What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-06 compared with 2020-11-05 · 222 added, 391 removed, 604 unchanged (50% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

2021 December 31,

1 unchanged sentence

Cash and cash equivalents $ 30,641 $ 35,963

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

Accounts receivable, less allowances of $ 18,333 at March 31, 2021 and $ 17,013 at December 31, 2020

131,251 170,037

1 unchanged sentence

Prepaid expenses and other current assets 10,128 12,129

Income taxes receivable — 1,577

TOTAL CURRENT ASSETS 382,285 421,293

24 unchanged sentences

Common stock, $ 0.01 par value, shares authorized:

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

50,000,000 at March 31, 2021 and December 31, 2020;

shares issued and outstanding:

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

21,979,942 at March 31, 2021 and 21,755,195 at December 31, 2020

Paid-in capital 268,127 268,666

(Accumulated deficit) retained earnings

( 13,842 ) 7,173

Retained earnings

Accumulated other comprehensive loss

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net sales $ 195,653 $ 145,070

3 unchanged sentences

Selling, general and administrative expenses 38,108 41,522

Restructuring expenses — 338 253 1,119

Goodwill and other impairments — 20,100

4 unchanged sentences

498 ( 2,251 )

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

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

Income tax provision

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

5,730 ( 32,232 )

Equity in earnings (losses), net of taxes

Income tax (provision) benefit

( 2,416 ) 3,729

Equity in (losses) earnings, net of taxes

NET INCOME (LOSS)

9 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net income (loss)

13 unchanged sentences

Common stock Paid-in

capital Retained Earnings Accumulated other

capital Retained earnings

Accumulated other

comprehensive

1 unchanged sentence

BALANCE AT DECEMBER 31, 2020 21,755 $ 218 $ 268,666 $ 424 $ ( 39,172 ) $ 230,136

Comprehensive (loss) income:

Comprehensive income (loss):

— — — 3,067 — 3,067

2 unchanged sentences

Effect of retirement benefit obligations — — — — 27 27

Total comprehensive loss

Net issuance of restricted shares to employees 169 1 ( 1 ) — — —

Total comprehensive income

Performance shares issued to employees 150 1 ( 1 ) — — —

Net issuance of restricted shares granted to employees 177 2 ( 2 ) — — —

Stock compensation expense — — 1,439 — — 1,439

4 unchanged sentences

BALANCE AT MARCH 31, 2021 21,980 $ 220 $ 268,127 $ 2,548 $ ( 37,489 ) $ 233,406

Comprehensive (loss) income:

— — — ( 11,513 ) — ( 11,513 )

Translation adjustment — — — — ( 2,953 ) ( 2,953 )

Net change in cash flow hedges — — — — 982 982

Effect of retirement benefit obligations — — — — 12 12

Total comprehensive loss

Restricted shares issued to directors 61 1 ( 1 ) — — —

Net issuance of restricted shares to employees 250 3 ( 3 ) — — —

Stock compensation expense — — 1,186 — — 1,186

Net exercise of stock options 34 — 133 — — 133

Shares effectively repurchased for required employee withholding taxes ( 17 ) — ( 158 ) — — ( 158 )

Dividends (1) — — — ( 896 ) — ( 896 )

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

Comprehensive (loss) income

— — — ( 13,519 ) — ( 13,519 )

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

Derivative fair value adjustment — — — — 151 151

Effect of retirement benefit obligations — — — — 13 13

Total comprehensive loss

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

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

Dividends (1) — — — ( 937 ) — ( 937 )

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

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

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Common stock Paid-in

capital Retained Earnings (Accumulated deficit)

Accumulated other

capital Retained earnings

(accumulated deficit) Accumulated other

comprehensive

8 unchanged sentences

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

Net issuance of restricted shares to employees 220 2 ( 2 ) — — —

Net issuance of restricted shares granted to employees and directors 220 2 ( 2 ) — — —

Stock compensation expense — — 1,320 — — 1,320

3 unchanged sentences

BALANCE AT MARCH 31, 2020 21,486 $ 215 $ 264,405 $ ( 21,923 ) $ ( 41,770 ) $ 200,927

Comprehensive (loss) income:

— — — ( 3,977 ) — ( 3,977 )

Translation adjustment — — — — ( 2,514 ) ( 2,514 )

Net change in cash flow hedges — — — — 101 101

Effect of retirement benefit obligations — — — — 19 19

Total comprehensive loss

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

Stock compensation expense — — 1,415 — — 1,415

Shares effectively repurchased for required employee withholding taxes ( 26 ) — ( 187 ) — — ( 187 )

Dividends (1) — — — ( 913 ) — ( 913 )

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

Comprehensive income:

— — — 13,913 — 13,913

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

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

Effect of retirement benefit obligations — — — — 20 20

Total comprehensive income

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

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

Dividends (1) — — — ( 942 ) — ( 942 )

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

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

(1) Cash dividends declared per share of common stock were $ 0.0425 and $ 0.0425 in the three months ended March 31, 2021 and 2020, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

OPERATING ACTIVITIES

Net income (loss)

$ 3,067 $ ( 28,164 )

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

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

Depreciation and amortization 5,958 6,234

1 unchanged sentence

Amortization of financing costs 443 441

Mark to market loss (gain) on interest rate derivatives

Mark to market (gain) loss on interest rate derivatives

( 498 ) 2,251

2 unchanged sentences

Stock compensation expense 1,444 1,326

Undistributed equity in losses, net of taxes

SKU Rationalization — 8,500

Undistributed equity in losses (earnings), net of taxes

Changes in operating assets and liabilities

5 unchanged sentences

Income taxes payable 2,156 —

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

NET CASH PROVIDED BY OPERATING ACTIVITIES

36,282 33,687

1 unchanged sentence

Purchases of property and equipment ( 674 ) ( 1,222 )

Acquisition ( 178 ) —

NET CASH USED IN INVESTING ACTIVITIES

11 unchanged sentences

Effect of foreign exchange on cash 42 ( 285 )

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

( 5,322 ) 73,913

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

3 unchanged sentences

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

4 unchanged sentences

GAAP for complete financial statements.

In the opinion of management, all adjustments, which consist of normal recurring accruals and non-recurring adjustments, some specifically associated with recent events surrounding the COVID-19 pandemic, considered necessary for a fair presentation have been included.

In the opinion of management, all adjustments, which consist of normal recurring accruals and non-recurring adjustments, considered necessary for a fair presentation have been included.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

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

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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

1 unchanged sentence

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

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

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.

The Company's inventory levels at March 31, 2021, did not decrease from the previous two quarters.

The higher inventory levels are a result of increased inventory purchases to meet higher expected demand in 2021.

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

Revenue recognition

6 unchanged sentences

Cost of sales

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

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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

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

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

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

March 31, 2021

Distribution expenses

2 unchanged sentences

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 impacts 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.

6 unchanged sentences

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

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

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

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

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

Pursuant to this agreement, the Company sold to HSBC $ 40.6 million a nd $ 37.9 million of receivables during the three months ended March 31, 2021 and 2020, respectively.

Charges of $ 0.1 million and $ 0.2 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020, respectively.

At March 31, 2021 and 2020, $ 25.6 million and $ 23.2 million, respectively, of receivables sold were outstanding and due to HSBC from customers.

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

4 unchanged sentences

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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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

September 30,

2021 December 31, 2020

3 unchanged sentences

Total $ 210,265 $ 203,164

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

Fair value of financial instruments

The Company determined that the carrying amounts of cash and cash equivalents, accounts receivable and accounts payable are reasonable estimates of their fair values because of their short-term nature.

The Company determined the carrying amounts of borrowings outstanding under its ABL Agreement and Term Loan (each as defined in Note 6 – Debt to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q) approximate fair value since such borrowings bear interest at variable market rates.

The Company determined that the carrying amounts of borrowings outstanding under its ABL Agreement and Term Loan (each as defined in NOTE 7 — DEBT to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q) approximate fair value since such borrowings bear interest at variable market rates.

The Company accounts for derivative instruments in accordance with Accounting Standard Codification (“ASC”) Topic 815, Derivatives and Hedging ("ASC 815") .

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 is included in accumulated other comprehensive loss and is subsequently recognized in the Company’s unaudited condensed consolidated statements of operations to mirror the location of the hedged items impacting earnings.

Changes to the fair value of derivatives that do not qualify as hedging instruments for accounting purposes are recorded in the Company’s unaudited condensed consolidated statements of operations.

The changes in the fair value of hedges are included in accumulated other comprehensive loss and is subsequently recognized in the Company’s unaudited condensed 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 Company’s unaudited condensed consolidated statements of operations.

Goodwill, intangible assets and long-lived assets

1 unchanged sentence

Additionally, if events or conditions were to indicate the carrying value of a reporting unit may not be recoverable, the Company would evaluate goodwill and other intangible assets for impairment at that time.

As it relates to the goodwill assessment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment testing described in 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.

5 unchanged sentences

Cost of capital was also determined to be a significant assumption as it is the discount rate used to calculate the current fair value of those projected cash flows.

For the guideline public company method, significant assumptions relate to the selection of appropriate guideline companies and related valuation multiples used in the market analysis.

Although the Company believes the assumptions and estimates made are reasonable and appropriate, different assumptions and estimates could materially impact its reported financial results.

In addition, sustained declines in the Company's stock price and

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

related market capitalization could impact key assumptions in the overall estimated fair values of its reporting units and could result in non-cash impairment charges that could be material to the Company's consolidated balance sheet or results of operations.

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.

1 unchanged sentence

These tests can include the relief from royalty model or other valuation models.

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 group may not be recoverable.

Impairment indicators include, among other conditions, cash flow deficits, historical or anticipated declines in revenue or operating profit or material adverse changes in the business climate that indicate that the carrying amount of an asset group may be impaired.

When impairment indicators are present, the recoverability of the asset group is measured by comparing the carrying value of the asset group to the estimated undiscounted future cash flows expected to be generated by the asset group.

If the carrying amount of the asset group is not recoverable, the impairment to be recognized is measured by the amount by which the carrying amount of the long-lived asset group exceeds the fair value of the asset group.

See Note 5 – Intangible Assets to the unaudited condensed consolidated financial statements included in this Quarterly Report for additional information.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit or material adverse changes in the business climate that indicate that the carrying amount of an asset may be impaired.

When impairment indicators are present, the recoverability of the asset is measured by comparing the carrying value of the asset to the estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of the asset is not recoverable, the impairment to be recognized is measured by the amount by which the carrying amount of each long-lived asset exceeds the fair value of the asset.

See NOTE 6 — INTANGIBLE ASSETS.

The Company determines if an arrangement is a lease at the inception of a contract.

1 unchanged sentence

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 condensed consolidated balance sheets.

Finance leases are not material to the Company’s condensed 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 condensed 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.

5 unchanged sentences

Leases with an initial term of twelve months or less are not recorded on the balance sheet.

The Company accounts 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 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.

Employee healthcare

4 unchanged sentences

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

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

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

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

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

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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

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

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

New accounting pronouncements

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

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740):

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 three months ended March 31, 2021 and 2020, the Company did not incur any restructuring expenses.

Adoption of new accounting pronouncements

Effective January 1, 2021, the Company adopted 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 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 adoption did not have a material impact on the Company's condensed consolidated financial statements.

New accounting pronouncements

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

This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses.

This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

The ASU also provides updated guidance regarding the impairment of available-for-sale debt securities and includes additional disclosure requirements.

6 unchanged sentences

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

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

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 3 – Leases for additional information on the Company’s adoption of this guidance.

NOTE 2 — REVENUE

4 unchanged sentences

Sales arrangements with delivery terms that are not FOB Shipping Point are not recognized upon shipment and the transfer of control for revenue recognition is evaluated based on the associated shipping terms and customer obligations.

Shipping and handling fees that are billed to customers in sales transactions are included in net sales and amounted to $ 0.9 million and $ 2.6 million for the three

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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

Shipping and handling fees that are billed to customers in sales transactions are included in net sales and amounted to $ 0.7 million for the three months ended March 31, 2021 and 2020.

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

5 unchanged sentences

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 sale s.

As a result of the COVID-19 pandemic, many of the Company's customers which operate retail locations have 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 co mmissions, 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 following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

The following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended

Kitchenware $ 119,995 $ 79,274

3 unchanged sentences

International segment 19,472 15,862

Kitchenware 19,186 16,406 45,500 42,918

Tableware 4,025 3,897 11,122 19,717

Total International segment 23,211 20,303 56,622 62,635

Total net sales $ 195,653 $ 145,070

3 unchanged sentences

Total net sales $ 195,653 $ 145,070

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

NOTE 3 — ACQUISITION

On February 26, 2021, the Company acquired the business and certain assets of Year & Day, a designer and distributor of ceramic dinnerware, stainless steel flatware and Italian glassware, for cash in the amount of $ 0.2 million.

The assets and operating results of the Year & Day brand are reflected in the Company’s condensed consolidated financial statements in accordance with ASC Topic No.

805, Business Combinations, commencing from the acquisition date.

The purchase price was allocated based on the Company’s preliminary estimate of the fair values of the assets acquired which consistent of inventory $ 0.3 million and liabilities assumed of $ 0.1 million.

The Year & Day acquisition did not have a material impact on the Company's consolidated statement of operations for the three months ended March 31, 2021.

NOTE 4 — LEASES

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

Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet.

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 September 30, 2020 were $ 1.4 million and were recorded in accrued expenses in the unaudited condensed consolidated balance sheet at September 30, 2020.

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

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

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

The components of lease expense for the three months ended March 31, 2021 and 2020 were as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020 2019 2020 2019

Operating lease expenses (1) :

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

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

Nine Months Ended

September 30,

Fixed lease expense $ 4,495 $ 4,814

Variable lease expense 978 995

Total $ 5,473 $ 5,809

(1) Expenses are recorded within distribution expenses and selling, general and administrative expenses on the unaudited condensed consolidated statement of operations.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

Supplemental cash flow information for lease related liabilities and assets for the three months ended March 31, 2021 and 2020 were as follows (in thousands):

Three Months Ended

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

Operating cash flows for operating leases $ 4,904 $ 4,112

Nine Months Ended

September 30,

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

Three Months Ended

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

Operating leases $ 847 $ 437

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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

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

The aggregate future lease payments for operating leases as of March 31, 2021 were as follows (in thousands):

2021 (excluding the three months ending March 31, 2021)

Thereafter 38,912

2 unchanged sentences

Present value of lease payments $ 112,490

The Company expects to make payments related to the deferrals obtained as a result of COVID-19-related rent concessions of $ 0.4 million in 2020 and $ 1.0 million in 2021, per the updated terms of the applicable lease agreements.

At March 31, 2021, the deferred rent payments received for COVID-19 relief, were $ 0.2 million and were recorded in accrued expenses in the unaudited condensed consolidated balance sheet at March 31, 2021.

These deferred rent payments are due in 2021, per the updated terms of the applicable lease agreements.

Average lease terms and discount rates were as follows:

September 30, 2020

March 31, 2021

Operating leases:

7 unchanged sentences

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

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

Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired)

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

for the three months ended March 31, 2021 and 2020 in the accompanying unaudited condensed consolidated statements of operations.

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

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

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

Dollars ("USD") using the spot rates of MXN 20.51 and MXN 19.88 at March 31, 2021 and December 31, 2020, respectively.

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020 2019 2020 2019

Average exchange rate (USD to MXN) 20.33

19.91 - 23.31

19.11 - 19.42

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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

The effect of the translation of the Company’s investment, as well as the translation of Vasconia's balance sheet, resulted in an increase to the investment of $ 1.3 million and a decrease of $( 1.5 ) million during the three months ended March 31, 2021 and 2020, respectively.

These translation effects are recorded in accumulated other comprehensive loss.

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

Summarized income statement information for the three months ended March 31, 2021 and 2020 for Vasconia in USD and MXN is as follows (in thousands):

Three Months Ended

September 30,

USD MXN USD MXN

3 unchanged sentences

3,784 76,933 ( 550 ) ( 10,948 )

Net income (loss)

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

Nine Months Ended

September 30,

USD MXN USD MXN

Net Sales $ 99,932 $ 2,171,695 $ 115,100 $ 2,216,293

21,025 459,731 22,801 438,478

Income from operations

3,821 87,229 4,117 78,739

Net (loss) income

( 770 ) ( 15,661 ) 1,422 28,303

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

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

The Company recorded equity in (losses) eanings of Vasconia, net of taxes, of $( 0.2 ) million and $ 0.3 million for the three months ended March 31, 2021 and 2020, respectively.

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

Vasconia due to and due from balances Balance Sheet

Location September 30, 2020 December 31, 2019

Location March 31, 2021 December 31, 2020

Amounts due from Vasconia Prepaid expenses and other current assets $ 56 $ 55

Amounts due to Vasconia Accrued expenses and Accounts payable ( 243 ) ( 91 )

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

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

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

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 for the nine months ended September 30, 2020.

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

As of March 31, 2021 and December 31, 2020, the fair value (based on Level 1 inputs using the quoted stock price) of the Company’s investment in Vasconia was $ 31.8 million and $ 32.8 million, respectively.

The carrying value of the Company’s investment in Vasconia was $ 21.1 million and $ 20.0 million as of March 31, 2021 and December 31, 2020, respectively.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

NOTE 6 — INTANGIBLE ASSETS

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

September 30, 2020 December 31, 2019

Gross Impairment Accumulated

Intangible assets consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

Gross Accumulated

Amortization Net Gross Impairment Accumulated

13 unchanged sentences

For goodwill, the outcome of the valuation is largely dependent upon estimates made by the Company 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 under the discounted cash flow method.

For its indefinite-lived trade names the Company performed a quantitative impairment analysis by comparing the fair value of the indefinite-lived trade names to their respective carrying values in the first quarter of 2020.

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.

Significant assumptions used in the Company’s fair value analysis included future net sales for the related brands, royalty rates, and the cost of capital.

Based upon these analyses performed, the Company recognized a non-cash goodwill impairment charge of $ 19.1 million, and a $ 1.0 million non-cash impairment charge for certain of its indefinite-lived intangible assets in the U.S.

segment in the first quarter of 2020.

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

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

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

Although management cannot predict when improvements in macroeconomic conditions will occur, if consumer confidence and consumer spending decline significantly in the future or if commercial and industrial economic activity or the market capitalization experiences a sustained deterioration significantly from current levels, it is reasonably likely the Company will be required to record impairment charges in the future.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

NOTE 7 — DEBT

1 unchanged sentence

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

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

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

The percentage applied to the Company's excess cash flow is based on the Company's Total Net Leverage Ratio (as defined in our debt agreements).

When an Excess Cash Flow payment is required, lenders have the option to decline a portion or all of the prepayment amount.

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

1 unchanged sentence

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

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

September 30, 2020

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

As of March 31, 2021 and December 31, 2020, the total availability under the ABL Agreement was as follows (in thousands):

March 31, 2021

December 31, 2020

8 unchanged sentences

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

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current portion of Term Loan facility:

7 unchanged sentences

Total Non-current portion of Term Loan facility $ 234,968 $ 238,977

The estimated Excess Cash Flow principal payment recorded at March 31, 2021 represents the Company's estimate for the 2022 Excess Cash Flow payment.

The 2021 Excess Cash Flow payment, paid on March 30, 2021, totaled $ 10.5 million.

The Excess Cash Flow payment differs from the estimated amount at December 31, 2020 of $ 19.1 million as certain lenders opted to not require payment per the terms of the debt agreements.

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

subsidiaries with certain minor exceptions.

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

its foreign subsidiary borrowers designated as such under the ABL Agreement and, subject to limitations on such guaranty, are guaranteed by the foreign subsidiary borrowers, as well as by the Company.

Certain payment obligations under the ABL Agreement are also direct obligations of its foreign subsidiary borrowers designated as such under the ABL Agreement and, subject to limitations on such guaranty, are guaranteed by the foreign subsidiary borrowers, as well as by the Company.

The obligations of the Company under the Debt Agreements and any hedging arrangements and cash management services and the guarantees by its domestic subsidiaries in respect of those obligations are secured by substantially all of the assets and stock (but in the case of foreign subsidiaries, limited to 65 % of the capital stock in first-tier foreign subsidiaries and not including the stock of subsidiaries of such first-tier foreign subsidiaries) owned by the Company and the U.S.

2 unchanged sentences

Borrowings under the ABL Agreement bear interest, at the Company’s option, at one of the following rates:

(i) alternate base rate, defined, for any day, as the greater of the prime rate, a federal funds and overnight bank funding based rate plus 0.5 % or one-month LIBOR plus 1.0 %, plus a margin of 0.25 % to 0.75 %, or (ii) LIBOR plus a margin of 1.25 % to 1.75 %.

(i) alternate base rate, defined, for any day, as the greater of the prime rate, a federal funds and overnight bank funding based rate plus 0.5 % or

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

one-month LIBOR plus 1.0 %, plus a margin of 0.25 % to 0.75 %, or (ii) LIBOR plus a margin of 1.25 % to 1.75 %.

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

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

There were no outstanding borrowings under the ABL Agreement at March 31, 2021.

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

1 unchanged sentence

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

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

The interest rate on outstanding borrowings under the Term Loan at March 31, 2021 was 4.5 %.

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

1 unchanged sentence

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

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

The Company was in compliance with the covenants of the Debt Agreements at March 31, 2021.

The Company expects that it will continue to borrow, subject to availability, and repay funds under the ABL Agreement based on working capital and other corporate needs.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

NOTE 8 — DERIVATIVES

Interest Rate Swap Agreements

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

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

The Company's total outstanding notional value of interest rate swaps was $ 94.0 million at March 31, 2021.

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

The hedge periods of these agreements commenced in April 2018 and expire in March 2023.

The notional amounts are reduced over these periods.

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

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

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

The original notional values are reduced over these periods.

The aggregate notional value of designated interest rate swaps were $ 69.0 million at March 31, 2021.

In June 2019, the Company entered into additional interest rate swap agreements, with an aggregate notional value of $ 25.0 million at March 31, 2021.

These non-designated interest rate swaps serve as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings and expire in February 2025.

Foreign Exchange Contracts

5 unchanged sentences

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

The aggregate gross notional values of foreign exchange contracts at March 31, 2021 was $ 18.7 million.

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

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

1 unchanged sentence

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

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

Factors that could influence the effectiveness of the

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

Company’s hedging programs include those impacting currency markets and the availability of hedging instruments and liquidity of the credit markets.

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

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

The Company does not enter into such contracts for speculative purposes and as of March 31, 2021, the Company does not have any foreign currency forward contract derivatives that are not designated as hedges.

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

Derivatives designated as hedging instruments Balance Sheet

Location September 30,

Location March 31,

December 31, 2020

Interest rate swaps Prepaid expenses $ — $ 427

Other assets — 1,267

Accrued expenses 614 —

Interest rate swaps Accrued expenses 449 504

Other Long-Term Liabilities 794 1,034

Foreign exchange contracts Prepaid expenses — 180

Foreign exchange contracts Accrued expenses 432 —

Derivatives not designated as hedging instruments Balance Sheet

Location September 30,

Location March 31,

December 31, 2020

Interest rate swaps Other assets $ — $ 402

Other Long-Term Liabilities 1,913 —

Interest rate swaps Other Long-Term Liabilities 1,243 1,742

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

The fair values of the

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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

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

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

3 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

Derivatives designated as hedging instruments 2021 2020

3 unchanged sentences

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

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

The Company had no terminated or matured interest rate swaps during the three months ended March 31, 2021.

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

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

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

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

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

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

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

During the three months ended March 31, 2021, the Company reclassified $ 0.4 million of cash flow hedges in other comprehensive losses to earnings.

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

At March 31, 2021, the estimated amount of existing losses expected to be reclassified into earnings within the next 12 months was $ 1.3 million.

During the three months ended March 31, 2020, the Company reclassified $ 0.1 million of cash flow hedges in other comprehensive losses to earnings.

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

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

Three Months Ended

September 30, Nine Months Ended

September 30,

Derivatives not designated as hedging instruments Location of gain (loss) 2021 2020

3 unchanged sentences

$ 387 $ ( 2,266 )

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

NOTE 9 — STOCK COMPENSATION

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

Option Awards

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

A summary of the Company’s stock option activity and related information for the three months ended March 31, 2021 is as follows:

Options Weighted-

5 unchanged sentences

Grants 48,000 14.18

Cancellations ( 12,313 ) 11.86

Exercises ( 166,400 ) 11.68

Expirations ( 2,400 ) 19.10

Options outstanding, September 30, 2020

Options outstanding, March 31, 2021

1,166,100 13.54 5.4 $ 2,666

Options exercisable, September 30, 2020

Options exercisable, March 31, 2021

867,807 $ 14.72 4.3 $ 1,269

1 unchanged sentence

Weighted-average years expected to be recognized over 1.7

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

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

The intrinsic value is calculated for each in-the-money stock option as the difference between the closing price of the Company’s common stock on March 31, 2021 and the exercise price.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

Restricted Stock

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

A summary of the Company’s restricted stock activity and related information for the three months ended March 31, 2021 is as follows:

Shares Weighted-

5 unchanged sentences

Cancellations ( 250 ) 9.76

Non-vested restricted shares, September 30, 2020

Non-vested restricted shares, March 31, 2021

725,299 $ 9.33

1 unchanged sentence

Weighted-average years expected to be recognized over 1.9

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

The total fair value of restricted stock that vested during the three months ended March 31, 2021 was $ 3.7 million

Performance shares

2 unchanged sentences

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

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

A summary of the Company’s performance-based award activity and related information for the three months ended March 31, 2021 is as follows:

average grant

4 unchanged sentences

Cancellations ( 21,208 ) 12.75

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

Non-vested performance-based awards, March 31, 2021

436,480 $ 10.54

2 unchanged sentences

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

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

The total fair value of performance-based awards that vested during the three months ended March 31, 2021 was $ 2.1 million.

At March 31, 2021, there were 399,327 shares available for awards that could be granted under the Plan, assuming maximum performance of performance-based awards.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Stock Compensation Expense Components 2021 2020

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

NOTE 10 — INCOME (LOSS) PER COMMON SHARE

2 unchanged sentences

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

The calculations of basic and diluted income (loss) per common share for the three months ended March 31, 2021 and 2020 are as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

(in thousands, except per share amounts)

4 unchanged sentences

Stock options and other stock awards

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

Weighted-average shares outstanding – Diluted 21,771 $ 20,745

Basic income (loss) per common share

3 unchanged sentences

Antidilutive Securities (1)

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

NOTE 11— INCOME TAXES

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Income tax provision of $ 2.4 million and an income tax benefit of $ 3.7 million for the three months ended March 31, 2021 and 2020, respectively, represent taxes on both U.S.

and foreign earnings at combined effective income tax provision rates of 42.2 % and an income tax benefit rate of 11.6 %, respectively.

The effective tax rate for the three months ended March 31, 2021 differs from the federal statutory income tax rate of 21% primarily due to state and local tax expense, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

The effective rate for the three months ended March 31, 2020 differs from the federal statutory income tax rate primarily due to the impact of the non-deductible portion of the goodwill impairment charge recorded in the three months ended March 31, 2020.

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

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

The Company’s 2015 U.S.

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

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

The Company's New York State tax returns for years 2015 and 2016 remain under audit with no material assessments as of March 31, 2021.

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

There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three-month periods ended March 31, 2021 and March 31, 2020.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

with no assessments.

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

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

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

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

The Company is required to recognize the effect of tax law changes in the period of enactment.

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

March 31, 2021

NOTE 12 – BUSINESS SEGMENTS

9 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

(in thousands)

12 unchanged sentences

Total depreciation and amortization $ 5,958 $ 6,234

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

September 30,

2021 December 31,

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

NOTE 13 — CONTINGENCIES

23 unchanged sentences

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

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

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

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.

3 unchanged sentences

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

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

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

Customs and Border Protection matter

8 unchanged sentences

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

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

These claims are now under review.

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.

6 unchanged sentences

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

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

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

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

NOTE 14 — OTHER

Cash dividends

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

Dividends declared in the three months ended March 31, 2021 were as follows:

Dividend per share Date declared Date of record Payment date

$ 0.0425 3/9/2021 5/3/2021 5/17/2021

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

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

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

In 2020, the Company declared dividends as follows:

• On March 10, 2020, the Board of Directors declared a quarterly dividend of $ 0.0425 per share payable on May 15, 2020 to shareholders of record on May 1, 2020.

Subsequently, the Company issued a press release on April 23, 2020, announcing that the Board of Directors unanimously approved the rescheduling of the May quarterly dividend.

Accordingly, shareholders of record as of November 16, 2020 will be eligible to receive a dividend of $ 0.0425 per share on December 16, 2020.

• On June 25, 2020, the Board of Directors declared a quarterly dividend of $ 0.0425 per share payable on August 17, 2020 to shareholders of record on August 3, 2020.

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

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

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

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

During the three months ended March 31, 2021, the Company paid dividends of $ 1.0 million.

This included the payment made on February 12, 2021 of $ 0.9 million to shareholders of record on January 29, 2021 and payments of $ 0.1 million for dividends payable upon the vesting of restricted shares and performance shares.

In the three months ended March 31, 2021, the Company reduced retained earnings for the accrual of $ 0.9 million relating to the dividend payable on May 17, 2021.

Supplemental cash flow information

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

3 unchanged sentences

Non-cash investing activities:

Translation loss adjustment

Translation gain (loss) adjustment

$ 1,829 $ ( 4,458 )

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

Components of accumulated other comprehensive loss, net

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

(in thousands)

3 unchanged sentences

1,829 ( 4,458 )

Amounts reclassified from accumulated other comprehensive loss (1)

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

Balance at end of period $ ( 34,017 ) $ ( 38,477 )

Accumulated deferred (losses) gains on cash flow hedges:

Accumulated deferred losses on cash flow hedges:

Balance at beginning of period $ ( 1,125 ) $ 1,164

Change in unrealized losses

( 554 ) ( 2,996 )

Amounts reclassified from accumulated other comprehensive loss:

Settlement of cash flow hedge (1)

305 ( 143 ) 664 ( 166 )

Change in unrealized (losses) gains

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

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

Net change in cash flow hedges, net of taxes of $( 19 ) and $( 998 )

( 173 ) ( 2,877 )

7 unchanged sentences

$ ( 37,489 ) $ ( 41,770 )

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

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

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements