term Loan facility:

Term Loan facility payment, net of current portion $ 247,605 $ 260,293

Term Loan facility, net of current portion $ 242,605 $ 260,293

Estimated unamortized debt issuance costs ( 4,878 ) ( 6,012 )

Total Non-current portion of Term Loan facility $ 237,727 $ 254,281

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

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.

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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 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 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.

4 unchanged sentences

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

The interest rate on outstanding borrowings under the ABL Agreement at June 30, 2020 was 1.8 %.

The interest rate on outstanding borrowings under the ABL Agreement at September 30, 2020 was 1.8 %.

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

1 unchanged sentence

(i) alternate base rate, defined, for any day, as the greater of (x) the prime rate, (y) a federal funds and overnight bank funding based rate plus 0.5 % or (z) one-month LIBOR, but not less than 1.0 %, plus 1.0 %, which alternate base rate shall not be less than 2 %, plus a margin of 2.5 % or (ii) LIBOR, but not less than 1.0 %, plus a margin of 3.5 %.

The interest rate on outstanding borrowings under the Term Loan at June 30, 2020 was 4.5 %.

The interest rate on outstanding borrowings under the Term Loan at September 30, 2020 was 4.5 %.

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

Restrictions include limitations on additional indebtedness, 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 $ 15.0 million and 10 % of the aggregate commitment under the ABL Agreement at any time and (b) ending on the day after such availability has exceeded the greater of $ 15.0 million and 10 % of the aggregate commitment under the ABL Agreement for forty-five ( 45 ) consecutive days, the Company is required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 as of the last day of any period of four consecutive fiscal quarters.

The Company was in compliance with the covenants of the Debt Agreements at June 30, 2020.

Further, the ABL Agreement provides that during any period (a) commencing on the last day of the most recently ended four consecutive fiscal quarters on or prior to the date availability under the ABL Agreement is less than the greater of $ 15.0 million and 10 % of the aggregate commitment under the ABL Agreement at any time and (b) ending on the day after such availability has exceeded the greater of $ 15.0 million and 10 % of the aggregate commitment under the ABL Agreement for 45 consecutive days, the Company is required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 as of the last day of any period of four consecutive fiscal quarters.

The Company was in compliance with the covenants of the Debt Agreements at September 30, 2020.

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.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

NOTE 7 — DERIVATIVES

Interest Rate Swap Agreements

The Company is a party to interest rate swap agreements, with an aggregate notional value of $ 75.0 million at June 30, 2020.

The Company is a party to interest rate swap agreements, with an aggregate notional value of $ 75.0 million at September 30, 2020.

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

1 unchanged sentence

The notional amounts are reduced over these periods.

The Company entered into additional interest rate swap agreements, with an aggregate notional value of $ 25.0 million at June 30, 2020, that do not meet the criteria for hedge accounting treatment.

The Company entered into additional interest rate swap agreements, with an aggregate notional value of $ 25.0 million at September 30, 2020, that do not meet the criteria for hedge accounting treatment.

As a result, these interest rate swap agreements are considered non-designated interest rate swaps that serve as economic hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings and expire in February 2025.

The Company's total outstanding notional value of interest rate swaps was $ 100.0 million at June 30, 2020.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

The Company's total outstanding notional value of interest rate swaps was $ 100.0 million at September 30, 2020.

Foreign Exchange Contracts

3 unchanged sentences

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

The Company purchases short-term (i.e.

12 months or less) foreign currency forward contracts to protect against currency exchange risks associated with the payment of merchandise purchases to foreign suppliers.

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

The Company 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 Company's foreign exchange contracts, that had been designed as hedges in order to apply hedge accounting, matured in April 2020.

As of June 30, 2020 the Company did not have any outstanding foreign exchange contracts.

At September 30, 2020 the Company did not have any outstanding foreign exchange contracts.

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

3 unchanged sentences

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

The Company does not enter into such contracts for speculative purposes and as of June 30, 2020, the Company does not have any foreign currency forward contract derivatives that are not designated as hedges.

The Company does not enter into such contracts for speculative purposes and as of September 30, 2020, the Company does not have any foreign currency forward contract derivatives that are not designated as hedges.

The fair values of the Company’s derivative financial instruments included in the condensed consolidated balance sheets are presented as follows (in thousands):

Derivatives designated as hedging instruments Balance Sheet

Location June 30,

Location September 30,

December 31, 2019

5 unchanged sentences

Derivatives not designated as hedging instruments Balance Sheet

Location June 30,

Location September 30,

December 31, 2019

2 unchanged sentences

The fair values of the interest rate swaps have been obtained from the counterparties to the agreements and were based on Level 2 observable inputs using proprietary models and estimates about relevant future market conditions.

The fair values of the foreign exchange contracts were based on Level 2 observable inputs using quoted market prices for similar assets in an active market.

The fair values of the

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

foreign exchange contracts were based on Level 2 observable inputs using quoted market prices for similar assets in an active market.

The counterparties to the derivative financial instruments are major international financial institutions.

1 unchanged sentence

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

The amounts of gains and losses related to the Company’s derivative financial instruments designated as hedging instruments are recognized in other comprehensive loss, net of taxes, as follows (in thousands):

The amounts of gains and losses, realized and unrealized, related to the Company’s derivative financial instruments designated as hedging instruments are recognized in other comprehensive income (loss), net of taxes, as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Derivatives designated as hedging instruments 2020 2019 2020 2019

3 unchanged sentences

Realized gains and losses on the interest rate swaps are reclassified into earnings as the interest expense on the debt is recognized.

The Company had no terminated or matured interest rate swaps during the three and six months ended June 30, 2020.

The Company had no terminated or matured interest rate swaps during the three and nine months ended September 30, 2020.

Realized gains and losses on foreign exchange contracts that are reported in other comprehensive income (loss) are reclassified into cost of sales as the underlying inventory purchased is sold.

During the three months ended June 30, 2020, the Company reclassified $ 0.2 million of cash flow hedges in other comprehensive losses to earnings.

During the three months ended September 30, 2020, the Company reclassified $ 0.3 million of cash flow hedges in other comprehensive losses to earnings related to realized interest rate swap losses.

During the nine months ended September 30, 2020, the Company reclassified $ 0.7 million of cash flow hedges in other comprehensive losses to earnings.

This was comprised of $ 0.9 million related to realized interest rate swap losses and a gain of $ 0.2 million related to foreign exchange contracts recognized in cost of sales.

During the six months ended June 30, 2020, the Company reclassified $ 0.4 million of cash flow hedges in other comprehensive losses to earnings.

During the three months ended September 30, 2019, the Company reclassified $ 0.1 million of cash flow hedges in other comprehensive losses to earnings.

This was comprised of $ 0.1 million related to realized interest rate swap losses and a gain of $ 0.2 million related to foreign exchange contracts recognized in cost of sales.

During the three months ended June 30, 2019, the Company reclassified $ 0.1 million related to realized interest rate swap losses and a gain of $ 0.1 million related to foreign exchange contracts recognized in cost of sales.

During the six months ended June 30, 2019, the Company reclassified $ 0.1 million related to realized interest rate swap losses and a gain of $ 0.1 million related to foreign exchange contracts recognized in cost of sales.

Interest and mark to market losses related to the Company’s derivative financial instruments not designated as hedging instruments that were recognized in earnings are as follows (in thousands):

During the nine months ended September 30, 2019, the Company reclassified $ 0.2 million of cash flow hedges in other comprehensive losses to earnings.

This was comprised of $ 0.1 million related to realized interest rate swap losses and a gain of $ 0.3 million related to foreign exchange contracts recognized in cost of sales.

Interest and mark to market gains (losses) related to the Company’s derivative financial instruments not designated as hedging instruments that were recognized in earnings are as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

Derivatives not designated as hedging instruments Location of gain (loss) 2020 2019 2020 2019

Interest rate swaps Mark to market (loss) gain on interest rate derivatives

Interest rate swaps Mark to market gain (loss) on interest rate derivatives

$ 99 $ 367 $ ( 2,316 ) $ 717

3 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

NOTE 8 — STOCK COMPENSATION

1 unchanged sentence

The amendment and restatement of the Plan revised the terms and conditions of the Plan to, among other things, increase the shares available for grant under the Plan by 850,000 shares.

As of June 30, 2020, there were 746,809 shares available for the grant of awards under the Plan.

As of September 30, 2020, there were 760,741 shares available for the grant of awards under the Plan.

Option Awards

A summary of the Company’s stock option activity and related information for the six months ended June 30, 2020 is as follows:

A summary of the Company’s stock option activity and related information for the nine months ended September 30, 2020 is as follows:

Options Weighted-

7 unchanged sentences

Expirations ( 232,737 ) 13.18

Options outstanding, June 30, 2020

Options outstanding, September 30, 2020

1,300,775 13.28 5.0 $ 179

Options exercisable, June 30, 2020

Options exercisable, September 30, 2020

995,982 $ 14.27 3.9 $ 22

1 unchanged sentence

Weighted-average years expected to be recognized over 1.3

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been received by the option holders had all option holders exercised their stock options on June 30, 2020.

The intrinsic value is calculated for each in-the-money stock option as the difference between the closing price of the Company’s common stock on June 30, 2020 and the exercise price.

The intrinsic value is calculated for each in-the-money stock option as the difference between the closing price of the Company’s common stock on September 30, 2020 and the exercise price.

Restricted Stock

A summary of the Company’s restricted stock activity and related information for the six months ended June 30, 2020 is as follows:

A summary of the Company’s restricted stock activity and related information for the nine months ended September 30, 2020 is as follows:

Shares Weighted-

5 unchanged sentences

Cancellations ( 6,295 ) 9.37

Non-vested restricted shares, June 30, 2020

Non-vested restricted shares, September 30, 2020

832,952 $ 7.61

1 unchanged sentence

Weighted-average years expected to be recognized over 1.3

The total fair value of restricted stock that vested during the six months ended June 30, 2020 was $ 1.8 million.

The total fair value of restricted stock that vested during the nine months ended September 30, 2020 was $ 1.8 million.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

Performance shares

2 unchanged sentences

The shares are subject to the terms and conditions of the Company’s Plan.

A summary of the Company’s performance-based award activity and related information for the six months ended June 30, 2020 is as follows:

A summary of the Company’s performance-based award activity and related information for the nine months ended September 30, 2020 is as follows:

average grant

4 unchanged sentences

Cancellations ( 15,274 ) 16.92

Non-vested performance-based awards, June 30, 2020

Non-vested performance-based awards, September 30, 2020

433,845 $ 9.92

2 unchanged sentences

(1) Represents the target number of shares to be issued for each performance-based award.

The total fair value of performance-based awards that vested during the six months ended June 30, 2020 was $ 0.4 million.

The total fair value of performance-based awards that vested during the nine months ended September 30, 2020 was $ 0.4 million.

The Company recorded stock compensation expense as follows (in thousands):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Stock Compensation Expense Components 2020 2019 2020 2019

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

NOTE 9 — LOSS PER COMMON SHARE

Basic loss per common share has been computed by dividing net loss by the weighted-average number of shares of the Company’s common stock outstanding during the relevant period.

Diluted loss per common share adjusts net loss and basic loss per common share for the effect of all potentially dilutive shares of the Company’s common stock.

September 30, 2020

NOTE 9 — INCOME (LOSS) PER COMMON SHARE

Basic income (loss) per common share has been computed by dividing net income (loss) by the weighted-average number of shares of the Company’s common stock outstanding during the relevant period.

Diluted income (loss) per common share adjusts net income (loss) and basic income (loss) per common share for the effect of all potentially dilutive shares of the Company’s common stock.

Anti-dilutive securities are not included in the computation of diluted earnings per share under the treasury stock method.

The calculations of basic and diluted loss per common share for the three and six months ended June 30, 2020 and 2019 are as follows:

The calculations of basic and diluted income (loss) per common share for the three and nine months ended September 30, 2020 and 2019 are as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

(in thousands, except per share amounts)

Net loss – Basic and Diluted

Net income (loss) – Basic and Diluted

$ 13,913 $ ( 13,519 ) $ ( 18,228 ) $ ( 29,899 )

Weighted-average shares outstanding – Basic 20,935 20,429 20,835 20,494

Effect of dilutive securities:

Stock options and other stock awards

Weighted-average shares outstanding – Basic and Diluted 21,285 20,429 20,835 20,494

Basic and Diluted loss per common share

Basic income (loss) per common share

$ 0.66 $ ( 0.66 ) $ ( 0.87 ) $ ( 1.46 )

Diluted income (loss) per common share

$ 0.65 $ ( 0.66 ) $ ( 0.87 ) $ ( 1.46 )

Antidilutive Securities 1,850 2,128 2,133 2,246

NOTE 10— INCOME TAXES

The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to pre-tax income or loss for the reporting period.

For the three and six months ended June 30, 2020, the Company has used a discrete effective tax rate method to calculate taxes.

Management determined that since minimal changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the three and six months ended June 30, 2020.

Income tax expense of $ 3.0 million and benefit of $ 0.7 million for the three and six months ended June 30, 2020, respectively, represent taxes on both U.S.

and foreign earnings at a combined effective income tax provision rate of 3,092.9 % and benefit rate of 2.2 %, respectively.

The effective tax rate for the three and six months ended June 30, 2020 differs from the federal statutory income tax rate of 21.0% primarily due to non-deductible goodwill impairment and other significant permanent items recorded year-to-date, partially offset by the benefit of losses in foreign jurisdictions.

Income tax benefit of $ 5.8 million and $ 8.3 million for the three and six months ended June 30, 2019, respectively, represent taxes on both U.S.

and foreign earnings at combined effective income tax benefit rates of 33.6 % and 33.8 %, respectively.

The effective tax rate for the three and six months ended June 30, 2019 differs from the federal statutory rate of 21.0% primarily due to state and local taxes and the impact of non-deductible expenses.

In interim reporting periods through March 30, 2020, the Company had historically calculated the provision for income taxes using a forecasted rate methodology and applying an estimate of the annual effective tax rate for the full fiscal year to pre-tax income or loss for the reporting period.

For the three and six months ended June 30, 2020, the Company used a discrete tax methodology to calculate taxes as management determined that minimal changes in projected pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, and the historical method would not provide a reliable estimate.

For the three and nine months ended September 30, 2020, the Company continues to apply the discrete tax methodology as the historical method would not provide a reliable estimate.

Income tax provision of $ 3.7 million and $ 3.0 million for the three and nine months ended September 30, 2020, respectively, represent taxes on both U.S.

and foreign earnings at combined effective income tax provision rates of 21.2 % and ( 20.3 )%, respectively.

The effective tax rate for the three months ended September 30, 2020 is consistent with the federal statutory income tax rate of 21% and includes an increase for state and local taxes offset by other items that are not material.

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

The effective rate for the nine months ended September 30, 2020 differs from the federal statutory income tax rate primarily due to state and local taxes, equity based awards, and the non-deductible portion of the U.S.

goodwill impairment recorded in the three months ended March 31, 2020.

Income tax provision of $ 15.1 million and $ 6.8 million for the three and nine months ended September 30, 2019, respectively, represent taxes on both U.S.

and foreign earnings at combined effective income tax provision rates of 857.5 % and ( 30.0 )%, respectively.

The negative rate for the nine months ended September 30, 2019 reflects tax expense on a pretax financial reporting loss.

The effective tax rate for the three and nine months ended September 30, 2019 differs from the federal statutory income tax rate of 21% primarily due to state and local taxes and the impact of non-deductible expenses, offset by a benefit for federal credits.

Included within the non-deductible expenses is the European goodwill impairment recorded in the three months ended September 30, 2019, which is not deductible for income tax purposes in the foreign jurisdiction.

The Company has identified the following jurisdictions as “major” tax jurisdictions:

1 unchanged sentence

The Company’s 2015 U.S.

Federal income tax return audit was completed with no assessments.

The Company's New York State tax returns for years 2014-2016 remain under audit with no material assessments as of June 30, 2020.

Federal income tax return audit was completed as of June 30, 2020

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

with no assessments.

The Company's New York State tax returns for years 2014-2016 remain under audit with no material assessments as of September 30, 2020.

The Company evaluates its tax positions on a quarterly basis and revises its estimates accordingly.

There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three-month periods ended June 30, 2020 and June 30, 2019.

There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three-month periods ended September 30, 2020 and September 30, 2019.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law and the new legislation contains several key tax provisions, including the five-year net operating loss carryback, an adjusted business interest limitation, and payroll tax deferral.

1 unchanged sentence

The Company has assessed the applicability of the CARES Act and determined there is no material impact to the Company.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

NOTE 11 – BUSINESS SEGMENTS

2 unchanged sentences

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

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

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.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

13 unchanged sentences

Total depreciation and amortization $ 6,090 $ 6,122 $ 18,385 $ 18,771

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

September 30,

2020 December 31,

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

NOTE 12 — CONTINGENCIES

23 unchanged sentences

In February 2020, the tolling agreements were extended to November 2020.

In October 2020, the Department of Justice requested that the parties enter into a further extension of the tolling agreement to November 2021.

The Company and WSPR executed such extension agreement on October 30, 2020 and the extension agreement will be effective once countersigned by the Department of Justice.

The tolling agreements do not constitute in any way an admission or acknowledgment of any fact, conclusion of law or liability by the parties to the agreements.

1 unchanged sentence

The public comment period for the proposed plan ended on September 10, 2019.

On September 30, 2019, the EPA issued the ROD for operable unit 2 (“OU-2”), electing to implement its preferred remedy which consists of in-situ treatment of groundwater and a monitored natural attenuation (MNA) program including monitoring of the plume fringe at the Site.

On September 30, 2019, the EPA issued the ROD for operable unit 2 (“OU-2”), electing to implement its preferred remedy which consists of in-situ treatment of groundwater and a monitored natural attenuation program including monitoring of the plume fringe at the Site.

The EPA’s estimated total net present worth cost for its selected remedy is $ 17.3 million.

Accordingly, based on the above uncertainties and variables, it is not possible at this time for the Company to estimate its share of liability, if any, related to this matter.

However, in the event of one or more adverse determinations related to this matter, it is

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

possible that the ultimate liability resulting from this matter and the impact on the Company’s results of operations could be material.

September 30, 2020

Accordingly, based on the above uncertainties and variables, it is not possible at this time for the Company to estimate its share of liability, if any, related to this matter.

However, in the event of one or more adverse determinations related to this matter, it is possible that the ultimate liability resulting from this matter and the impact on the Company’s results of operations could be material.

Customs and Border Protection matter

8 unchanged sentences

Based on this decision, no additional duties will be owed for the seven tableware collections imported in this shipment.

The Company is now in the process of compiling a complete set of supporting documents for the remaining three protests (for the remaining 29 tableware collections that were imported by the Company under the protested shipments) for submission to the CBP.

The Company has compiled and submitted to CBP a complete set of supporting documents for the remaining three protests (for the remaining 29 tableware collections that were imported by the Company under the protested shipments).

These claims are now under review.

If the CBP approves these additional claims and accepts the evidence presented as it did with the Lead Protest, then no additional duties will be owed for the remaining protested shipments.

6 unchanged sentences

The Company is, from time to time, involved in other legal proceedings.

The Company is involved in other legal proceedings from time to time.

The Company believes that other current litigation is routine in nature and incidental to the conduct of the Company’s business and that none of this litigation, individually or collectively, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

NOTE 13 — OTHER

Cash dividends

Dividends declared in the six months ended June 30, 2020 were as follows:

Dividends declared in the nine months ended September 30, 2020 were as follows:

Dividend per share Date declared Date of record Payment date

1 unchanged sentence

$ 0.0425 6/25/2020 8/3/2020 8/17/2020

On February 14, 2020, the Company paid dividends of $ 0.9 million to shareholders of record on January 31, 2020.

$ 0.0425 8/4/2020 11/2/2020 11/16/2020

On February 14, 2020 and August 17, 2020 the Company paid dividends of $ 0.9 million and $ 0.9 million to shareholders of record on January 31, 2020 and August 3, 2020.

In 2020, the Company declared dividends as follows:

4 unchanged sentences

• On August 4, 2020, the Board of Directors declared a quarterly dividend of $ 0.0425 per share payable on November 16, 2020 to shareholders of record on November 2, 2020.

In the three months ended June 30, 2020, the Company reduced retained earnings for the accrual of $ 0.9 million relating to the dividend payable on August 17, 2020.

For the six months ended June 30, 2020, the Company reduced retained earnings for the accrual of $ 1.8 million relating to the dividend payable on August 17, 2020 and December 16, 2020 .

• On November 3, 2020, the Board of Directors declared a quarterly dividend of $ 0.0425 per share payable on February 12, 2021 to shareholders of record on January 29, 2021.

In the three months ended September 30, 2020, the Company reduced retained earnings for the accrual of $ 0.9 million relating to the dividend payable on November 16, 2020.

For the nine months ended September 30, 2020, the Company reduced retained earnings by $ 2.8 million relating to the dividends declared through September 30, 2020.

Supplemental cash flow information

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

Components of accumulated other comprehensive loss, net

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

2 unchanged sentences

Balance at beginning of period $ ( 40,991 ) $ ( 35,374 ) $ ( 34,019 ) $ ( 33,727 )

Translation loss during period

Translation income (loss) during period

2,145 ( 2,385 ) ( 5,062 ) ( 4,032 )

2 unchanged sentences

Balance at end of period $ ( 38,846 ) $ ( 37,759 ) $ ( 38,846 ) $ ( 37,759 )

Accumulated deferred gains on cash flow hedges:

Accumulated deferred (losses) gains on cash flow hedges:

Balance at beginning of period $ ( 1,612 ) $ 1,739 $ 1,164 $ 161

4 unchanged sentences

( 89 ) 294 ( 3,224 ) 1,895

Net change in cash flow hedges, net of taxes of $ 69 , $ 306 , $( 929 ) and $ 495

Net change in cash flow hedges, net of taxes of $ 73 and $ 36 for the three months ended September 30, 2020 and 2019, respectively and $( 856 ) and $ 531 for the nine months ended September 30, 2020 and 2019, respectively.

216 151 ( 2,560 ) 1,729

3 unchanged sentences

Amounts reclassified from accumulated other comprehensive loss:

Amortization of actuarial gains, net of taxes

Amortization of actuarial loss, net of taxes 20 13 59 38

Balance at end of period $ ( 1,541 ) $ ( 1,012 ) $ ( 1,541 ) $ ( 1,012 )

Total accumulated other comprehensive losses at end of period

Total accumulated other comprehensive loss at end of period

$ ( 41,783 ) $ ( 36,881 ) $ ( 41,783 ) $ ( 36,881 )

(1) Amount is recorded in equity in losses on the unaudited condensed consolidated statements of operations.

(1) Amount is recorded in equity in earnings (losses) on the unaudited condensed consolidated statements of operations.

(2) Amounts reclassified are recorded in interest expense and cost of sales on the unaudited condensed consolidated statement of operations.

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements