What changed in this filing

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Item 9A. Controls and Procedures

2021-03-10 compared with 2020-03-13 · 463 added, 366 removed, 1260 unchanged (40% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of December 31, 2019, that the Company’s controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in

such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer of the Company, as appropriate to allow timely decisions regarding required disclosure.

are effective to ensure that information required to be disclosed by the Company in the reports filed by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer of the Company, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

5 unchanged sentences

Internal control over financial reporting includes those policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and acquisitions and dispositions of the assets of the Company;

• Provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S.

6 unchanged sentences

Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 using the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2019 is effective.

Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2020 was effective.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report.

34 unchanged sentences

2.1 Agreement and Plan of Merger, dated as of December 22, 2017, by and among the Company, TPP Acquisition I Corp., TPP Acquisition II LLC, Taylor Parent, LLC, Taylor Holdco, LLC, and CP Taylor GP, LLC.

(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on December 29, 2017) Holdco, LLC, and CP Taylor GP, LLC.

(incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on December 29, 2017)

3.1 Second Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005)

3.2 Certificate of Amendment to Second Restated Certificate of Incorporation of Lifetime Certificate of Amendment to Second Restated Certificate of Incorporation of Lifetime Brands, Inc.

(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 10, 2016) , Inc.

(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 10, 2016)

3.2 Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 10, 2016)

3.3 Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 8, 2016)

4.1 Description of the Company’s securities registered under Section 12 of the Securities Exchange Act of 1934, as amended

4.1 Description of the Company’s securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019)

10.1 License Agreement dated December 14, 1989 between the Company and Farberware, Inc.

1 unchanged sentence

33-40154 on Form S-1)(P)

10.2 Fourth Amended and Restated Employment Agreement, dated as of June 27, 2019, between the Company and Jeffrey Fourth Amended and Restated Employment Agreement, dated as of June 27, 2019, between the Company and Jeffrey Siegel (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 28, 2019)* (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 28, 2019)*

10.3 First Amendment to the Fourth Amended and Restated Employment Agreement, dated as of October 11, 2019, between the Company and Jeffrey Siegel ( First Amendment to the Fourth Amended and Restated Employment Agreement, dated as of October 11, 2019, between the Company and Jeffrey Siegel (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed October 15, 2019)* by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed October 15, 2019) *

10.4 Lease Agreement, dated as of May 10, 2006, between AG Metropolitan Endo, L.L.C and the Company for the property located at 1000 Stewart Lease Agreement, dated as of May 10, 2006, between AG Metropolitan Endo, L.L.C and the Company for the property located at 1000 Stewart Avenue in Garden City, New York (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed May 15, 2006) in Garden City, New York (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed May 15, 2006)

10.2 Fourth Amended and Restated Employment Agreement, dated as of June 27, 2019, between the Company and Jeffrey Siegel (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 28, 2019)*

10.3 First Amendment to the Fourth Amended and Restated Employment Agreement, dated as of October 11, 2019, between the Company and Jeffrey Siegel (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed October 15, 2019) *

10.4 Letter Agreement Amending and Supplementing Employment Agreement between Lifetime Brands, Inc.

and Daniel Siegel, effective April 13, 2020 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020)

10.5 Lease Agreement, dated as of May 10, 2006, between AG Metropolitan Endo, L.L.C and the Company for the property located at 1000 Stewart Avenue in Garden City, New York (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed May 15, 2006)

10.6 First Amendment to the Lease Agreement, dated as of September 26, 2006, between AG Metropolitan Endo, L.L.C and the Company for the property located at 1000 Stewart Avenue in Garden City, New York (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006)

10.7 Amended and Restated 2000 Long-Term Incentive Plan, dated June 28, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 29, 2018)*

10.7 Form of Restricted Stock Award Agreement under the Amended and Restated 2000 Long-term Incentive Plan (incorporated by reference Form of Restricted Stock Award Agreement under the Amended and Restated 2000 Long-term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed August 10, 2015)* 10.1 to the Company’s Quarterly Report on Form 10-Q filed August 10, 2015)*

10.8 Form of Form of Deferred Stock (Performance-Vesting) Award Agreement under the Amended and Restated 2000 Long-term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed August 10, 2015)* Stock (Performance-Vesting) Award Agreement under the Amended and Restated 2000 Long-term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed August 10, 2015)*

10.8 Form of Restricted Stock Award Agreement under the Amended and Restated 2000 Long-term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed August 10, 2015)*

10.9 Form of Deferred Stock (Performance-Vesting) Award Agreement under the Amended and Restated 2000 Long-term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed August 10, 2015)*

10.10 Amended and Restated 2000 Incentive Bonus Compensation Plan, effective as of June 22, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 23, 2017)*

10.10 Amended and Restated Employment Agreement, dated September 10, 2015, between the Company and Laurence Winoker ( Amended and Restated Employment Agreement, dated September 10, 2015, between the Company and Laurence Winoker (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 16, 2015)* by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 16, 2015)*

10.11 Amended and Restated 2000 Incentive Bonus Compensation Plan, effective as of June 25, 2020 (filed as Appendix B to the Registrant's Definitive Proxy Statement on Schedule 14A, filed on April 29, 2020 and incorporated by reference herein)

10.12 Amended and Restated Employment Agreement, dated September 10, 2015, between the Company and Laurence Winoker (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 16, 2015)*

10.13 Amendment to the Amended and Restated Employment Agreement, dated November 8, 2017, between the Company and Laurence Winoker (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017)*

10.12 Second Amendment Second Amendment to the Amended and Restated Employment Agreement, dated as of October 11, 2019, between the Company and Laurence Winoker (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed October 15, 2019)* the Amended and Restated Employment Agreement, dated as of October 11, 2019, between the Company and Laurence Winoker (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed October 15, 2019)*

10.14 Letter Agreement Amending and Supplementing Employment Agreement between Lifetime Brands, Inc.

and Laurence Winoker, effective April 13, 2020 (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020)

10.15 Amendment No.

1 dated September 5, 2007 to the Shares Subscription Agreement by and among the Company, Ekco, S.A.B.

José Ramón Elizondo Anaya and Mr.

Miguel Ángel Huerta Pando (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008)

10.16 Shares Subscription Agreement by and among the Company, Ekco, S.A.B.

3 unchanged sentences

1 dated September 5, 2007 to the Shares Subscription Agreement by and among the Company, Ekco, S.A.B.

Amendment No.

1 dated September 5, 2007 to the Shares Subscription Agreement by and among the Company, Ekco, S.A.B.

José Ramón Elizondo Anaya and Mr.

Miguel Ángel Huerta Pando (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008) Mr.

José Ramón Elizondo Anaya and Mr.

Miguel Ángel Huerta Pando (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008)

10.18 Amendment No.

2 dated September 25, 2008 to the Amendment No.

2 dated September 25, 2008 to the Shares Subscription Agreement by and among the Company, Ekco, S.A.B.

José Ramón Elizondo Anaya and Mr.

Miguel Ángel Huerta Pando (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008) Subscription Agreement by and among the Company, Ekco, S.A.B.

José Ramón Elizondo Anaya and Mr.

Miguel Ángel Huerta Pando (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008)

10.16 Asset Asset Purchase Agreement between Mikasa, Inc.

and the Company, dated as of June 6, 2008 (incorporated by reference to Exhibit 99.1 to the Company’s Form 10-Q for the quarter ended June 30, 2008) Agreement between Mikasa, Inc.

10.19 Asset Purchase Agreement between Mikasa, Inc.

and the Company, dated as of June 6, 2008 (incorporated by reference to Exhibit 99.1 to the Company’s Form 10-Q for the quarter ended June 30, 2008)

2 unchanged sentences

10.22 Amendment No.

1 to the Senior Secured Credit Agreement, dated as of November 13, 2012, by and among the Company, the Subsidiary Guarantors party thereto, the Swap Agreement Counterparty, the financial institutions party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K filed June 27, 2013).A., as Administrative Agent (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K filed June 27, 2013)

10.23 Amendment No.

3 unchanged sentences

10.26 Employment Agreement, dated as of November 8, 2017, between the Company and Daniel Siegel (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017)*

10.24 Amendment to the Employment Agreement, dated as of October 11, 2019, between the Company and Daniel Siegel (incorporated by reference to Exhibit 10.5 to the Amendment to the Employment Agreement, dated as of October 11, 2019, between the Company and Daniel Siegel (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed October 15, 2019)* ’s Current Report on Form 8-K filed October 15, 2019)*

10.25 Form of Amended and Restated Director’s and Form of Amended and Restated Director’s and Officer’s Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 28, 2016) ’s Indemnification Agreement (incorporated by reference to Exhibit 1 0 .1 to the Company’s Current Report on Form 8-K filed January 28, 2016)

10.27 Amendment to the Employment Agreement, dated as of October 11, 2019, between the Company and Daniel Siegel (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed October 15, 2019)*

10.28 Letter Agreement Amending and Supplementing Employment Agreement between Lifetime Brands, Inc.

and Daniel Siegel, effective April 13, 2020 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020)

10.29 Second Amendment, dated February 1, 2021, to the Employment Agreement, dated as of November 8, 2017, by and between Lifetime Brands, Inc.

and Daniel Siegel (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed February 1, 2021)

10.30 Form of Amended and Restated Director’s and Officer’s Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 28, 2016)

10.31 Receivables Purchase Agreement, dated as of September 30, 2016 by and among the Company, as a Seller and as a Seller Agent and initial Servicer, for itself and each of its subsidiaries thereto as a Seller, and HSBC Bank USA, National Association, as Purchaser (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 4, 2016)

6 unchanged sentences

Kay (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 15, 2019)*

10.36 Letter Agreement Amending and Supplementing Employment Agreement between Lifetime Brands, Inc.

and Robert B.

Kay, effective April 13, 2020

10.37 Second Amendment, dated February 1, 2021, to the Employment Agreement, dated as of December 22, 2017, by and between Lifetime Brands, Inc.

and Robert Kay (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed February 1, 2021)

10.38 Stockholders Agreement, dated as of March 2, 2018, between the Company and Taylor Parent, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 6, 2018)

5 unchanged sentences

(incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed March 6, 2018)

10.43 Amendment No.1 to the Receivables Purchase Agreement, dated as of October 9, 2020 by and among the Company, as a Seller and as a Seller Agent and initial Servicer, for itself and each of its subsidiaries thereto as a Seller, and HSBC Bank USA, National Association, as Purchaser

21.1 Subsidiaries of the Company

1 unchanged sentence

23.2 Consent of Castillo Miranda Y Compania, S.C.

23.3 Consent of KPMG Cardenas Dosal, S.

31.1 Certification by Robert B.

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(formerly Ekco, S.A.B.)

99.2 Report of Independent Registered Accounting Firm on the consolidated financial statements of Grupo Vasconia, S.A.B.

(formerly Ekco, S.A.B.)

101.INS Inline XBRL Instance Document (the instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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Craig Phillips

/s/ Veronique Gabai-Pinsky Director March 10, 2021

Veronique Gabai-Pinsky

/s/ Bruce Pollack Director March 10, 2021

Bruce Pollack

/s/ Dennis E.

Reaves Director March 13, 2020

/s/ Michael J.

9 unchanged sentences

Consolidated Statements of Operations for the Years ended December 31, 2020, 2019, and 2018

Consolidated Statements of Comprehensive (Loss) Income for the Years ended December 31, 201 9 , 2018 and 201 7

Consolidated Statements of Comprehensive Loss for the Years ended December 31, 2020, 2019 and 2018

Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 20 20 , 201 9 , and 20 18

10 unchanged sentences

We have audited the accompanying consolidated balance sheets of Lifetime Brands, Inc.

and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations , comprehensive (loss) income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the consolidated financial statements).

(and subsidiaries) (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations , comprehensive loss, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “ consolidated financial statements ” ).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S.

8 unchanged sentences

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 10, 2021 expressed an unqualified opinion thereon.

Adoption of ASU No.

2016-02, Leases

As discussed in Note A to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of ASU No.

2016-02, Leases .

Basis for Opinion

9 unchanged sentences

We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Goodwill and Trade names

Description of the Matter

At December 31, 2020, the Company’s intangible assets consist of goodwill in the U.S.

reporting unit with a carrying value of $30.3 million and two indefinite-lived trade names in the U.S.

reportable segment with an aggregated carrying value of $49.6 million.

As discussed in Note 7 of the audited consolidated financial statements, the Company tests goodwill and indefinite-lived trade names for impairment at least annually, or more frequently when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable.

An impairment loss is recognized when the fair value of goodwill or the indefinite-lived trade names is less than its carrying amount.

During the current year, the Company recognized a goodwill impairment charges of $19.1 million in the U.S.

reporting unit and $1.0 million of an indefinite-lived trade name in the U.S.

reportable segment.

Auditing management’s annual and interim goodwill and indefinite-lived trade names impairment tests was complex as valuation of the reporting unit and indefinite-lived trade names involves considerable management judgment and estimation.

For goodwill, the Company estimated the fair value of the reporting unit 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 discounted cash flow method is largely dependent upon estimates made by management with respect to significant assumptions, including projected net sales, projected earnings before interest, tax, depreciation and amortization (“EBITDA”), terminal growth rates, and the cost of capital For the guideline public company method, the significant assumptions related to the selection of the appropriate guideline companies and related valuation multiples used in the analysis.

For indefinite-lived trade names, significant assumptions used in management’s fair value analysis included future net sales for the related brands, royalty rates, and the cost of capital.

These assumptions are forward-looking.

Changes in market, industry and company-specific conditions could materially impact the determination of the fair value of these assets and the measurement of the impairments.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s valuation of goodwill and indefinite-lived trade names.

This included testing management’s review controls relating to the Company’s valuation models and significant assumptions, described above.

As part of our audit, we assessed the methodologies and significant assumptions used for the purposes of performing the impairment tests, among other procedures.

We evaluated our historical experience with management’s effort in producing accurate projections of revenue growth and profitability by comparing its historical projections to the Company’s actual performance.

We tested the significant assumptions discussed above, as well as the completeness and accuracy of the underlying data used in the valuations.

We assessed the appropriateness of the Company’s projections by comparing them to general and sector-specific market expectations.

We engaged our valuation specialists to assess the reasonableness of the cost of capital, the valuation models and significant assumptions used in the valuation of the U.S.

reporting unit and the indefinite-lived trade names.

In order to reflect the uncertainty inherent in the projections, we inspected the sensitivity analyses performed by the Company and performed our own sensitivity analyses by increasing or decreasing the significant assumptions and evaluated the potential outcome for the U.S.

reporting unit and the indefinite-lived trade names in the U.S.

reportable segment.

For the guideline public company method, we evaluated the reasonableness of the selected guideline public companies and the resulting market multiples calculation.

In addition, we tested the reconciliation of the fair value of the reporting units developed by management to the stock market capitalization of the Company as of the valuation date and evaluated the implied control premium for reasonableness.

Estimation of Variable Consideration

Description of the Matter

For the year ended December 31, 2020, the Company reported net sales of $769.2 million.

As described in Note 2 of the audited consolidated financial statements, the Company offers various sales incentives and promotional programs to its customers in the normal course of business.

These sales incentives and promotional spending, typically including cooperative advertising, buydowns, volume discounts and discounts, represent variable consideration and are reflected as reductions in net sales in the Company’s consolidated statements of operations.

While a majority of the sales incentives and promotions are contractually agreed upon with the Company’s customers, certain discounts require the Company to estimate the sales incentive and promotions based on historical experience and other known factors or as the most likely amount in a range of possible outcomes.

Auditing the Company’s measurement of the variable consideration associated with discounts is challenging because the calculation involves subjective estimates of future price concessions, number of units sold by distributors and product returns.

Changes in these assumptions can have a material effect on the amount of net sales recognized.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over the estimation of variable consideration.

Among others, we tested management’s review controls over the determination of significant assumptions used in estimating the variable consideration.

We also tested controls over management’s review of the completeness and accuracy of the underlying data used in the analysis.

Among other procedures, we inspected the sales contracts and communications between the sales department and customers that were used to support the estimation of the variable consideration.

For a sample of transactions, we performed detailed transactional testing of customer deductions to validate the timing and amount of the sales allowances recorded.

We performed corroborative inquiries of sales division executives to evaluate the ongoing sales promotions and spending needs at year end.

Additionally, we performed retrospective analyses over management’s historical estimates in order to assess the reasonableness of how the Company measures certain variable consideration discounts.

/s/ Ernst & Young LLP

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OTHER ASSETS 2,468 4,071

DEFERRED INCOME TAXES — 733

TOTAL ASSETS $ 807,481 $ 770,023

4 unchanged sentences

Accrued expenses 80,050 52,060

Income taxes payable 4,788 —

Current portion of operating lease liabilities 11,480 10,661

1 unchanged sentence

OTHER LONG-TERM LIABILITIES 16,483 12,214

DEFERRED INCOME TAXES 13,685 15,141

OPERATING LEASE LIABILITIES 112,180 —

INCOME TAXES PAYABLE, LONG-TERM 1,444 1,217

OPERATING LEASE LIABILITIES 102,355 112,180

DEFERRED INCOME TAXES 10,714 13,685

REVOLVING CREDIT FACILITY 27,302 32,822

4 unchanged sentences

none issued and outstanding

CCommon stock, $ 0.01 par value, shares authorized:

Common stock, $ 0.01 par value, shares authorized:

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

18 unchanged sentences

Selling, general and administrative expenses 155,872 161,618 162,933

Impairment of goodwill 42,990 2,205 —

Goodwill and other impairments 20,100 42,990 2,205

Restructuring expenses 211 1,435 2,324

(Loss) income from operations

Income (loss) from operations

24,970 ( 23,395 ) 18,579

Interest expense ( 17,277 ) ( 20,780 ) ( 18,004 )

Mark to market (loss) gain on interest rate derivatives

( 2,144 ) 402 —

Loss on early retirement of debt

(Loss) income before income taxes and equity in earnings

Income (loss) before income taxes and equity in earnings

5,549 ( 43,773 ) 509

2 unchanged sentences

Equity in earnings, net of taxes

NET (LOSS) INCOME

1,310 467 660

BASIC (LOSS) INCOME PER COMMON SHARE

$ ( 3,007 ) $ ( 44,415 ) $ ( 1,720 )

DILUTED (LOSS) INCOME PER COMMON SHARE

BASIC LOSS PER COMMON SHARE

$ ( 0.14 ) $ ( 2.16 ) $ ( 0.09 )

DILUTED LOSS PER COMMON SHARE

$ ( 0.14 ) $ ( 2.16 ) $ ( 0.09 )

See Notes to consolidated financial statements.

LIFETIME BRANDS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

1 unchanged sentence

2020 2019 2018

Net (loss) income

$ ( 3,007 ) $ ( 44,415 ) $ ( 1,720 )

Other comprehensive income (loss) , net of tax:

Other comprehensive (loss) income, net of tax:

Translation adjustment ( 2,062 ) ( 292 ) ( 5,906 )

Deferred (losses) gains on cash flow hedges :

Settlement of cash flow hedge ( 209 ) ( 14 ) —

Fair value adjustment, net of tax of $ 347 in 2019, $ 38 in 2018 and $ 0 in 2017

Total deferred gains on cash flow hedges

Amount reclassified 235 — —

Total translation loss

( 1,827 ) ( 292 ) ( 5,906 )

Deferred gains (losses) on cash flow hedges:

Fair value adjustment, net of tax of $( 803 ), $ 347 and $ 38

( 3,273 ) 1,212 161

Settlement of cash flow hedges 984 ( 209 ) ( 14 )

Total deferred (losses) gains on cash flow hedges

( 2,289 ) 1,003 147

Effect of retirement benefit obligations:

Net (loss) income arising from retirement benefit obligations, net of tax of $( 251 ) in 2019, $ 93 in 2018 and $( 132 ) in 2017

Net (loss) income arising from retirement benefit obligations, net of tax of $( 259 ), $( 251 ) and $ 93

( 680 ) ( 601 ) 373

amortization of loss included in net (loss) income, net of tax of $ 34 in 2019, $ 23 in 2018 and $ 42 in 2017

amortization of loss included in net loss, net of tax of $ 52 , $ 34 and $ 23

Total effects of retirement benefit obligations ( 601 ) ( 550 ) 468

Other comprehensive income (loss), net of tax

Other comprehensive (loss) income, net of tax

( 4,717 ) 161 ( 5,291 )

Comprehensive (loss) income

Comprehensive loss

$ ( 7,724 ) $ ( 44,254 ) $ ( 7,011 )

9 unchanged sentences

14,903 $ 149 $ 178,909 $ 60,546 $ ( 29,325 ) $ 210,279

Comprehensive income (loss):

Comprehensive (loss) income:

— — — ( 1,720 ) — ( 1,720 )

2 unchanged sentences

Effect of retirement benefit obligations — — — — 468 468

Total comprehensive income

Restricted shares issued to directors 30 — — — — —

Net issuance of restricted shares to employees 97 1 1 — — 2

Total comprehensive loss

Restricted shares granted to directors 46 — — — — —

Net issuance of restricted shares granted to employees 211 2 ( 2 ) — — —

Issuance of 5,593,116 shares of common stock for acquisition of Filament, net of equity issuance costs

5,593 56 75,914 — — 75,970

Stock compensation expense — — 4,091 — — 4,091

1 unchanged sentence

Shares effectively repurchased for required employee withholding taxes ( 47 ) — ( 560 ) — — ( 560 )

Adoption of ASU 2016-09 — — 77 ( 46 ) — 31

Dividends (1)

8 unchanged sentences

Total comprehensive loss

Restricted shares issued to directors 46 — — — — —

Net issuance of restricted shares to employees 211 2 ( 2 ) — — —

Issuance of 5,593,116 shares of common stock for acquisition of Filament, net of equity issuance costs

5,593 56 75,914 — — 75,970

Performance shares issued to employees 67 1 ( 1 ) —

Net issuance of restricted shares granted to employees and directors 416 4 ( 4 ) — — —

Stock compensation expense — — 5,021 — — 5,021

6 unchanged sentences

21,256 $ 213 $ 263,386 $ 7,173 $ ( 34,455 ) $ 236,317

Comprehensive (loss) income:

Comprehensive loss:

— — — ( 3,007 ) — ( 3,007 )

4 unchanged sentences

Performance shares issued to employees 62 1 ( 1 ) — — —

Net issuance of restricted shares to employees 416 4 ( 4 ) — — —

Net issuance of restricted shares granted to employees and directors 525 5 ( 5 ) — — —

Stock compensation expense — — 5,916 — — 5,916

14 unchanged sentences

OPERATING ACTIVITIES

Net (loss) income

$ ( 3,007 ) $ ( 44,415 ) $ ( 1,720 )

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

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

Depreciation and amortization 24,664 25,115 23,329

Impairment of goodwill 42,990 2,205 —

Goodwill and other impairments 20,100 42,990 2,205

Amortization of financing costs 1,774 1,748 1,543

Mark to market loss (gain) on interest rate derivatives

2,144 ( 402 ) —

Deferred rent — — 57

Non-cash lease expense 2,379 1,047 —

Provision for doubtful accounts, net of (recoveries) 3,291 ( 163 ) 338

Deferred income taxes ( 1,861 ) ( 1,073 ) 2,086

Stock compensation expense 5,951 5,041 4,135

Undistributed equity earnings

Undistributed equity (earnings), net of taxes

( 1,258 ) ( 343 ) ( 545 )

14 unchanged sentences

Filament acquisition, net of cash acquired — — ( 216,527 )

Fitz acquisition, net of cash acquired — — ( 9,072 )

Net proceeds from sale of property — — 249

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Repayments of Term Loan ( 7,583 ) ( 2,750 ) ( 2,063 )

Repayments of Credit Agreement term loan — — ( 9,500 )

Proceeds from short term loan — — 216

3 unchanged sentences

Cash dividends paid ( 3,651 ) ( 3,571 ) ( 3,273 )

Payment of capital lease obligations ( 92 ) ( 77 ) ( 94 )

Payments for finance lease obligations ( 152 ) ( 92 ) ( 77 )

Proceeds from the exercise of stock options 27 132 286

3 unchanged sentences

Effect of foreign exchange on cash 98 ( 64 ) ( 236 )

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

INCREASE IN CASH AND CASH EQUIVALENTS

24,593 3,723 47

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CASH AND CASH EQUIVALENTS AT END OF YEAR $ 35,963 $ 11,370 $ 7,647

See Notes to consolidated financial statements.

LIFETIME BRANDS, INC.

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December 31, 2020

NOTE A — SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

Organization and business

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The Company generally markets several lines within each of its product categories under more than one brand.

The Company sells its products directly to retailers (who may resell the Company’s products through their Internet websites) and, to a lesser extent, to distributors.

The Company also sells a limited selection of its products directly to consumers through its own Internet websites.

The Company sells its products directly to retailers (who may resell the Company’s products through their websites) and, to a lesser extent, to distributors.

The Company also sells a limited selection of its products directly to consumers through its own websites.

Basis of presentation

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The accompanying consolidated financial statements include estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with U.S.

The most significant of these estimates and assumptions relate to revenue recognition, allowances for doubtful accounts, reserves for sales returns and allowances and customer chargebacks, inventory mark-down provisions, impairment of tangible and intangible assets, stock based compensation expense, estimates for unpaid healthcare claims, derivative valuations, accruals related to the Company’s tax positions and tax valuation allowances.

The most significant of these estimates and assumptions relate to revenue recognition, allowances for doubtful accounts, reserves for sales returns and allowances and customer chargebacks, inventory mark-down provisions, impairment of goodwill, tangible and intangible assets, stock-based compensation expense, estimates for unpaid healthcare claims, derivative valuations, accruals related to the Company’s tax positions and tax valuation allowances.

Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates.

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All intercompany accounts and transactions have been eliminated in consolidation.

Risk and uncertainties

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.

The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict.

Foreign currency

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Realized and unrealized gains and losses from non-designated foreign currency hedges are recognized in selling, general and administrative expenses in the consolidated statements of operations.

Foreign currency gains and losses included within selling, general and administrative expenses were a $ 0.1 million gain in 2019, a $ 0.5 million loss in 2018, and a $ 3.0 million loss in 2017.

Revenue recognition

The Company sells products wholesale, to retailers and distributors, and retail, directly to the consumer.

Wholesale sales and retail sales are primarily 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.

Foreign currency gains and losses included within selling, general and administrative expenses were a $ 0.5 million gain in 2020, a $ 0.1 million gain in 2019, and a $ 0.5 million loss in 2018.

LIFETIME BRANDS, INC.

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December 31, 2020

Revenue recognition

The Company sells products wholesale, to retailers and distributors, and retail, directly to the consumer.

The Company offers various sales incentives and promotional programs to its customers in the normal course of business.

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These arrangements and returns are reflected as reductions of revenue at the time of sale.

See Note B – Revenue for additional information.

See NOTE 2 — REVENUE for additional information.

Cost of sales

Cost of sales consist primarily of costs associated with the production and procurement of product, inbound freight costs, purchasing costs, royalties and other product procurement related charges.

Prior to January 1, 2019, depreciation associated with certain tooling used to produce products was classified as selling, general and administrative expenses.

The amount recorded in cost of sales for the year ended December 31, 2019 was $ 1.4 million.

The impact on the comparative periods presented is immaterial and therefore, the comparative periods have not been adjusted to reflect this change in accounting policy.

The Company implemented programs to improve the productivity of its inventory and simplify its U.S.

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 year ended December 31, 2019, the Company recorded an $ 8.5 million charge to cost of sales associated with the SKU Rationalization initiative.

The inventory charge represented approximately 8 % of the Company's consolidated inventory as of June 30, 2019, the period in which the charge was taken.

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.

Prior to January 1, 2019, depreciation associated with certain tooling used to produce products was recorded in selling, general and administrative expenses in the consolidated statement of operations.

The amount recorded in cost of sales for the year ended December 31, 2020 and 2019 was $ 1.0 million and $ 1.4 million, respectively.

The impact on the comparative periods presented is immaterial and therefore, the comparative periods have not been adjusted to reflect this change in accounting policy.

Distribution expenses

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Accounts receivable

The Company periodically reviews the collectability of its accounts receivable and establishes allowances for estimated losses that could result from the inability of its customers to make required payments, taking into consideration customer credit history and financial condition, industry and market segment information, credit reports, and economic trends and conditions such as the impact of the COVID-19 pandemic in 2020.

A considerable amount of judgment is required to assess the ultimate realization of these receivables including assessing the initial and on-going creditworthiness of the Company’s customers.

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The sale of accounts receivable, under the Company’s Receivable Purchase Agreement with HSBC, are reflected as a reduction of accounts receivable in the Company’s consolidated balance sheet at the time of sale and any related expense is included in selling, general and administrative expenses in the Company’s consolidated statements of operations.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

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

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Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal and transportation.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

Property and equipment

Property and equipment is stated at cost.

Property and equipment, other than leasehold improvements, are depreciated using the straight-line method over the estimated useful lives of the assets.

Buildings are depreciated over 30 years and machinery and equipment over periods ranging from 3 years to 10 years.

Equipment under finance leases is recorded at the present value of the total minimum lease payments.

Property and equipment, other than leasehold improvements and equipment under finance leases, are depreciated using the straight-line method over the estimated useful lives of the assets.

Buildings are depreciated over 30 years, machinery and equipment and computer hardware and software are depreciated over periods ranging from 3 years to 10 years.

Leasehold improvements are amortized over the term of the lease or the estimated useful lives of the improvements, whichever is shorter.

Equipment under finance leases are amortized over the shorter of the lease term or the assets' useful lives.

Advances paid towards the acquisition of property and equipment and the cost of property and equipment not ready for use before the end of the period are classified as construction in progress.

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Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company’s customer base.

During the years ended December 31, 2019, 2018 and 2017, Wal-Mart Stores, Inc., including Sam’s Club and, in the U.K., Asda Superstore, (“Walmart”), accounted for 16 %, 14 % and 15 % of net sales, respectively.

Sales to Walmart are included in the Company's U.S.

During the years ended December 31, 2020, 2019 and 2018, Wal-Mart Stores, Inc., including Sam’s Club and, in the U.K., Asda Superstore, (“Walmart”), accounted for 20 %, 16 % and 14 % of consolidated net sales, respectively.

During the years ended December 31, 2020 and 2019, sales to Costco Wholesale Corporation (“Costco”) accounted for 11 % of consolidated net sales.

During the year ended December 31, 2020, Amazon.com Inc., (“Amazon”), accounted for 10 % of consolidated net sales.

Sales to Walmart, Costco and Amazon are included in the Company's U.S.

and International segments.

During the year ended December 31, 2019, sales to Costco Wholesale Corporation (“Costco”) accounted for 11 % of consolidated net sales.

Sales to Costco are included in the Company's U.S.

and International segment.

No other customers accounted for 10% or more of the Company’s sales during these periods.

1 unchanged sentence

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures , provides enhanced guidance for using fair value to measure assets and liabilities and establishes a common definition of fair value, provides a framework for measuring fair value under U.S.

generally accepted accounting principles and expands disclosure requirements about fair value measurements.

Fair value measurements included in the Company’s consolidated financial statements relate to the Company’s annual goodwill and other intangible asset impairment tests and derivatives, described in Notes G - Goodwill and Intangible Assets and I - Derivatives, respectively.

GAAP and expands disclosure requirements about fair value measurements.

Fair value measurements included in the Company’s consolidated financial statements relate to the Company’s annual goodwill and other intangible asset impairment tests and derivatives, described in NOTE 7 — GOODWILL AND INTANGIBLE ASSETS and NOTE 9 — DERIVATIVES, respectively.

Fair value of financial instruments

1 unchanged sentence

The Company determined that the carrying amounts of borrowings outstanding under its ABL Agreement and Term Loan approximate fair value since such borrowings bear interest at variable market rates.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

The Company accounts for derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging.

1 unchanged sentence

Changes in the fair value of derivatives that qualify as hedges and have been designated as part of a hedging relationship for accounting purposes have no net impact on earnings until the hedged item is recognized in earnings.

The change in the fair value of hedges are included in accumulated other comprehensive loss and is subsequently recognized in the Company’s consolidated statements of operations to mirror the location of the hedged items impacting earnings.

Changes in fair value of derivatives that do not qualify as hedging instruments for accounting purposes are recorded in the consolidated statement of operations.

The change in the fair value of hedges are included in accumulated other comprehensive income (loss) and is subsequently recognized in the Company’s consolidated statements of operations to mirror the location of the hedged items impacting earnings.

Changes in fair value of derivatives that do not qualify as hedging instruments for accounting purposes are recorded in the consolidated statements of operations.

Goodwill, intangible assets and long-lived assets

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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.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

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 Accounting Standards Update (“ASU”) Topic 350, Intangibles – Goodwill and Other.

(“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 considered to be unimpaired.

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.

Impairment testing is based upon the best information available including estimates of fair value which incorporate assumptions marketplace participants would use in making their estimates of fair value.

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.

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.

See NOTE 7 — GOODWILL AND INTANGIBLE ASSETS for further discussion regarding goodwill impairment.

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.

See NOTE 7 — GOODWILL AND INTANGIBLE ASSETS for further discussion regarding impairment of indefinite lived intangibles.

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.

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Share-based compensation

The Company accounts for its share-based compensation arrangements in accordance with ASC Topic 718, Stock Compensation, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period.

The Company accounts for its share-based compensation arrangements in accordance with ASC Topic 718, Compensation:

Stock-based Compensation, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period.

Forfeitures are accounted for as they occur.

The Company uses the Black-Scholes option valuation model to estimate the fair value of its stock options.

The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s

LIFETIME BRANDS, INC.

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December 31, 2020

common stock and the risk-free interest rate.

The Company uses the Black-Scholes option valuation model to estimate the fair value of its stock options.

The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s common stock and the risk-free interest rate.

Changes in these subjective input assumptions can materially affect the fair value estimate of the Company’s stock options on the date of the option grant.

1 unchanged sentence

Each performance award represents the right to receive up to 150 % of the target number of shares of common stock.

The number of shares of common stock earned will be determined based on the attainment of specified performance goals by the end of the performance period, as determined by the Compensation Committee of the Board of Directors.

The number of shares of common stock earned will be determined based on the attainment of specified performance goals, as determined by the Compensation Committee of the Board of Directors, by the end of the performance period.

Compensation expense for performance awards is recognized over the vesting period and will vary based on remeasurement during the performance period.

2 unchanged sentences

The performance share awards vest at the end of a three year period, as determined by the Compensation Committee.

The Company bases the estimated fair value of Stock Compensation restricted stock awards on the date of grant.

The Company bases the estimated fair value of restricted stock awards on the date of grant.

The estimated fair value is determined based on the closing price of the Company’s common stock on the date of grant multiplied by the number of shares awarded.

3 unchanged sentences

The current and long-term components of operating lease liabilities are included in the current portion of operating lease liability and operating lease liabilities, respectively, on the consolidated balance sheets.

Finance leases are not material to the Company’s consolidated balance sheets.

Finance leases are included in property and equipment, net, accrued expenses and other long-term liabilities.

The Company's finance leases are not material to the Company’s consolidated balance sheets.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term.

11 unchanged sentences

Restructuring expenses

In connection with the Company’s March 2018 acquisition of Filament, the Company commenced a restructuring plan to integrate the operations of Filament with the Company’s operations and realize the savings expected from the synergies of the acquisition.

Costs associated with restructuring activities are recorded at fair value when a liability has been incurred.

A liability has been incurred at the communication date for severance.

Charges associated with lease terminations, related to restructuring activities, are recognized at the effective date of the lease modification.

During the years ended December 31, 2019 and 2018, the Company's U.S.

segment incurred $ 0.7 million and $ 2.1 million, respectively, of restructuring expense related to the Filament integration, of which $ 0.1 million and $ 1.4 million was accrued at December 31, 2019 and 2018, respectively.

During the years ended December 31, 2019, and December 31, 2018 the Company's international segment incurred $ 0.7 million and $ 0.2 million, respectively, of restructuring expense primarily related to the integration of its legal entities operating in Europe of which $ 0.2 million was accrued at December 31, 2018.

The Company had no international restructuring accrual as of December 31, 2019.

The Company's International segment expects to incur restructuring charges of $ 0.5 million in 2020 to complete its warehouse integration efforts.

segment incurred $ 0.7 million and $ 2.1 million, respectively, of restructuring expense related to the integration of Filament, of which $ 0.1 million was accrued at December 31, 2019.

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.

LIFETIME BRANDS, INC.

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December 31, 2020

During the years ended December 31, 2019, and 2018, the Company's International segment incurred $ 0.7 million and $ 0.2 million, respectively, of restructuring expense primarily related to the integration of its legal entities operating in Europe.

The Company had no international restructuring accrual as of December 31, 2020 and December 31, 2019.

The Company does not expect to incur any additional restructuring charges for these efforts.

Commitments and Contingencies

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Adopted Accounting Pronouncements

Effective January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts and Cash Payments, which reduces the diversity in practice on how certain transactions are classified in the statement of cash flows.

The adoption of this ASU did not have a material impact on the Company’s cash flow statement.

Effective January 1, 2019, the Company adopted ASU 2018-02, Income Statement- Reporting Comprehensive Income:

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which addresses the effect on items within accumulated other comprehensive income (loss) of the change in the U.S.

federal corporate tax rate due to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017.

The Company did not elect to reclassify the stranded income tax effects of the Tax Act from accumulated other comprehensive income to retained earnings.

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), which requires a lessee, in most leases, to initially recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term.

The guidance required adoption using a modified retrospective transition approach with either 1) periods prior to the adoption date being recast or 2) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast.

The Company adopted this standard on January 1, 2019 using the cumulative-effect adjustment method and elected certain practical expedients allowed under the standard.

The Company’s project team assessed the effect of the adoption of this standard on its accounting policies, business processes, internal controls over financial reporting and related disclosures.

Upon adoption, the Company's asset and lease liabilities increased by $ 91.0 million and $ 104.5 million, respectively.

The Company did not recognize a material cumulative-effect adjustment to retained earnings upon adoption.

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”).

The guidance allows concessions related to the timing of payments, where the total consideration has not changed, to not be accounted for as lease modifications.

Instead, any such concessions can be accounted for as if no change was made to the contract or as variable lease payments.

The Company adopted the guidance on April 1, 2020 and elected to account for COVID-19-related rent concessions that did not result in a substantial increase in the rights of the lessor or the obligations of the lessee not as lease modifications.

See NOTE 4 — LEASES for additional information on the Company’s adoption of this guidance.

Accounting Pronouncements to be Adopted in Future Periods

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In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles and improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.

Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles and simplifies the application of U.S.

GAAP for other areas of Topic 740 by clarifying and amending the existing guidance.

The guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020.

Early adoption is permitted.

Additionally, an entity that elects early adoption must adopt all the amendments in the same period.

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

The impact of the adoption is not expected to have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

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

NOTE B — REVENUE

In March 2020, the FASB issued ASU 2020-04, 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 LIBOR or another reference rate that is expected to be discontinued as a result of reference rate reform.

The guidance was effective upon issuance and may be applied prospectively to contract modifications and hedging relationships entered into or evaluated as of any date from March 12, 2020 but no later than December 31, 2022.

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.

NOTE 2 — REVENUE

The Company sells products wholesale, to retailers and distributors, and sells products retail, directly to consumers.

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To indicate the transfer of control, the Company 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

The Company’s principal terms of sale are Free on Board ("FOB") Shipping Point, or equivalent, and, as such, the Company primarily

LIFETIME BRANDS, INC.

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December 31, 2020

included in net sales and amounted to $ 3.6 million, $ 3.5 million and $ 2.7 million for the years ended December 31, 2019, 2018 and 2017, respectively.

transfers control and records revenue for product sales upon shipment.

Shipping and handling fees that are billed to customers in sales transactions are included in net sales and amounted to $ 3.9 million, $ 3.6 million and $ 3.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

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

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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.

As a result of the COVID-19 pandemic, beginning in the first quarter of 2020 and lasting through the fourth quarter of 2020, many of the Company's customers that operate retail locations temporarily closed their stores voluntarily or as mandated by government stay at home orders.

In response to these closings, the affected customers have requested extended payment terms.

The Company has been working with these customers to address their temporary extended payment requests.

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.

1 unchanged sentence

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

The Company has two reportable segments, U.S.

and International.

Prior to December 31, 2018, certain international operations of the Company’s business were managed domestically by the U.S.

In 2019, the Company realigned its operating segments to reflect the changes in how the Company manages its business, reviews operating performance and allocates resources.

The prior period segment information has been recast to reflect the current reportable segment structure of the Company.

The following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the years ended December 31, 2020, 2019 and 2018 (in thousands).

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December 31, 2020

NOTE C — ACQUISITIONS

NOTE 3 — ACQUISITIONS

On December 22, 2017, the Company entered into an agreement providing for the acquisition of Filament by the Company.

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Total allocated value $ 294,416

The acquisition is being accounted for as a business combination using the acquisition method of accounting in accordance with FASB ASC Topic 805, Business Combinations (“ASC Topic 805”), which established a new basis of accounting for all identifiable assets acquired and liabilities assumed at fair value.

The acquisition was being accounted for as a business combination using the acquisition method of accounting in accordance with FASB ASC Topic 805, Business Combinations (“ASC Topic 805”), which established a new basis of accounting for all identifiable assets acquired and liabilities assumed at fair value.

ASC Topic 805 allows the acquiring company to adjust preliminary amounts recognized at the acquisition date to their subsequently determined final fair values during a measurement period, generally up to one year from the date of the acquisition.

The goodwill and other intangible assets are included in the U.S.

Customer relationships and certain trade names, which are included in intangible assets, net, are amortized on a straight-line basis over their estimated useful lives (see Note G– Goodwill and Intangible Assets).

Customer relationships and certain trade names, which are included in intangible assets, net, are amortized on a straight-line basis over their estimated useful lives (see NOTE 7 — GOODWILL AND INTANGIBLE ASSETS).

Goodwill results from such factors as an assembled workforce.

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Income before income taxes and equity in earnings 2,439

Net (loss) income ( 267 ) 5,794

Basic and diluted (loss) income per common share $ ( 0.01 ) $ 0.28

Net loss ( 267 )

Basic and diluted loss per common share $ ( 0.01 )

The unaudited pro forma results are not necessarily indicative of the operating results that would have occurred if the Filament acquisition had been completed as of the date for which the pro forma financial information is presented.

In addition, the unaudited pro forma results do not purport to project the future consolidated operating results of the combined company.

Fitz and Floyd

On August 31, 2017, the Company acquired the Fitz and Floyd business, including the trade names and related working capital, from Fitz and Floyd Enterprises, LLC (“Fitz”) for cash in the amount of $ 9.1 million.

The purchase price was funded by borrowings under the Company’s revolving credit facility.

The assets and operating results of the Fitz and Floyd business are reflected in the Company’s consolidated financial statements in accordance with ASC Topic 805 commencing from the date of the acquisition of Fitz.

The consolidated statement of operations for the year ended December 31, 2017 includes $ 7.7 million of net sales attributable to the Fitz and Floyd brands.

The purchase price was allocated based on the Company’s estimate of the fair values of the assets acquired and liabilities assumed, as follows (in thousands):

Accounts receivable $ 3,115

Inventory 5,424

Other assets 458

Other liabilities ( 2,056 )

Goodwill and other intangibles 2,131

Total allocated value $ 9,072

On the basis of estimated fair values, the excess of the purchase price over the net assets acquired of $ 2.1 million has been allocated as follows:

$ 1.7 million for customer relationships and trade names and $ 0.4 million for goodwill.

The goodwill recognized results from such factors as an assembled workforce and the value of other synergies expected from combining operations with the Company.

All the goodwill and other intangibles are included in the U.S.

Customer relationships and trade names are amortized on a straight-line basis over their estimated useful lives (see Note G- Goodwill and Intangible Assets).

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

NOTE D — LEASES

NOTE 4 — LEASES

The Company has operating leases for corporate offices, distribution facilities, manufacturing plants, and certain vehicles.

1 unchanged sentence

The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized.

The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification.

Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities.

Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments that do not depend on changes in index rates or payments based on usage, are not included in the ROU assets or liabilities.

These are expensed as incurred and recorded as variable lease expense.

4 unchanged sentences

As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The components of lease costs for the year ended December 31, 2019 were as follows (in thousands):

The components of lease costs for the year ended December 31, 2020 and 2019 were as follows (in thousands):

Year Ended December 31,

Operating lease costs (1) :

Fixed $ 18,898

Fixed lease expense $ 18,181 $ 18,898

Variable lease expense 3,798 $ 4,571

Total $ 21,979 $ 23,469

Rent and related expenses under operating leases were $ 18.4 million and $ 16.8 million for the years ended December 31, 2018 and 2017, respectively.

Supplemental cash flow information for the year ended December 31, 2019 was as follows (in thousands):

(1) Expenses are recorded in selling, general and administrative expenses.

Rent and related expenses under operating leases was $ 18.4 million for the years ended December 31, 2018.

Supplemental cash flow information for the year ended December 31, 2020 and 2019 were as follows (in thousands):

Year Ended December 31,

2 unchanged sentences

Total $ 15,802 $ 17,851

Year ended December 31, 2019

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

Operating leases $ 118,447

Total $ 118,447

Included in machinery, furniture and equipment at each of December 31, 2019 and 2018 is $ 0.3 million and $ 1.8 million, respectively, related to assets recorded under capital leases.

Included in accumulated depreciation and amortization at December 31, 2019 and December 31, 2018 is $ 0.1 million and $ 1.7 million, respectively, related to assets recorded under capital leases.

LIFETIME BRANDS, INC.

1 unchanged sentence

December 31, 2020

Year Ended December 31,

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

Operating leases $ 0 $ 118,447

Total $ 0 $ 118,447

Included in machinery, furniture and equipment at each of December 31, 2020 and 2019 is $ 0.4 million and $ 0.3 million, respectively, related to assets recorded under finance leases.

Included in accumulated depreciation and amortization at December 31, 2020 and December 31, 2019 is $ 0.2 million and $ 0.1 million, respectively, related to assets recorded under finance leases.

In response to the COVID-19 pandemic, the Company negotiated COVID-19-related rent concessions for several of its leased properties.

The majority of these rent concessions were in the form of deferred rent payments for one or more months.

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 at December 31, 2020 were $ 1.0 million and were recorded in accrued expenses in the condensed consolidated balance sheet at December 31, 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.

These lease modifications were accounted for as a resolution to a contingency that fixes previously variable lease payments which resulted in the remeasurement of the right-of-use asset and lease liability.

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 aggregate future lease payments for operating leases as of December 31, 2020 were as follows (in thousands):

4 unchanged sentences

Present value of lease payments $ 113,835

The Company expects to make payments related to the deferrals obtained as a result of COVID-19-related rent concessions of $ 1.0 million in 2021, per the updated terms of the applicable lease agreements.

Average lease terms and discount rates were as follows:

December 31, 2020

December 31, 2019

Weighted-average remaining lease term (years)

5 unchanged sentences

December 31, 2020

NOTE E — SALE OF ACCOUNTS RECEIVABLE

NOTE 5 — SALE OF ACCOUNTS RECEIVABLE

To improve its liquidity during seasonally high working capital periods, the Company has an uncommitted Receivables Purchase Agreement with HSBC Bank USA, as Purchaser (the “Receivables Purchase Agreement”).

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

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

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

2 unchanged sentences

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

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

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

Either party may terminate the agreement at any time upon 60 days prior written notice to the other party.

1 unchanged sentence

At December 31, 2020 and 2019, $ 24.7 million and $ 20.9 million, respectively, of receivables sold are outstanding and are due to HSBC Bank USA from customers.

A charge of $ 0.6 million and $ 0.5 million related to the sale of the Receivables is included in SG&A expenses in the consolidated statement of operations for the years ended December 31, 2019 and 2018, respectively.

NOTE F — EQUITY INVESTMENTS

A charge of $ 0.4 million and $ 0.6 million related to the sale of the Receivables is included in selling, general and administrative expenses in the consolidated statements of operations for the years ended December 31, 2020 and 2019, respectively.

NOTE 6 — EQUITY INVESTMENTS

The Company owns approximately 30 % of the outstanding capital stock of Vasconia, an integrated manufacturer of aluminum products and one of Mexico’s largest housewares companies.

4 unchanged sentences

The value of the Company’s investment balance has been translated from Mexican pesos (“MXN”) to U.S.

dollars (“USD”) using the spot rate of MXN 18.91 and MXN 19.64 at December 31, 2019 and 2018, respectively.

dollars (“USD”) using the spot rate of M XN 19.88 an d MXN 18.91 at December 31, 2020 and 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:

23 unchanged sentences

Gross profit 24,947 540,244 34,032 654,342 36,891 711,941

Income from operations 8,620 165,287 11,402 222,115 10,475 199,170

(Loss) income from operations

( 102 ) 6,674 8,620 165,287 11,402 222,115

Net income 5,566 108,678 1,757 28,892 2,887 57,590

8 unchanged sentences

Equity in earnings in 2018 includes deferred tax benefit of $ 0.1 million due to a change in the tax basis of the investment as a result of the Tax Act.

Equity in earnings in 2017 includes deferred tax benefit of $ 0.2 million due to the requirement to record tax benefits for foreign currency translation losses through other comprehensive income (loss), with a corresponding adjustment to deferred tax liabilities.

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

As of December 31, 2020, the fair value (based on Level 1 inputs using the quoted stock price) of the Company’s investment in Vasconia was $ 32.8 million.

The carrying value of the Company’s investment in Vasconia was $ 20.0 million.

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

The subsidiary held a note receivable relating to the 2016 sale of its 40 % equity interest in GS International S/A (“GSI”), a wholesale distributor of branded housewares products in Brazil, which was accounted for as an equity method investment.

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 during the year ended December 31, 2020.

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

In February 2012, the Company entered into a joint venture, Grand Venture Holdings Limited (“Grand Venture”), with Manweal Development Limited (“Manweal”), a Chinese corporation, to distribute Mikasa® products in China, which included an initial investment by the Company of $ 0.5 million.

2 unchanged sentences

Due to the operating losses the Company evaluated the carrying value of its investment for other-than temporary impairment under the equity method of accounting and recorded an impairment charge of approximately $ 0.2 million during the year ended December 31, 2018.

As of December 31, 2018, the Company had a carrying value of zero in Grand Venture.

As of December 31, 2020 and 2019, the Company had a carrying value of zero in Grand Venture.

LIFETIME BRANDS, INC.

1 unchanged sentence

December 31, 2020

NOTE G — GOODWILL AND INTANGIBLE ASSETS

The Company’s intangible assets, all of which are included in the U.S.

and International segments, consist of the following (in thousands):

NOTE 7 — GOODWILL AND INTANGIBLE ASSETS

The Company’s intangible assets consist of the following (in thousands):

Year Ended December 31,

5 unchanged sentences

Trade names (1)

50,600 ( 1,000 ) — 49,600 58,216 — — 58,216

Finite -lived intangible assets:

1 unchanged sentence

Trade names (1)

52,030 ( 20,874 ) 31,156 43,986 ( 17,337 ) 26,649

Customer relationships 177,801 ( 54,008 ) 123,793 176,602 ( 40,605 ) 135,997

1 unchanged sentence

Total $ 352,231 $ ( 20,100 ) $ ( 88,106 ) $ 244,025 $ 393,558 $ ( 42,990 ) $ ( 70,097 ) $ 280,471

(1) During 2020, as part of the Company’s annual impairment analysis of indefinite-lived trade names it was determined that certain of the Company’s trade names, previously estimated to contribute to cash flows indefinitely, have definite lives.

Accordingly, these trade names were reclassified from indefinite-lived to finite-lived or amortizable intangible assets as of October 1, 2020.

These trade names are being amortized over an estimated useful life of 18 years.

A summary of the activities related to the Company’s intangible assets for the years ended December 31, 2020, 2019 and 2018 consists of the following (in thousands):

4 unchanged sentences

Acquisition of customer relationships 124,430 — 124,430

Acquisition of other intangible assets 5,367 — 5,367

Foreign currency translation adjustment ( 1,524 ) ( 672 ) ( 2,196 )

Amortization ( 15,323 ) — ( 15,323 )

Impairment of goodwill — ( 2,205 ) ( 2,205 )

Goodwill and Intangible Assets, December 31, 2018 247,157 91,690 338,847

Acquisition of goodwill — 78,795 78,795

Acquisition of trade names 61,500 — 61,500

Acquisition of customer relationships 124,430 — 124,430

Acquisition of other intangible assets 5,367 — 5,367

Purchase price adjustment — 972 972

Foreign currency translation adjustment 786 ( 301 ) 485

2 unchanged sentences

Goodwill and Intangible Assets, December 31, 2019 231,100 49,371 280,471

Purchase price adjustment — 972 972

Foreign currency translation adjustment 607 — 607

Amortization ( 16,953 ) — ( 16,953 )

Impairment of indefinite -lived intangible assets ( 1,000 ) — ( 1,000 )

Impairment of goodwill — ( 19,100 ) ( 19,100 )

12 unchanged sentences

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.

1 unchanged sentence

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.

3 unchanged sentences

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.

International Reporting Unit

Several impairment indicators for the European kitchenware business were considered by the Company including the continued uncertainties of the macro-environment in Europe as a result of the then ongoing Brexit negotiations.

The carrying value of the goodwill for the International reporting unit was zero as of December 31, 2020.

During 2019 several impairment indicators for the European kitchenware business were considered by the Company including the continued uncertainties of the macro-environment in Europe as a result of the then-ongoing Brexit negotiations.

In addition, the Company considered the decline in operating performance for the European kitchenware business, which included slower fulfillment of orders and labor inefficiencies associated with setting up the new warehouse in the U.K.

These factors resulted in a decline in the long-term forecast for the European kitchenware business.

During the third quarter of 2019, the Company performed an interim assessment of its European kitchenware business by comparing the fair value of the reporting unit with its carrying value.

In the third quarter of 2019, the Company performed an interim assessment of its European kitchenware business by comparing the fair value of the reporting unit with its carrying value as of September 30, 2019.

The Company performed the analysis using a discounted cash flow and market multiple approach.

Based upon the analysis performed, the Company recognized a $ 9.7 million non-cash goodwill impairment charge during the third quarter of 2019.

The goodwill impairment charge was the result of a decline in operating performance and

The goodwill impairment charge was the result of a decline in operating performance and reduced expectations for future cash flows of the European kitchenware business.

The fair value of the business was approximately 30.1 % below its carrying value as of September 30, 2019.

LIFETIME BRANDS, INC.

1 unchanged sentence

December 31, 2020

reduced expectations for future cash flows of the European kitchenware business.

The fair value of the business was approximately 30.1 % below its carrying value as of September 30, 2019.

During the third quarter of 2019 the Company also determined its European kitchenware and tableware reporting units had met the criteria to be combined into one reporting unit based on the guidance of ASC Topic No.

2 unchanged sentences

In 2018, the Company incurred a non-cash goodwill impairment charge of $ 2.2 million related to the European tableware business due to a decline in operating performance and reduced expectations for future cash flows.

Following the goodwill impairment charges taken in both the third quarter of 2019 and 2018, goodwill associated with the International reporting unit, comprised of the European kitchenware business and tableware business, acquired in 2014 and 2011, respectively, is zero .

Reporting Unit

During the first quarter of 2020, as a result of the economic downturn caused by the COVID-19 pandemic, the Company performed an interim assessment of the goodwill for the U.S.

reporting unit as of March 31, 2020, 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.

Based upon the analysis performed, the Company recognized a non-cash goodwill impairment charge of $ 19.1 million during the first quarter of 2020.

The goodwill impairment charge resulted from, among other factors, the uncertain market conditions arising from the COVID-19 pandemic, which impacted the Company's market capitalization, as well as a reduction of forecasted future cash flows associated with the effects of the COVID-19 pandemic.

The fair value of the U.S.

reporting unit was approximately 3.9 % below its carrying value as of March 31, 2020.

The Company performed its annual impairment assessment of its U.S.

1 unchanged sentence

The Company performed the analysis using a discounted cash flow and market multiple method.

Based upon the analysis performed, the Company recognized a non-cash goodwill impairment charge of $ 33.2 million, during the three months ended December 31, 2019.

The goodwill impairment charge resulted from, among other factors, a sustained decline in the Company's market capitalization observed in the fourth quarter of 2019.The fair value of the U.S, reporting unit was approximately 6.1 % below its carrying value.

As of October 1, 2020, the fair value of the U.S.

reporting unit exceeded the carrying value of goodwill.

Management’s projections used to estimate the cash flows included organic net sales growth and net sales growth through new customer channels as well as continued operating efficiencies in future periods.

1 unchanged sentence

As of December 31, 2020, the Company assessed the carrying value of goodwill and determined, based on qualitative factors, that no further impairment existed for goodwill.

In 2019, the Company recognized a non-cash goodwill impairment charge of $ 33.2 million, during the three months ended December 31, 2019.

The Company performed the analysis using a discounted cash flow and market multiple method.

The goodwill impairment charge resulted from, among other factors, a sustained decline in the Company's market capitalization observed in the fourth quarter of 2019.

The fair value of the U.S, reporting unit was approximately 6.1 % below its carrying value at October 1, 2019.

Annual indefinite-lived trade name impairment test

The Company bypassed the optional qualitative impairment analysis for its indefinite-lived trade name assets annual October 1, 2019 impairment test.

The Company values its indefinite-lived trade names using a relief-from-royalty approach, which assumes the value of the trade name is the discounted cash flows of the amount that would be paid by a hypothetical market participant had they not owned the trade name and instead licensed the trade name from another company.

During the first quarter of 2020, as a result of the economic decline caused by the COVID-19 pandemic, the Company determined its indefinite-lived trade names had indicators for impairment.

As a result, the Company bypassed the optional qualitative impairment analysis for its indefinite-lived trade names and performed an interim quantitative impairment analysis as of March 31, 2020, by comparing the fair value of the indefinite-lived trade names to their respective carrying values.

As a result of the impairment testing performed in connection with the COVID-19 pandemic triggering event, the Company determined that certain of its indefinite-lived intangible assets in the U.S.

segment were impaired.

As a result, the Company recorded a $ 1.0 million non-cash impairment charge during the first quarter of 2020.

The Company bypassed the optional qualitative impairment analysis for its indefinite-lived trade name assets annual October 1, 2020 impairment test.

As of October 1, 2020, the Company completed the quantitative impairment analysis by comparing the fair value of the indefinite-lived trade names to their respective carrying value.

The Company determined that the fair value of all its indefinite-lived trade names were above their respective carrying values with the exception of the Rabbit trade name that was acquired as part of the Filament acquisition on March 2, 2018, and which resulted in a fair value equal to its carrying value as of the October 1, 2019 impairment test date.

The Company determined that the fair value of all its indefinite-lived trade names were above their respective carrying values.

While the indefinite-lived trade names were not determined to be impaired, the indefinite-lived trade names are at risk of future impairment in the event the trade names do not perform as projected or if market factors utilized in the impairment analysis deteriorate, including an unfavorable change in long-term growth rates or the weighted average cost of capital.

As of December 31, 2019, the Company assessed the carrying value of its indefinite-lived trade names and determined based on qualitative factors, no impairment existed.

NOTE H — DEBT

As of December 31, 2020, the Company assessed the carrying value of its indefinite-lived trade names and determined based on qualitative factors that no impairment existed.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

NOTE 8 — DEBT

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

2 unchanged sentences

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

This amount is recorded in the current maturity of term loan

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

on the consolidated balance sheets.

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

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 December 31, 2019 and 2018, the total availability under the ABL Agreement are as follows (in thousands):

December 31, 2019 December 31, 2018

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

December 31, 2020

December 31, 2019

Maximum aggregate principal allowed $ 150,000 $ 150,000

Outstanding borrowings under the ABL Agreement ( 27,302 ) ( 32,822 )

Open letters of credit ( 2,288 ) ( 3,392 )

Standby letters of credit ( 2,698 ) ( 2,288 )

Total availability under the ABL Agreement $ 120,000 $ 114,890

6 unchanged sentences

Current portion of Term Loan facility:

Term Loan facility annual principal payment $ 2,750 $ 2,750

Excess Cash Flow principal payment 7,145 —

Unamortized debt issuance costs ( 1,482 ) ( 1,497 )

Term Loan facility payment $ — $ 2,750

Estimated Excess Cash Flow principal payment 19,120 7,145

Estimated unamortized debt issuance costs ( 1,463 ) ( 1,482 )

Total Current portion of Term Loan facility $ 17,657 $ 8,413

Non-current portion of Term Loan facility:

Term Loan facility $ 260,293 $ 270,188

Unamortized debt issuance costs ( 6,012 ) ( 7,494 )

Term Loan facility, net of current portion $ 243,485 $ 260,293

Estimated unamortized debt issuance costs ( 4,508 ) ( 6,012 )

Total Non-current portion of Term Loan facility $ 238,977 $ 254,281

As of December 31, 2019, the future principal payments of the Term Loan are as follows (in thousands):

Thereafter 249,293

Total $ 270,188

As of December 31, 2020, the future principal payments of the Term Loan are $ 19.1 million, due in 2021 and $ 243.5 million, due at loan maturity in 2025.

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

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

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

3 unchanged sentences

subsidiary guarantors, subject to certain exceptions.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

the Company and its domestic 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.

Such security interest consists of (1) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and its domestic 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 its domestic 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:

1 unchanged sentence

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

Interest rates on outstanding borrowings under the ABL Agreement at December 31, 2019 ranged from 2.44 % to 2.63 %.

The interest rate on outstanding borrowings under the ABL Agreement at December 31, 2020 was 1.52 %.

In addition, the Company paid a commitment fee that ranged from 0.250 % to 0.375 % on the unused portion of the ABL Agreement during the year ended December 31, 2020.

8 unchanged sentences

Other Credit Agreements

A subsidiary of the Company has a credit facility (“HSBC Facility”) with HSBC Bank (China) Company Limited, Shanghai Branch (“HSBC”) for up to $ 18.0 million Chinese renminbi ($ 2.6 million).

The HSBC Facility is subject to annual renewal and may be used to fund general working capital needs of the Company’s subsidiary which is a trading company in the China.

Borrowings under the HSBC Facility are guaranteed by the Company and are granted at the sole discretion of HSBC.

No borrowings were outstanding under the HSBC Facility at December 31, 2019 and December 31, 2018.

NOTE I — DERIVATIVES

In 2019, a subsidiary of the Company held a credit facility (“HSBC Facility”) with HSBC Bank (China) Company Limited, Shanghai Branch (“HSBC”) for up to $ 18.0 million Chinese renminbi ($ 2.6 million).

The HSBC Facility was subject to annual renewal and may have been used to fund general working capital needs of the Company’s subsidiary, which is a trading company in the China.

Borrowings under the HSBC Facility were guaranteed by the Company and were granted at the sole discretion of HSBC.

No borrowings were outstanding under the HSBC Facility at December 31, 2019.

The credit facility was not renewed as of December 31, 2020.

NOTE 9 — DERIVATIVES

Interest Rate Swap Agreements

The Company is a party to interest rate swap agreements, with an aggregate notional value of $ 100.0 million at December 31, 2019.

The Company designated 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 notional amounts are reduced over these periods.

The Company's net total outstanding notional value of interest rate swaps was $ 100 million at December 31, 2020.

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

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

expire in March 2023.

The original notional values are reduced over these periods.

The aggregate notional value was $ 75.0 million at December 31, 2020.

In June 2019, the Company entered into additional interest rate swap agreements, with an aggregate notional value of $ 25.0 million at December 31, 2020.

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.

The Company's net total outstanding notional value of interest rate swaps was $ 125.0 million at December 31, 2019.

Foreign Exchange Contracts

2 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

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

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.

At December 31, 2020, the Company had no outstanding foreign exchange contracts.

The aggregate gross notional values of foreign exchange contracts at December 31, 2019 was $ 7.3 million.

6 unchanged sentences

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

No contracts were outstanding at December 31, 2018.

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

2 unchanged sentences

Other assets — 1,267

Accrued expenses 504 —

Other Long-Term Liabilities 1,034 —

Foreign exchange contracts Accrued expenses — 180

1 unchanged sentence

Interest rate swaps Other assets $ — $ 402

Other Long-Term Liabilities 1,742 —

The fair value 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.

3 unchanged sentences

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

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

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

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

Year ended December 31,

7 unchanged sentences

During the year ended December 31, 2020, the Company reclassified $ 1.0 million of cash flow hedges in other comprehensive losses to earnings.

This comprised of a charge of $ 1.2 million related to interest rate swaps recognized in interest expense and a gain of $ 0.2 million related to foreign exchange contracts recognized in cost of sales.

At December 31, 2020, the estimated amount of existing losses expected to be reclassified into earnings within the next 12 months was $ 1.0 million.

During the year ended December 31, 2019, the Company reclassified $ 0.2 million of cash flow hedges in other comprehensive losses to earnings.

This comprised of $ 0.3 million related to interest rate swaps recognized in interest expense and a gain of $ 0.5 million related to foreign exchange contracts recognized in cost of sales.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are recognized in earnings as follows (in thousands):

1 unchanged sentence

Derivatives not designated as hedging instruments Location of Gain or (Loss) 2020 2019 2018

Interest rate swaps Interest expense $ 407 $ — $ —

Interest rate swaps Mark to market gain (loss) on interest rate derivatives $ ( 2,144 ) $ 402 $ —

Interest expense ( 327 ) 5 —

$ ( 2,471 ) $ 407 $ —

Foreign exchange contracts Selling, general & administrative expense $ — $ — $ 150

NOTE J — CAPITAL STOCK

NOTE 10 — CAPITAL STOCK

Cash dividends

3 unchanged sentences

$ 0.0425 June 27, 2019 August 1, 2019 August 15, 2019

$ 0.0425 July 31, 2018 November 1, 2018 November 15, 2018

$ 0.0425 November 7, 2018 February 1, 2019 February 15, 2019

$ 0.0425 March 12, 2019 May 1, 2019 May 15, 2019

$ 0.0425 August 6, 2019 November 1, 2019 November 15, 2019

$ 0.0425 November 7, 2019 January 31, 2020 February 14, 2020

$ 0.0425 March 10, 2020 November 16, 2020 December 16, 2020

$ 0.0425 June 25, 2020 August 3, 2020 August 17, 2020

2 unchanged sentences

On March 9, 2021, the Board of Directors declared a quarterly dividend of $ 0.0425 per share payable on May 17, 2021 to shareholders of record on May 3, 2021.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

Stock repurchase program

11 unchanged sentences

Performance-based awards that have been granted under the Plan vest after 3 years based upon the attainment of specified performance goals.

On June 25, 2020, the shareholders of the Company approved an amendment and restatement of the Company’s Amended and Restated 2000 Long Term Incentive Plan (the “Plan”).

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 December 31, 2020, there were 780,315 shares available for the grant of awards under the Plan.

1 unchanged sentence

A summary of the Company’s stock option activity and related information for the three years ended December 31, 2020, is as follows:

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

Options Weighted-

1 unchanged sentence

life (years) Aggregate

(in thousands)

Options outstanding at December 31, 2017 1,456,200 $ 13.64

16 unchanged sentences

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 exercisable in-the-money stock options on December 31, 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 December 31, 2019 and the exercise price.

The total intrinsic values of those stock options that were exercised in the years ended December 31, 2019, 2018 and 2017 were $ 0.3 million, $ 0.4 million and $ 2.1 million, respectively.

The intrinsic value is

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

calculated for each in-the-money stock option as the difference between the closing price of the Company’s common stock on December 31, 2020 and the exercise price.

The total intrinsic value of those stock options that were exercised in the year ended December 31, 2020 was less than $ 0.1 million.

The total intrinsic values of those stock options that were exercised in the years ended December 31, 2019 and 2018 were $ 0.3 million and $ 0.4 million, respectively.

The intrinsic value of a stock option that is exercised is calculated at the date of exercise.

11 unchanged sentences

Expected dividend yield 2.67 % 1.80 % 1.22 %

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

Restricted Stock

17 unchanged sentences

The total fair value of restricted stock that vested during the year ended December 31, 2020 was $ 2.3 million.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

Performance shares

2 unchanged sentences

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

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

A summary of the Company’s performance-based award activity and related information for the three years ended December 31, 2020 is as follows:

2 unchanged sentences

Grants 182,300 12.81

Vested ( 58,888 ) 14.84

Cancellations ( 13,017 ) 15.95

21 unchanged sentences

Total Stock Compensation Expense $ 5,951 $ 5,041 $ 4,135

NOTE K — (LOSS) INCOME PER COMMON SHARE

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

Diluted (loss) income per common share adjusts net (loss) income and basic (loss) income 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) income per common share for the years ended December 31, 2019, 2018 and 2017, are as follows:

LIFETIME BRANDS, INC.

1 unchanged sentence

December 31, 2020

NOTE 11 — 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.

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.

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 years ended December 31, 2020, 2019 and 2018, are as follows:

2020 2019 2018

(in thousands - except per share amounts)

Net (loss) income – Basic and Diluted

Net loss – Basic and Diluted

$ ( 3,007 ) $ ( 44,415 ) $ ( 1,720 )

3 unchanged sentences

Weighted-average shares outstanding – Diluted 20,860 20,597 19,452

Basic (loss) income per common share

Basic loss per common share

$ ( 0.14 ) $ ( 2.16 ) $ ( 0.09 )

Diluted (loss) income per common share

Diluted loss per common share

$ ( 0.14 ) $ ( 2.16 ) $ ( 0.09 )

Antidilutive shares (1)

NOTE L — INCOME TAXES

2,167 2,120 1,869

(1) Stock options and other stock awards that have been excluded from the denominator as their inclusion would have been anti-dilutive.

NOTE 12 — INCOME TAXES

The components of income before income taxes and equity in earnings are as follows:

4 unchanged sentences

Foreign ( 12,463 ) ( 22,462 ) ( 4,946 )

Total (loss) income before income taxes and equity in earnings

Total income (loss) before income taxes and equity in earnings

$ 5,549 $ ( 43,773 ) $ 509

9 unchanged sentences

$ 9,866 $ 1,109 $ 2,889

On December 22, 2017, the Tax Act was enacted.

On March 27, 2020, H.R.

748, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into legislation which includes business tax provisions that impact taxes related to 2018, 2019 and 2020.

Some of the significant tax law changes in accordance with the CARES Act are to increase the limitation on deductible business interest expense for 2019 and 2020, allow for the five-year carryback of net operating losses for 2018-2020, suspend the 80% limitation of taxable income for net operating loss carryforwards for 2018-2020, and accelerate the ability to claim refunds of Alternative Minimum Tax (“AMT”) credit carryforwards.

The CARES Act remedied certain aspects of the Tax Act such as accelerated depreciation recovery for assets defined as qualified improvement property and carryback of operating losses to fiscal tax years.

The latter required carryback of Filament losses to pre-acquisition fiscal years ended March 31, 2017 and March 31, 2016, which resulted in a tax expense that exceeded the benefit received

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

from the various CARES Act provisions claimed by the Company.

The Company received a tax refund of $ 2.3 million in the third quarter of 2020.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted.

The Tax Act revises the U.S.

2 unchanged sentences

federal tax rate from 35% to 21%.

In response to the Act, the U.S.

Securities and Exchange Commission (“SEC”) provided guidance by issuing Staff Accounting Bulletin No.

118 (“SAB 118”), which has since been codified by the release of ASU No.

2018-5, Income Taxes (Topic 740):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

ASU 2018-5 allows companies to record provisional amounts during a measurement period with respect to the impacts of the Act for which the accounting requirements under ASC Topic 740 are not complete, but a reasonable estimate has been determined.

The measurement period under ASU 2018-5 ends when a company has obtained, prepared, and analyzed the information that was needed in order to complete the accounting requirements under ASC Topic 740, but cannot exceed one year.

As of December 31, 2018, the Company had completed the accounting for the effects of the Act.

The Company had included the impact of the Act on its annual effective tax rate and has recorded an additional provision of $ 0.7 million primarily related to an adjustment to the estimated transition tax liability, including an uncertain tax position.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

Since January 1, 2018, the Tax Act has subjected the Company to a tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries, base erosion anti-abuse tax (“BEAT”), foreign derived intangible income tax (“FDII”), and IRC Section 163(j) interest limitation (“Interest Limitation”).

3 unchanged sentences

The tax impact of FDII was immaterial for 2020 and 2019.

The Company incurred interest limitation in 2019 and 2018, resulting in a cumulative deferred tax asset related to interest carried forward of approximately $ 1.9 million.

The Company was not subject to an interest limitation in 2020 and 2019, due to the favorable provisions provided under the CARES Act.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

3 unchanged sentences

Operating lease liabilities $ 27,502 $ 29,126

Deferred rent expense — 3,504

Stock options 2,178 2,660

Inventory 2,438 2,351

Operating loss and non-deductible interest carry-forward 8,041 7,071

Operating loss carryforwards 9,894 8,041

Accounts receivable allowances 1,461 777

Accrued compensation 1,839 846

Deferred compensation 1,310 1,123

Other 3,061 911

10 unchanged sentences

$ ( 10,714 ) $ ( 13,685 )

As of December 31, 2018, a net deferred tax liability of $ 13.9 million was recorded in purchase accounting in connection with the Filament acquisition, including uncertain tax positions of $ 0.3 million.

The assessment of tax accounting concluded in the first quarter of 2019 with no material adjustments.

The Company has generated various state net operating loss carryforwards of which $ 20.2 million remained at December 31, 2019 that begin to expire in 2026.

The Company has net operating losses in foreign jurisdictions of $ 28.1 million at December 31, 2019 that begin to expire in 2022.

The Company also has U.S.

losses of $ 0.4 million that can be carried forward indefinitely and are subject to IRC section 382 limitations.

The Company has capital loss carryforwards of $ 7.7 million in foreign jurisdictions and $ 1.0 million in the U.S.

federal jurisdiction at December 31, 2020 that are offset entirely by a valuation allowance.

The Company has net operating losses in foreign jurisdictions of $ 39.2 million and $ 11.8 million in state jurisdictions at December 31, 2020 that are offset entirely by a valuation allowance.

The state net operating losses begin to expire in 2026.

federal losses have been carried back as a result of the CARES Act and no carryforwards remain.

LIFETIME BRANDS, INC.

16 unchanged sentences

Federal return to provision 6.8 0.4 ( 27.5 )

Loss of Filament pre-acquisition attributes due to CARES Act 8.6 — —

Equity-based compensation 19.4 — —

Valuation Allowance 48.3 ( 3.1 ) ( 34.2 )

Other — ( 0.3 ) 14.4

1 unchanged sentence

(1) In 2019, the rate for the impairment of goodwill was ( 20.8 )% due to a pretax loss position.

In 2018, the rate for the impairment of goodwill was 98.6 % due to a pretax income position.

The estimated values of the Company’s gross uncertain tax positions at December 31, 2020, 2019 and 2018 are liabilities of $ 1.6 million, $ 1.5 million and $ 2.0 million, respectively, and consist of the following:

7 unchanged sentences

Balance at December 31 $ ( 1,648 ) $ ( 1,508 ) $ ( 1,975 )

The Company had approximately $ 89,000 and $ 29,000 , net of federal and state tax benefit, accrued at December 31, 2019 and 2018, respectively, for the payment of interest.

The Company had approximately $ 0.1 million and $ 0.1 million, net of federal and state tax benefit, accrued at December 31, 2020 and 2019, respectively, for the payment of interest.

The Company’s policy for recording interest and penalties is to record such items as a component of the provision for income taxes.

5 unchanged sentences

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

Federal, California, Massachusetts, Texas and the United Kingdom.

Federal, California, Georgia, Illinois, Massachusetts, New Jersey, New York and the United Kingdom.

At December 31, 2020, the periods subject to examination by the Company’s major state jurisdictions, except for New York State, are generally for the years ended 2016 through 2019.

In certain jurisdictions Filament may have additional periods subject to examination.

The Company’s 2015 Federal income tax return and New York State tax returns for years 2014-2016 remain under audit with no material assessments as of December 31, 2019.

The Company’s 2015 U.S.

Federal income tax return audit was completed as of June 30, 2020 with no assessments.

The Company's New York State tax returns for years 2015-2016 remain under audit with no material assessments as of December 31, 2020.

LIFETIME BRANDS, INC.

1 unchanged sentence

December 31, 2020

NOTE M — BUSINESS SEGMENTS

NOTE 13 — BUSINESS SEGMENTS

Segment information

1 unchanged sentence

and International.

Prior to December 31, 2018, certain international operations of the Company’s business were managed domestically by the U.S.

In 2019, the Company realigned its operating segments to reflect the changes in how the Company manages its business, reviews operating performance and allocates resources.

The prior period segment information has been recast to reflect the current reportable segment structure of the Company.

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.

25 unchanged sentences

segment includes $ 0.7 million and $ 2.1 million of restructuring expenses related to the U.S.

restructuring plan and the Filament integration, respectively, as described in Note A – Significant Accounting Policies.

(2) In 2019, the the Company recognized a non-cash goodwill impairment charge of $ 33.2 million related to its U.S.

reporting unit, as described in Note G - Goodwill and intangible assets.

(3) In 2019, 2018 and 2017, income from operations for the International segment includes $ 0.7 million, $ 0.2 million and $ 1.0 million, respectively, of restructuring expenses related to the integration of entities in Europe, as described in Note A – Significant Accounting Policies.

(4) In 2019 and 2018, T he Company recognized a $ 9.7 million non-cash goodwill impairment charge related to the European kitchenware business and a non-cash goodwill impairment charge of $ 2.2 million related to the European tableware business, respectively, as described in Note G - Goodwill and intangible assets.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

restructuring plan and the Filament integration, respectively, as described in NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

(2) In 2020 and 2019, the Company recognized non-cash impairment charges of $ 20.1 million and $ 33.2 million, respectively, related to the U.S.

segment as described in NOTE 7 — GOODWILL AND INTANGIBLE ASSETS

(3) In 2020, 2019 and 2018, income from operations for the International segment includes $ 0.2 million, $ 0.7 million and $ 0.2 million, respectively, of restructuring expenses, as described in NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES.

(in thousands)

3 unchanged sentences

Total assets $ 807,481 $ 770,023

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

Year Ended December 31,

1 unchanged sentence

Beginning balance $ 49,371 $ 81,641

Acquisition activity — 78,795

Purchase price adjustment — 972

16 unchanged sentences

Total $ 45,620 $ 53,528

NOTE N — COMMITMENTS AND CONTINGENCIES

NOTE 14 — COMMITMENTS AND CONTINGENCIES

The Company has license agreements that require the payment of royalties on sales of licensed products which expire through 2048.

Future minimum royalties payable under these agreements are as follows (in thousands):

Year ending December 31,

2021 $ 10,045

Thereafter 5,243

Total $ 26,771

LIFETIME BRANDS, INC.

1 unchanged sentence

December 31, 2020

Year ending December 31,

Total $ 27,542

Legal proceedings

23 unchanged sentences

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

In November 2020, the tolling agreements were extended to November 2021.

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.

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

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.

6 unchanged sentences

The period of investigation is stated to be from August 26, 2014 to the present.

Since being notified of the investigation, the Company has obtained a significant amount of evidence that, the Company believes, supports that the imported products were properly classified as specified sets.

The Company's counsel filed a lead Protest and Application for Further Review on February 5, 2020 and will be requesting that CBP suspend the matter until the protest is reviewed and decided by CBP headquarters based on the sufficiency of the evidence presented.

Since being notified of the investigation, the Company has obtained a significant amount of evidence that, the

LIFETIME BRANDS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

Company believes, supports that the imported products were properly classified as specified sets.

The Company's counsel filed a Lead Protest and Application for Further Review with CBP on February 5, 2020 (the "Lead Protest") relating to a single shipment made during the investigation period.

CBP approved the Company’s Lead Protest on June 8, 2020 stating that the specified set requirement was fulfilled with respect to the protested shipment based on information provided by the Company.

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

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

One of these three was approved on October 15, 2020;

the other two remain pending.

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.

Because the period of investigation covers a five-year period, the Company is compiling supporting documentation packages for all tableware collections imported during this period.

In the event CBP accepts the evidence presented, then no additional duties or penalties will be owed.

9 unchanged sentences

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.

NOTE O — RETIREMENT PLANS

NOTE 15 — RETIREMENT PLANS

401(k) plan and other defined contribution plans

The Company maintains a defined contribution retirement plan for eligible employees under Section 401(k) of the Internal Revenue Code.

1 unchanged sentence

The Company suspended its matching contribution in 2009 as an expense savings measure.

The Company’s United Kingdom-based subsidiaries maintain defined contribution pension plans.

The Company’s United Kingdom-based subsidiary, Lifetime Brands Europe Limited, maintains a defined contribution pension plan.

Retirement benefit obligations

2 unchanged sentences

The discount rate used to calculate the retirement benefit obligations was 2.02 % at December 31, 2020 and 2.88 % at December 31, 2019.

The retirement benefit obligations are included in accrued expenses and deferred rent and other long-term liabilities.

The retirement benefit obligations are included in accrued expenses and other long-term liabilities.

The Company expects to recognize $ 0.2 million of actuarial losses included in accumulated other comprehensive loss in net periodic benefit cost in 2021.

5 unchanged sentences

2026 through 2030 1,845

NOTE P — OTHER

NOTE 16 — OTHER

The components of inventory are as follows:

5 unchanged sentences

Property and equipment

Property and equipment consist of:

Property and equipment (including finance leases) consist of:

(in thousands)

Machinery, furniture and equipment $ 74,494 $ 73,634

$ 109,092 $ 106,525

Leasehold improvements 38,467 38,293

38,293 29,803

Computer hardware and software 36,997 35,458

Building and improvements 791 780

2 unchanged sentences

accumulated depreciation and amortization ( 127,816 ) ( 120,434 )

( 120,434 ) ( 112,468 )

$ 28,168 $ 25,762

Total $ 23,120 $ 28,168

Depreciation and amortization expense of property and equipment for the years ended December 31, 2020, 2019 and 2018 was $ 7.4 million, $ 8.0 million and $ 8.0 million, respectively.

6 unchanged sentences

Retirement benefit obligations $ 7,534 $ 6,838

Non-income tax liability 2,705 1,860

Unearned revenue 1,728 —

Other non-income tax liabilities 2,824 2,705

Derivative financial instruments 2,776 —

Unearned revenues 1,444 1,728

Deferred payroll non-income tax liabilities 1,261 —

Royalty obligation 475 878

Other long term obligations 169 65

Deferred rent liability — 13,832

Total $ 16,483 $ 12,214

32 unchanged sentences

Translation adjustment during period ( 2,062 ) ( 292 ) ( 5,906 )

Amount reclassified from accumulated other comprehensive loss:

Currency translation adjustment 235 — —

Balance at end of year $ ( 35,846 ) $ ( 34,019 ) $ ( 33,727 )

1 unchanged sentence

Balance at beginning of year $ 1,164 $ 161 $ 14

Amounts reclassified from accumulated other comprehensive gains:

Settlement of cash flow hedge ( 209 ) ( 14 ) —

Derivative fair value adjustment, net of tax ( 3,273 ) 1,212 161

Amounts reclassified from accumulated other comprehensive loss:

Settlement of cash flow hedges 984 ( 209 ) ( 14 )

Balance at end of year $ ( 1,125 ) $ 1,164 $ 161

3 unchanged sentences

( 680 ) ( 601 ) 373

Amounts reclassified from accumulated other comprehensive loss:

Amount reclassified from accumulated other comprehensive loss:

Amortization of loss, net of tax

Balance at end of year $ ( 2,201 ) $ ( 1,600 ) $ ( 1,050 )

(1) Amounts reclassified are recorded in interest expense and cost of goods sold on the consolidated statement of operations.

Total accumulated other comprehensive loss at end of period $ ( 39,172 ) $ ( 34,455 ) $ ( 34,616 )

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

(2) Amounts reclassified are recorded in interest expense and cost of goods sold on the consolidated statements of operations.

(3) Amount is recorded in selling, general and administrative expenses on the consolidated statements of operations.

NOTE 17 — SUBSEQUENT EVENTS

Acquisition of Year and Day

On February 26, 2021, the Company acquired the business and certain assets of Year and Day, a designer and distributor of ceramic dinnerware, stainless steel flatware and Italian glassware.

LIFETIME BRANDS, INC.

22 unchanged sentences

$ 6,190 $ 5,503 $ ( 3,838 ) $ 7,855

Year ended Year ended December 31, 2016

Deducted from asset accounts:

Allowance for doubtful accounts $ 697 $ 127 $ ( 176 ) (a)

Reserve for sales returns and allowances 4,603 5,110 (c)

( 4,636 ) (b)

$ 5,300 $ 5,237 $ ( 4,812 ) $ 5,725

(a) Uncollectible accounts written off, net of recoveries.

2 unchanged sentences

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-K

Item 9A. Controls and Procedures