What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-06 · 218 added, 129 removed, 697 unchanged (33% of the section changed)

6 unchanged sentences

Cash and cash equivalents $ 33,345 $ 35,963

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

Accounts receivable, less allowances of $ 16,901 at June 30, 2021 and $ 17,013 at December 31, 2020

120,494 170,037

1 unchanged sentence

Prepaid expenses and other current assets 9,140 12,129

Income taxes receivable 1,750 —

TOTAL CURRENT ASSETS 382,913 421,293

24 unchanged sentences

Common stock, $ 0.01 par value, shares authorized:

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

50,000,000 at June 30, 2021 and December 31, 2020;

shares issued and outstanding:

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

22,006,623 at June 30, 2021 and 21,755,195 at December 31, 2020

Paid-in capital 268,976 268,666

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net sales $ 186,636 $ 150,140 $ 382,289 $ 295,210

3 unchanged sentences

Selling, general and administrative expenses 36,229 34,427 74,337 75,949

Restructuring expenses — 253 — 253

Goodwill and other impairments — — — 20,100

4 unchanged sentences

46 ( 164 ) 544 ( 2,415 )

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

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

7,228 ( 98 ) 12,958 ( 32,330 )

1 unchanged sentence

( 1,832 ) ( 3,031 ) ( 4,248 ) 698

Equity in (losses) earnings, net of taxes

Equity in earnings (losses), net of taxes

393 ( 848 ) 146 ( 509 )

NET INCOME (LOSS)

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net income (loss)

32 unchanged sentences

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

Comprehensive income:

— — — 5,789 — 5,789

Translation adjustment — — — — 2,394 2,394

Net change in cash flow hedges — — — — 236 236

Effect of retirement benefit obligations — — — — 41 41

Total comprehensive income

Net issuance of restricted shares granted to employees and directors 44 0 0 — — —

Stock compensation expense — — 1,323 — — 1,323

Net exercise of stock options 50 1 550 — — 551

Shares effectively repurchased for required employee withholding taxes ( 67 ) ( 1 ) ( 1,024 ) — — ( 1,025 )

Dividends (1) — — — ( 914 ) — ( 914 )

BALANCE AT JUNE 30, 2021 22,007 $ 220 $ 268,976 $ 7,423 $ ( 34,818 ) $ 241,801

(1) Cash dividends declared per share of common stock were $ 0.0850 and $ 0.0850 in the six months ended June 30, 2021 and 2020, respectively.

Common stock Paid-in

11 unchanged sentences

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

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

Net issuance of restricted shares granted to employees 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

(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.

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 granted to employees and directors 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

(1) Cash dividends declared per share of common stock were $ 0.0850 and $ 0.0850 in the six months ended June 30, 2021 and 2020, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

OPERATING ACTIVITIES

10 unchanged sentences

Stock compensation expense 2,772 2,746

Undistributed equity in losses (earnings), net of taxes

Undistributed equity in (earnings) losses, net of taxes

Changes in operating assets and liabilities

20 unchanged sentences

Cash dividends paid ( 1,957 ) ( 937 )

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

NET CASH USED IN FINANCING ACTIVITIES

( 42,214 ) ( 12,339 )

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

13 unchanged sentences

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

Operating results for the three and six months ended June 30, 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.

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.

10 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

Distribution expenses

11 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 $ 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.

Pursuant to this agreement, the Company sold to HSBC $ 38.9 million and $ 79.5 million of receivables during the three and six months ended June 30, 2021, respectively and $ 36.0 million and $ 73.9 million of receivables during the three and six months ended June 30, 2020, respectively.

Charges of $ 0.1 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for each of the three months ended June 30, 2021 and 2020.

Charges of $ 0.2 million and $ 0.3 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the six months ended June 30, 2021 and 2020, respectively.

At June 30, 2021 and 2020, $ 14.6 million and $ 20.8 million, respectively, of receivables sold were outstanding and due to HSBC from customers.

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

12 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

Fair value of financial instruments

4 unchanged sentences

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 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.

The changes in the fair value of hedges are included in accumulated other comprehensive loss and are 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.

19 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

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.

24 unchanged sentences

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.

During the three and six months ended June 30, 2021, the Company did not incur any restructuring expenses.

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

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

Adoption of new accounting pronouncements

3 unchanged sentences

The adoption did not have a material impact on the Company's condensed consolidated financial statements.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

New accounting pronouncements

1 unchanged sentence

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

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

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

The new guidance is effective for public business entities that meet the definition of a Smaller Reporting Company, as defined by the Securities and Exchange Commission for interim and annual periods beginning after December 15, 2022.

The Company met the definition of a Smaller Reporting Company as of the one-time determination date of November 15, 2019.

Early adoption is permitted.

10 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 $ 0.7 million for the three months ended March 31, 2021 and 2020.

Shipping and handling fees that are billed to customers in sales transactions are included in net sales and amounted to $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2021, respectively and $ 1.0 million and $ 1.7 million for the three and six months ended June 30, 2020, respectively.

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

1 unchanged sentence

These incentives and promotions typically include arrangements such as cooperative advertising, buydowns, volume rebates and discounts.

These arrangements represent forms of variable consideration and an estimate of sales returns are reflected as reductions in net sales in the Company’s unaudited condensed consolidated statements of operations.

These arrangements, which represent forms of variable consideration and an estimate of sales returns, are reflected as reductions in net sales in the Company’s unaudited condensed consolidated statements of operations.

These estimates are based on historical experience and other known factors or as the most likely amount in a range of possible outcomes.

6 unchanged sentences

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

June 30, 2021

The following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

2021 2020 2021 2020

Kitchenware $ 103,627 $ 84,418 $ 223,622 $ 163,692

9 unchanged sentences

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.

The purchase price was allocated based on the Company’s preliminary estimate of the fair values of the assets acquired which consistent of inventory of $ 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 and six months ended June 30, 2021.

NOTE 4 — LEASES

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

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

The components of lease expense for the three and six months ended June 30, 2021 and 2020 were as follows (in thousands):

Three Months Ended

Six Months Ended

2021 2020 2021 2020

Operating lease expenses (1) :

5 unchanged sentences

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

June 30, 2021

Supplemental cash flow information for lease related liabilities and assets for the six months ended June 30, 2021 and 2020 were as follows (in thousands):

Six Months Ended

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

Operating cash flows for operating leases $ 9,764 $ 7,285

Three Months Ended

Six Months Ended

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

Operating leases $ 1,248 $ 12

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)

During the three and six months ended June 30, 2020, 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.

The Company applied the guidance issued in the FASB Staff Q&A - Topic 842 and Topic 840:

Accounting For Lease Concessions Related to the Effects of the COVID-19 Pandemic, and elected to account for these rent concessions as if no changes to the lease were made and continued to recognize the straight-line lease expense.

The COVID-19 related deferred rent payments as of June 30, 2020, totaled $1.0 million and were deferred to the second half of fiscal year 2020 and into fiscal year 2021.

As of June 30, 2021, all deferred payments have been paid.

The aggregate future lease payments for operating leases as of June 30, 2021 were as follows (in thousands):

2021 (excluding the six months ended June 30, 2021)

Thereafter 39,000

2 unchanged sentences

Present value of lease payments $ 109,944

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:

March 31, 2021

June 30, 2021

Operating leases:

1 unchanged sentence

Weighted-average discount rate 6.2 %

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

NOTE 5 — INVESTMENTS

The Company owns approximately 30 % of the outstanding capital stock of Grupo Vasconia S.A.B.

As of June 30, 2021, the Company owns approximately 27 % of the outstanding capital stock of Grupo Vasconia S.A.B.

(“Vasconia”), an integrated manufacturer of aluminum products and one of Mexico’s largest housewares companies.

2 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)

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.

Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired) for the three and six months ended June 30, 2021 and 2020 in the accompanying unaudited condensed consolidated statements of operations.

On June 30, 2021, Vasconia sold shares, which diluted the Company’s investment ownership from approximately 30 % to approximately 27 %.

The dilution in ownership did not change the Company's accounting for its investment in Vasconia and the Company continues to apply the equity method of accounting.

The Company recorded a non-cash gain of $ 1.7 million, increasing the Company's investment balance.

Additionally, a loss of $ 2.0 million was recognized for the proportionate share of the diluted ownership for amounts previously recognized in accumulated other comprehensive loss.

The net loss of $ 0.3 million was included in equity in earnings (losses), net of taxes, in the accompanying unaudited condensed consolidated statements of operations for the three and six months ended June 30, 2021.

On July 29, 2021, the Company sold 2.2 million shares further reducing its ownership of approximately 27 % in Vasconia for net cash proceeds of approximately $ 3.0 million.

The Company estimates the gain on the sale, without consideration for income taxes, is $ 1.0 million.

The Company also estimates a non-cash loss of $ 1.4 million for amounts previously recognized in accumulated other comprehensive loss.

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 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:

Dollars ("USD") using the spot rates of MXN 19.86 and MXN 19.88 at June 30, 2021 and December 31, 2020, respectively.

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

Three Months Ended

Six Months Ended

2021 2020 2021 2020

Average exchange rate (USD to MXN) 20.02

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.

23.31 20.02 - 20.33

19.91 - 23.31

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 $ 1.6 million and a decrease of $ 4.0 million during the six months ended June 30, 2021 and 2020, respectively.

These translation effects are recorded in accumulated other comprehensive loss.

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):

Summarized income statement information for the three and six months ended June 30, 2021 and 2020 for Vasconia in USD and MXN is as follows (in thousands):

Three Months Ended

2 unchanged sentences

15,921 318,737 6,062 141,304

Income (loss) from operations

Income from operations

6,499 130,110 1,414 32,948

Net (loss) income

Net income (loss)

2,380 47,661 ( 1,994 ) ( 46,459 )

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.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

Six Months Ended

USD MXN USD MXN

Net sales $ 112,685 $ 2,272,569 $ 60,367 $ 1,299,048

27,879 561,840 11,469 248,961

Income from operations

10,283 207,043 864 22,000

Net income (loss)

1,610 32,000 ( 572 ) ( 18,156 )

The Company recorded equity in earnings of Vasconia, net of taxes, of $ 0.7 million and $ 0.5 million for the three and six months ended June 30, 2021, respectively.

The Company recorded equity in losses of Vasconia, net of taxes, of $ 0.6 million and $ 0.3 million for the three and six ended June 30, 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 March 31, 2021 December 31, 2020

Location June 30, 2021 December 31, 2020

Amounts due from Vasconia Prepaid expenses and other current assets $ 87 $ 55

Amounts due to Vasconia Accrued expenses and Accounts payable ( 298 ) ( 91 )

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.

As of June 30, 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 $ 39.2 million and $ 32.8 million, respectively.

The carrying value of the Company’s investment in Vasconia was $ 23.8 million and $ 20.0 million as of June 30, 2021 and December 31, 2020, 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 period ended June 30, 2020.

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

NOTE 6 — INTANGIBLE ASSETS

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

March 31, 2021 December 31, 2020

Intangible assets consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Gross Accumulated

29 unchanged sentences

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

June 30, 2021

As of June 30, 2021 and December 31, 2020, the total availability under the ABL Agreement was as follows (in thousands):

June 30, 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):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Current portion of Term Loan facility:

Term Loan facility payment $ — $ —

Estimated Excess Cash Flow principal payment $ 13,000 $ 19,120

5 unchanged sentences

Total Non-current portion of Term Loan facility $ 235,377 $ 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 estimated Excess Cash Flow principal payment recorded at June 30, 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.

7 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

(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 %.

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

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.

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

June 30, 2021

There were no outstanding borrowings under the ABL Agreement at June 30, 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 March 31, 2021 was 4.5 %.

The interest rate on outstanding borrowings under the Term Loan at June 30, 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 March 31, 2021.

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

1 unchanged sentence

Interest Rate Swap Agreements

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

The Company's total outstanding notional value of interest rate swaps was $ 75.0 million at June 30, 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.

1 unchanged sentence

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.

The aggregate notional value of designated interest rate swaps was $ 50.0 million at June 30, 2021.

In June 2019, the Company entered into additional interest rate swap agreements, with an aggregate notional value of $ 25.0 million at June 30, 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.

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

The aggregate gross notional values of foreign exchange contracts at June 30, 2021 was $ 10.8 million.

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

2 unchanged sentences

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

Factors that could influence the effectiveness of the

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.

All foreign currency forward contracts that the Company enters into are components of hedging

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 March 31, 2021, the Company does not have any foreign currency forward contract derivatives that are not designated as hedges.

June 30, 2021

programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure.

The Company does not enter into such contracts for speculative purposes and as of June 30, 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 March 31,

Location June 30,

December 31, 2020

3 unchanged sentences

Derivatives not designated as hedging instruments Balance Sheet

Location March 31,

Location June 30,

December 31, 2020

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

Derivatives designated as hedging instruments 2021 2020 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 months ended March 31, 2021.

The Company had no terminated or matured interest rate swaps during the three and six months ended June 30, 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 March 31, 2021, the Company reclassified $ 0.4 million of cash flow hedges in other comprehensive losses to earnings.

During the three months ended June 30, 2021, the Company reclassified $ 0.5 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 loss of $0.3 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.

During the six months ended June 30, 2021, the Company reclassified $ 0.8 million of cash flow hedges in other comprehensive losses to earnings.

This was comprised of $ 0.5 million related to realized interest rate swap losses and a loss of $ 0.3 million related to foreign exchange contracts recognized in cost of sales.

At June 30, 2021, the estimated amount of existing losses expected to be reclassified into earnings within the next 12 months was $ 1.2 million.

During the three months ended June 30, 2020, the Company reclassified $ 0.2 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 gain of $ 0.1 million related to foreign exchange contracts recognized in cost of sales.

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

This was comprised of $ 0.6 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.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 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

June 30, Six Months Ended

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

5 unchanged sentences

Option Awards

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

A summary of the Company’s stock option activity and related information for the six months ended June 30, 2021 is as follows:

Options Weighted-

7 unchanged sentences

Expirations ( 4,000 ) 19.10

Options outstanding, March 31, 2021

Options outstanding, June 30, 2021

1,111,875 13.63 5.3 $ 2,693

Options exercisable, March 31, 2021

Options exercisable, June 30, 2021

928,415 $ 14.29 4.7 $ 1,836

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 March 31, 2021.

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

The intrinsic value is calculated for each in-the-money stock option as the difference between the closing price of the Company’s common stock on June 30, 2021 and the exercise price.

Restricted Stock

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

A summary of the Company’s restricted stock activity and related information for the six months ended June 30, 2021 is as follows:

Shares Weighted-

5 unchanged sentences

Cancellations ( 250 ) 9.76

Non-vested restricted shares, March 31, 2021

Non-vested restricted shares, June 30, 2021

463,240 $ 11.31

1 unchanged sentence

Weighted-average years expected to be recognized over 1.8

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

The total fair value of restricted stock that vested during the six months ended June 30, 2021 was $ 8.4 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 three months ended March 31, 2021 is as follows:

A summary of the Company’s performance-based award activity and related information for the six months ended June 30, 2021 is as follows:

average grant

4 unchanged sentences

Cancellations ( 21,208 ) 12.75

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

Non-vested performance-based awards, June 30, 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 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 total fair value of performance-based awards that vested during the six months ended June 30, 2021 was $ 2.1 million.

At June 30, 2021, there were 357,483 shares available for awards that could be granted under the Plan, assuming maximum performance of performance-based awards.

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

Three Months Ended

Six Months Ended

Stock Compensation Expense Components 2021 2020 2021 2020

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 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 months ended March 31, 2021 and 2020 are as follows:

The calculations of basic and diluted income (loss) per common share for the three and six months ended June 30, 2021 and 2020 are as follows:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands, except per share amounts)

10 unchanged sentences

Antidilutive Securities (1)

423 2,088 422 2,100

(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

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.

Income tax provision of $ 1.8 million and $ 4.2 million for the three and six months ended June 30, 2021, respectively, represent taxes on both U.S.

and foreign earnings at combined effective income tax provision rates of 25.3 % and 32.8 %, respectively.

The effective tax rate for the three and six months ended June 30, 2021 differs from the federal statutory income tax rate of 21.0% 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, net of a benefit related to share based equity compensation.

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

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

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

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

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

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's New York State tax returns for years 2015-2016 remain under audit with no material assessments as of June 30, 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.

There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three-month periods ended June 30, 2021 and June 30, 2020.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

NOTE 12 – BUSINESS SEGMENTS

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands)

20 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

NOTE 13 — CONTINGENCIES

33 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

Customs and Border Protection matter

23 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

NOTE 14 — OTHER

Cash dividends

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

Dividends declared in the six months ended June 30, 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

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.

$ 0.0425 6/24/2021 8/2/2021 8/16/2021

During the six months ended June 30, 2021, the Company paid dividends of $ 2.0 million.

This included payments made on February 12, 2021 and May 17, 2021 of $ 0.9 million and $ 0.9 million to shareholders of record on January 29, 2021 and May 3, 2021, respectively, and payments of $ 0.2 million for dividends payable upon the vesting of restricted shares and performance shares.

In the three months ended June 30, 2021, the Company reduced retained earnings for the accrual of $ 0.9 million relating to the dividend payable on August 16, 2021.

For the six months ended June 30, 2021, the Company reduced retained earnings for the accrual of $ 1.9 million relating to the dividend payable on May 17, 2021 and August 16, 2021.

On August 3, 2021, the Board of Directors declared a quarterly dividend of $ 0.0425 per share payable on November 15, 2021 to shareholders of record on November 1, 2021.

Supplemental cash flow information

Three Months Ended

Six Months Ended

(in thousands)

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

June 30, 2021

Components of accumulated other comprehensive loss, net

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

(in thousands)

3 unchanged sentences

352 ( 2,749 ) 2,181 ( 7,207 )

Amounts reclassified from accumulated other comprehensive loss (1)

2,042 235 2,042 235

Translation Adjustment 2,394 ( 2,514 ) 4,223 ( 6,972 )

Balance at end of period $ ( 31,623 ) $ ( 40,991 ) $ ( 31,623 ) $ ( 40,991 )

5 unchanged sentences

Settlement of cash flow hedge (2)

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

465 240 846 359

Net change in cash flow hedges, net of taxes of $ 73 , $ 69 , $ 54 , $( 929 )

236 101 63 ( 2,776 )

Balance at end of period $ ( 1,062 ) $ ( 1,612 ) $ ( 1,062 ) $ ( 1,612 )

6 unchanged sentences

$ ( 34,818 ) $ ( 44,164 ) $ ( 34,818 ) $ ( 44,164 )

(1) Amounts are recorded in equity in earnings (losses) on the unaudited condensed statements of operations.

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

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements