LIFETIME BRANDS, INC 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures The Chief Executive Officer and the Chief Financial Officer of the Company (its principal executive officer and principal financial officer, respectively) have concluded, based on their evaluation as of December 31, 2021, that the Company’s controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed by it under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer of the Company, as appropriate to allow timely decisions regarding required disclosure. Changes in Internal Controls There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. 45 Table of Contents Management’s Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2021. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: • Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and acquisitions and dispositions of the assets of the Company; • Provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. All internal control systems, no matter how well designed, have inherent limitations. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or the degree of compliance with the policies or procedures may deteriorate. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 using the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2021 was effective. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report. 46 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Lifetime Brands, Inc. Opinion on Internal Control Over Financial Reporting We have audited Lifetime Brands, Inc.’s and subsidiaries internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Lifetime Brands, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2021 consolidated financial statements of the Company and our report dated March 9, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Jericho, New York March 9, 2022 47 Table of Contents Item 9B. Other Information Not applicable. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. PART III Items 10, 11, 12, 13 and 14 The information required under these items is contained in the Company’s 2022 Proxy Statement, which will be filed with the SEC within 120 days after the close of the Company’s fiscal year covered by this Annual Report on Form 10-K and is incorporated herein by reference. PART IV Item 15. Exhibits and Financial Statement Schedules (a) See Financial Statements and Financial Statement Schedule on page F-1. (b) Exhibits: Exhibit Index No. Description 2.1 Agreement and Plan of Merger, dated as of December 22, 2017, by and among the Company, TPP Acquisition I Corp., TPP Acquisition II LLC, Taylor Parent, LLC, Taylor Holdco, LLC, and CP Taylor GP, LLC. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on December 29, 2017) Holdco, LLC, and CP Taylor GP, LLC. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on December 29, 2017) 3.1 Second Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005) 3.2 Certificate of Amendment of Second Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed June 10, 2016) 3.3 Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 8, 2016) 4.1 Description of the Company’s securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2019) 10.1 License Agreement dated December 14, 1989 between the Company and Farberware, Inc. (incorporated by reference to the Company’s registration statement No. 33-40154 on Form S-1)(P) 10.2 Fourth Amended and Restated Employment Agreement, dated as of June 27, 2019, between the Company and Jeffrey Siegel (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 28, 2019)* 10.3 First Amendment to the Fourth Amended and Restated Employment Agreement, dated as of October 11, 2019, between the Company and Jeffrey Siegel (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed October 15, 2019) * 10.4 Letter Agreement Amending and Supplementing Employment Agreement between Lifetime Brands, Inc. and Daniel Siegel, effective April 13, 2020 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020) 10.5 Lease Agreement, dated as of May 10, 2006, between AG Metropolitan Endo, L.L.C and the Company for the property located at 1000 Stewart Avenue in Garden City, New York (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed May 15, 2006) 48 Table of Contents 10.6 First Amendment to the Lease Agreement, dated as of September 26, 2006, between AG Metropolitan Endo, L.L.C and the Company for the property located at 1000 Stewart Avenue in Garden City, New York (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006) 10.7 Amended and Restated 2000 Long-Term Incentive Plan, dated June 28, 2018 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 29, 2018)* 10.8 Form of Restricted Stock Award Agreement under the Amended and Restated 2000 Long-term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed August 10, 2015)* 10.9 Form of Deferred Stock (Performance-Vesting) Award Agreement under the Amended and Restated 2000 Long-term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed August 10, 2015)* 10.10 Amended and Restated 2000 Incentive Bonus Compensation Plan, effective as of June 22, 2017 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 23, 2017)* 10.11 Amended and Restated 2000 Incentive Bonus Compensation Plan, effective as of June 25, 2020 (filed as Appendix B to the Registrant's Definitive Proxy Statement on Schedule 14A, filed on April 29, 2020 and incorporated by reference herein) 10.12 Amended and Restated Employment Agreement, dated September 10, 2015, between the Company and Laurence Winoker (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 16, 2015)* 10.13 Amendment to the Amended and Restated Employment Agreement, dated November 8, 2017, between the Company and Laurence Winoker (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017)* 10.14 Letter Agreement Amending and Supplementing Employment Agreement between Lifetime Brands, Inc. and Laurence Winoker, effective April 13, 2020 (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020) 10.15 Amendment No. 1 dated September 5, 2007 to the Shares Subscription Agreement by and among the Company, Ekco, S.A.B. and Mr. José Ramón Elizondo Anaya and Mr. Miguel Ángel Huerta Pando (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008) 10.16 Shares Subscription Agreement by and among the Company, Ekco, S.A.B. and Mr. José Ramón Elizondo Anaya and Mr. Miguel Ángel Huerta Pando, dated as of June 8, 2007 (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed June 11, 2007) 10.17 Amendment No. 1 dated September 5, 2007 to the Shares Subscription Agreement by and among the Company, Ekco, S.A.B. and Mr. José Ramón Elizondo Anaya and Mr. Miguel Ángel Huerta Pando (incorporated by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008) 10.18 Amendment No. 2 dated September 25, 2008 to the Shares Subscription Agreement by and among the Company, Ekco, S.A.B. and Mr. José Ramón Elizondo Anaya and Mr. Miguel Ángel Huerta Pando (incorporated by reference to Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2008) 10.19 Asset Purchase Agreement between Mikasa, Inc. and the Company, dated as of June 6, 2008 (incorporated by reference to Exhibit 99.1 to the Company’s Form 10-Q for the quarter ended June 30, 2008) 10.20 Share Purchase Agreement, dated November 4, 2011, by and among the Company and Creative Tops Holding Limited and Creative Tops Far East Limited (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed November 8, 2011) 10.21 Senior Secured Credit Agreement, dated as of July 27, 2012, by and among the Company, the Subsidiary Guarantors, the Lenders and JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral Agent (incorporated by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013) 10.22 Amendment No. 1 to the Senior Secured Credit Agreement, dated as of November 13, 2012, by and among the Company, the Subsidiary Guarantors party thereto, the Swap Agreement Counterparty, the financial institutions party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K filed June 27, 2013) 49 Table of Contents 10.23 Amendment No. 2 to the Senior Secured Credit Agreement, dated as of June 21, 2013, by and among the Company, the Subsidiary Guarantors party thereto, the financial institutions party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed June 27, 2013) 10.24 Share Purchase Agreement relating to Thomas Plant (Birmingham) Limited, dated January 15, 2014, by and among the Company and Andrew Plant, Richard Plant, Peter Bushell, and Sally Wright (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed January 17, 2014) 10.25 Deed of Variation and Settlement, dated April 1, 2015, by and among the Company and Andrew Plant, Richard Plant, Peter Bushell, and Sally Wright (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed May 8, 2015) 10.26 Employment Agreement, dated as of November 8, 2017, between the Company and Daniel Siegel (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017)* 10.27 Amendment to the Employment Agreement, dated as of October 11, 2019, between the Company and Daniel Siegel (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed October 15, 2019)* 10.28 Letter Agreement Amending and Supplementing Employment Agreement between Lifetime Brands, Inc. and Daniel Siegel, effective April 13, 2020 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020) 10.29 Second Amendment, dated February 1, 2021, to the Employment Agreement, dated as of November 8, 2017, by and between Lifetime Brands, Inc. and Daniel Siegel (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed February 1, 2021) 10.30 Form of Amended and Restated Director’s and Officer’s Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 28, 2016) 10.31 Receivables Purchase Agreement, dated as of September 30, 2016 by and among the Company, as a Seller and as a Seller Agent and initial Servicer, for itself and each of its subsidiaries thereto as a Seller, and HSBC Bank USA, National Association, as Purchaser (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 4, 2016) 10.32 Lease Agreement (Single Tenant Facility), dated as of February 14, 2017 between Baseline Opportunity LLC and Lifetime Brands Inc. for property located at 1221 North Alder Avenue, Rialto, California (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017) 10.33 Voting Agreement, dated as of December 22, 2017, by and among Taylor Parent, LLC, and Jeffrey Siegel, Ronald Shiftan, Daniel Siegel and Clifford Siegel (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 29, 2017) 10.34 Employment Agreement, dated as of December 22, 2017, between the Company and Robert B. Kay (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 29, 2017)* 10.35 Amendment to the Employment Agreement, dated as of October 11, 2019, between the Company and Robert B. Kay (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed October 15, 2019)* 10.36 Letter Agreement Amending and Supplementing Employment Agreement between Lifetime Brands, Inc. and Robert B. Kay, effective April 13, 2020 (incorporated by reference to Exhibit 10. 1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020) 10.37 Second Amendment, dated February 1, 2021, to the Employment Agreement, dated as of December 22, 2017, by and between Lifetime Brands, Inc. and Robert Kay (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed February 1, 2021) 10.38 Stockholders Agreement, dated as of March 2, 2018, between the Company and Taylor Parent, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 6, 2018) 10.39 Amendment to Stockholders Agreement, dated as of October 11, 2019, between the Company and Taylor Parent, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 15, 2019) 10.40 Letter Agreement and Joinder, dated as of November 9, 2018, by and among the Company, Taylor Parent, LLC and Centre Capital Investors V, LP. (incorporated by reference to Exhibit 10.01 to the Company’s Current Report on Form 8-K filed November 15, 2018) 50 Table of Contents 10.41 Credit Agreement, dated as of March 2, 2018, by and among the Company, the other Borrowers from time to time party thereto, the other Loan Parties from time to time party thereto, the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10. 0 2 to the Company’s Current Report on Form 8-K filed March 6, 2018) 10.42 Amendment No. 1, dated as of December 28, 2021, by and among the Company, the other Loan Parties party thereto (as defined therein), and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by re ference to Exhibit 10.01 to the Company's Current Report on Form 8-K filed Decem b er 29, 2021) 10.43 Loan Agreement, dated as of March 2, 2018, by and among the Company, the other Loan Parties from time to time party thereto, the Lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent and Golub Capital LLC, as Syndication Agent. (incorporated by reference to Exhibit 10. 0 3 to the Company’s Current Report on Form 8-K filed March 6, 2018) 10.44 Amendment No.1 to the Receivables Purchase Agreement, dated as of October 9, 2020 by and among the Company, as a Seller and as a Seller Agent and initial Servicer, for itself and each of its subsidiaries thereto as a Seller, and HSBC Bank USA, National Association, as Purchaser (incorporated by reference to Exhibit 10. 43 to the Company's Annual Report on Form 10- K for the year ended December 31, 2020) 21.1 Subsidiaries of the Company 23.1 Consent of Ernst & Young LLP 23.2 Consent of Castillo Miranda Y Compania, S.C. 31.1 Certification by Robert B. Kay, Chief Executive Officer and Director, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification by Laurence Winoker, Senior Vice President – Finance, Treasurer and Chief Financial Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification by Robert B. Kay, Chief Executive Officer and Director, and Laurence Winoker, Senior Vice President – Finance, Treasurer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (**) 99.1 Report of Independent Registered Accounting Firm on the consolidated financial statements of Grupo Vasconia, S.A.B. (formerly Ekco, S.A.B.) 101.INS Inline XBRL Instance Document (the instance document does not appear in the interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 The cover page from this Annual Report on Form 10-K, formatted in Inline XBRL Notes to exhibits: (*) Compensatory plans in which the directors and executive officers of the Company participate. (**) Furnished, not filed. 51 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Lifetime Brands, Inc. /s/ Robert B. Kay Robert B. Kay Chief Executive Officer and Director Date: March 9, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Robert B. Kay Chief Executive Officer and Director March 9, 2022 Robert B. Kay (Principal Executive Officer) /s/ Laurence Winoker Senior Vice President – Finance, March 9, 2022 Laurence Winoker Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) /s/ Jeffrey Siegel Executive Chairman of the Board of Directors March 9, 2022 Jeffrey Siegel /s/ Rachael Jarosh Director March 9, 2022 Rachael Jarosh /s/ John Koegel Director March 9, 2022 John Koegel /s/ Cherrie Nanninga Director March 9, 2022 Cherrie Nanninga /s/ Craig Phillips Director March 9, 2022 Craig Phillips /s/ Veronique Gabai-Pinsky Director March 9, 2022 Veronique Gabai-Pinsky /s/ Bruce Pollack Director March 9, 2022 Bruce Pollack /s/ Michael J. Regan Director March 9, 2022 Michael J. Regan /s/ Michael Schnabel Director March 9, 2022 Michael Schnabel 52 Table of Contents Item 15 LIFETIME BRANDS, INC. LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE The following consolidated financial statements of Lifetime Brands, Inc. are filed as part of this Annual Report under Item 8 – Financial Statements and Supplementary Data. Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) F- 2 Consolidated Balance Sheets as of December 31, 2021 and 2020 F- 4 Consolidated Statements of Operations for the Years ended December 31, 202 1 , 20 20 , and 201 9 F- 5 Consolidated Statements of Comprehensive Income (Loss) for the Years ended December 31, 202 1 , 20 20 and 201 9 F- 6 Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 202 1 , 20 20 , and 201 9 F- 7 Consolidated Statements of Cash Flows for the Years ended December 31, 202 1 , 20 20 , and 201 9 F- 8 Notes to Consolidated Financial Statements F- 9 The following consolidated financial statement schedule of Lifetime Brands, Inc. required pursuant to Item 15(a) is submitted herewith: Schedule II – Valuation and Qualifying Accounts S- 1 All other financial schedules are not required under the related instructions or are inapplicable, and therefore have been omitted. F -1 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Lifetime Brands, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Lifetime Brands, Inc. (and subsidiaries) (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss , stockholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and the financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We did not audit the financial statements of Grupo Vasconia, S.A.B. and subsidiaries, a corporation in which the Company has a 24.7% interest. In the consolidated financial statements, the Company’s investment in Grupo Vasconia, S.A.B. and Subsidiaries is stated at $22.3 million and $20.0 million as of December 31, 2021 and 2020, respectively, and the Company’s equity in the net (loss) income of Grupo Vasconia, S.A.B. and Subsidiaries is stated at $1.8 million in 2021, $1.5 million in 2020 and $0.5 million in 2019. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for Grupo Vasconia, S.A.B. and Subsidiaries, is based solely on the reports of the other auditors. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) , and our report dated March 9, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits and the reports of other auditors provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Long-lived Asset Impairment Description of the Matter As described in Note 7 to the consolidated financial statements, during the fourth quarter of 2021, the Company identified triggering events, which resulted in the Company assessing its International asset group for recoverability. The Company's test of recoverability and fair value measurement for the asset group resulted in an impairment charge of $14.8 million relating to finite-lived intangible assets in the International segment. F -2 Table of Contents Auditing the Company's measurement of impairment involved a high degree of subjectivity as estimates underlying the determination of fair values were based on assumptions about future economic conditions. Significant assumptions used in the Company's fair value estimates included projected net sales, earnings before interest, taxes, depreciation and amortization (“EBITDA”), terminal growth rates and the discount rate. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company's processes to determine its asset groups, the fair value of the related assets and calculation of the long-lived asset impairment charges. This included testing management’s review controls relating to the Company’s valuation models and significant assumptions, described above. To test the estimated fair value of the company's long-lived assets, we performed audit procedures that included, among other procedures, assessing methodologies and testing the significant assumptions and the underlying data used by the Company in its analyses. We evaluated our historical experience with management’s effort in producing accurate projections of revenue growth and EBITDA by comparing its historical projections to the Company’s actual performance. We tested the significant assumptions discussed above, as well as the completeness and accuracy of the underlying data used in the valuations. We assessed the appropriateness of the Company’s projections by comparing them to general and sector-specific market expectations. We engaged our valuation specialists to assist in assessing the reasonableness of the discount rate, the valuation models and significant assumptions used in the valuation of the finite-lived assets in the International segment. In order to reflect the uncertainty inherent in the projections, we inspected the sensitivity analyses performed by the Company and performed our own sensitivity analyses by increasing or decreasing the significant assumptions and evaluated the potential outcome for each of the finite-lived assets. Estimation of Variable Consideration Description of the Matter For the year ended December 31, 2021, the Company reported net sales of $862.9 million. As described in Note 2 of the audited consolidated financial statements, the Company offers various sales incentives and promotional programs to its customers in the normal course of business. These sales incentives and promotional spending, typically including cooperative advertising, buydowns, volume rebates and discounts, represent variable consideration and are reflected as reductions in net sales in the Company’s consolidated statements of operations. While a majority of the sales incentives and promotions are contractually agreed upon with the Company’s customers, certain discounts require the Company to estimate the sales incentive and promotions based on historical experience and other known factors or as the most likely amount in a range of possible outcomes. Auditing the Company’s measurement of the variable consideration associated with discounts is challenging because the calculation involves subjective estimates of future price concessions, number of units sold by distributors and product returns. Changes in these assumptions can have a material effect on the amount of net sales recognized. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of the Company’s controls over the estimation of variable consideration. Among others, we tested management’s review controls over the determination of significant assumptions used in estimating the variable consideration. We also tested controls over management’s review of the completeness and accuracy of the underlying data used in the analysis. Among other procedures, we inspected the sales contracts and communications between the sales department and customers that were used to support the estimation of the variable consideration. For a sample of transactions, we performed detailed transactional testing of customer deductions to validate the timing and amount of the sales allowances recorded. We performed corroborative inquiries of sales division executives to evaluate the ongoing sales promotions and spending needs at year end. Additionally, we performed retrospective analyses over management’s historical estimates in order to assess the reasonableness of how the Company measures certain variable consideration discounts. /s/ Ernst & Young LLP We have served as the Company’s auditor since 1984. Jericho, New York March 9, 2022 F -3 Table of Contents LIFETIME BRANDS, INC. CONSOLIDATED BALANCE SHEETS (in thousands - except share data) December 31, 2021 2020 ASSETS CURRENT ASSETS Cash and cash equivalents $ 27,982 $ 35,963 Accounts receivable, less allowances of $ 16,544 at December 31, 2021 and $ 17,013 at December 31, 2020 175,076 170,037 Inventory 270,516 203,164 Prepaid expenses and other current assets 11,499 12,129 TOTAL CURRENT ASSETS 485,073 421,293 PROPERTY AND EQUIPMENT, net 20,748 23,120 OPERATING LEASE RIGHT-OF-USE ASSETS 86,487 96,543 INVESTMENTS 22,295 20,032 INTANGIBLE ASSETS, net 212,678 244,025 OTHER ASSETS 1,793 2,468 TOTAL ASSETS $ 829,074 $ 807,481 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Current maturity of term loan $ 5,771 $ 17,657 Accounts payable 82,573 66,095 Accrued expenses 112,741 80,050 Income taxes payable 604 4,788 Current portion of operating lease liabilities 12,612 11,480 TOTAL CURRENT LIABILITIES 214,301 180,070 OTHER LONG-TERM LIABILITIES 12,116 16,483 INCOME TAXES PAYABLE, LONG-TERM 1,472 1,444 OPERATING LEASE LIABILITIES 90,824 102,355 DEFERRED INCOME TAXES 12,842 10,714 REVOLVING CREDIT FACILITY — 27,302 TERM LOAN 241,873 238,977 STOCKHOLDERS’ EQUITY Preferred stock, $ 1.00 par value, shares authorized: 100 shares of Series A and 2,000,000 shares of Series B; none issued and outstanding — — Common stock, $ 0.01 par value, shares authorized: 50,000,000 at December 31, 2021 and 2020; shares issued and outstanding: 22,018,016 at December 31, 2021 and 21,755,195 at December 31, 2020 220 218 Paid-in capital 271,556 268,666 Retained earnings 17,419 424 Accumulated other comprehensive loss ( 33,549 ) ( 39,172 ) TOTAL STOCKHOLDERS’ EQUITY 255,646 230,136 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 829,074 $ 807,481 See Notes to consolidated financial statements. F -4 Table of Contents LIFETIME BRANDS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands – except per share data) Year Ended December 31, 2021 2020 2019 Net sales $ 862,924 $ 769,169 $ 734,902 Cost of sales 559,605 495,171 479,711 Gross margin 303,319 273,998 255,191 Distribution expenses 80,772 72,845 72,543 Selling, general and administrative expenses 156,945 155,872 161,618 Goodwill and other intangible asset impairments 14,760 20,100 42,990 Restructuring expenses — 211 1,435 Income (loss) from operations 50,842 24,970 ( 23,395 ) Interest expense ( 15,524 ) ( 17,277 ) ( 20,780 ) Mark to market gain (loss) on interest rate derivatives 1,062 ( 2,144 ) 402 Income (loss) before income taxes and equity in earnings 36,380 5,549 ( 43,773 ) Income tax provision ( 16,541 ) ( 9,866 ) ( 1,109 ) Equity in earnings, net of taxes 962 1,310 467 NET INCOME (LOSS) $ 20,801 $ ( 3,007 ) $ ( 44,415 ) BASIC INCOME (LOSS) PER COMMON SHARE $ 0.97 $ ( 0.14 ) $ ( 2.16 ) DILUTED INCOME (LOSS) PER COMMON SHARE $ 0.94 $ ( 0.14 ) $ ( 2.16 ) See Notes to consolidated financial statements. F -5 Table of Contents LIFETIME BRANDS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) Year ended December 31, 2021 2020 2019 Net income (loss) $ 20,801 $ ( 3,007 ) $ ( 44,415 ) Other comprehensive income (loss), net of tax: Translation adjustment 690 ( 2,062 ) ( 292 ) Amount reclassified 3,404 235 — Total translation gain (loss) 4,094 ( 1,827 ) ( 292 ) Deferred gains (losses) on cash flow hedges: Fair value adjustment, net of tax of $( 246 ), $ 803 and $( 347 ) ( 311 ) ( 3,273 ) 1,212 Less: Settlement of cash flow hedges 1,514 984 ( 209 ) Total deferred gains (losses) on cash flow hedges 1,203 ( 2,289 ) 1,003 Effect of retirement benefit obligations: Net income (loss) arising from retirement benefit obligations, net of tax of $( 64 ), $ 259 and $ 251 191 ( 680 ) ( 601 ) Less: amortization of loss included in net income (loss), net of tax of $( 45 ), $( 52 ) and $( 34 ) 135 79 51 Total effects of retirement benefit obligations 326 ( 601 ) ( 550 ) Other comprehensive income (loss), net of tax 5,623 ( 4,717 ) 161 Comprehensive income (loss) $ 26,424 $ ( 7,724 ) $ ( 44,254 ) See Notes to consolidated financial statements. F -6 Table of Contents LIFETIME BRANDS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Common stock Paid-in capital Retained earnings Accumulated other comprehensive loss Shares Amount Total BALANCE AT DECEMBER 31, 2018 20,764 $ 208 $ 258,637 $ 55,264 $ ( 34,616 ) $ 279,493 Net loss — — — ( 44,415 ) — ( 44,415 ) Other comprehensive income, net of tax — — — — 161 161 Performance shares issued to employees 67 1 ( 1 ) — — — Net issuance of restricted shares granted to employees and directors 416 4 ( 4 ) — — — Stock compensation expense — — 5,021 — — 5,021 Net exercise of stock options 53 1 131 — — 132 Shares effectively repurchased for required employee withholding taxes ( 44 ) ( 1 ) ( 398 ) — — ( 399 ) Dividends (1) — — — ( 3,676 ) — ( 3,676 ) BALANCE AT DECEMBER 31, 2019 21,256 $ 213 $ 263,386 $ 7,173 $ ( 34,455 ) $ 236,317 Net loss — — — ( 3,007 ) — ( 3,007 ) Other comprehensive loss, net of tax — — — — ( 4,717 ) ( 4,717 ) Performance shares issued to employees 62 1 ( 1 ) — — — Net issuance of restricted shares granted to employees and directors 525 5 ( 5 ) — — — Stock compensation expense — — 5,916 — — 5,916 Net exercise of stock options 3 0 27 — — 27 Shares effectively repurchased for required employee withholding taxes ( 91 ) ( 1 ) ( 657 ) — — ( 658 ) Dividends (1) — — — ( 3,742 ) — ( 3,742 ) BALANCE AT DECEMBER 31, 2020 21,755 $ 218 $ 268,666 $ 424 $ ( 39,172 ) $ 230,136 Net income — — — 20,801 — 20,801 Other comprehensive income, net of tax — — — — 5,623 5,623 Performance shares issued to employees 150 1 ( 1 ) — — — Net issuance of restricted shares granted to employees and directors 221 2 ( 2 ) — — — Stock compensation expense — — 5,204 — — 5,204 Net exercise of stock options 106 1 876 — — 877 Shares effectively repurchased for required employee withholding taxes ( 214 ) ( 2 ) ( 3,187 ) — — ( 3,189 ) Dividends (1) — — — ( 3,806 ) — ( 3,806 ) BALANCE AT DECEMBER 31, 2021 22,018 $ 220 $ 271,556 $ 17,419 $ ( 33,549 ) $ 255,646 (1) Cash dividend declared per share of common stock, were $ 0.17 , $ 0.17 and $ 0.17 in 2019, 2020 and 2021, respectively. See Notes to consolidated financial statements. F -7 Table of Contents LIFETIME BRANDS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year ended December 31, 2021 2020 2019 OPERATING ACTIVITIES Net income (loss) $ 20,801 $ ( 3,007 ) $ ( 44,415 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 22,520 24,664 25,115 Goodwill and other intangible asset impairments 14,760 20,100 42,990 Amortization of financing costs 1,739 1,774 1,748 Mark to market (gain) loss on interest rate derivatives ( 1,062 ) 2,144 ( 402 ) Non-cash lease expense ( 1,294 ) 2,379 1,047 Provision (recovery) for doubtful accounts ( 5 ) 3,291 ( 163 ) Deferred income taxes 1,799 ( 1,861 ) ( 1,073 ) Stock compensation expense 5,217 5,951 5,041 Undistributed (earnings) from equity investment, net of taxes ( 807 ) ( 1,258 ) ( 343 ) SKU Rationalization — — 8,500 Changes in operating assets and liabilities Accounts receivable ( 5,531 ) ( 43,760 ) ( 2,096 ) Inventory ( 67,501 ) ( 28,979 ) ( 7,455 ) Prepaid expenses, other current assets and other assets 2,043 1,088 ( 3,855 ) Accounts payable, accrued expenses and other liabilities 48,579 55,721 5,108 Income taxes receivable — 1,577 ( 135 ) Income taxes payable ( 4,270 ) 4,989 260 NET CASH PROVIDED BY OPERATING ACTIVITIES 36,988 44,813 29,872 INVESTING ACTIVITIES Purchases of property and equipment ( 3,986 ) ( 2,082 ) ( 9,169 ) Proceeds from sale of shares of equity method investment 3,061 — — Acquisition ( 178 ) — — NET CASH USED IN INVESTING ACTIVITIES ( 1,103 ) ( 2,082 ) ( 9,169 ) FINANCING ACTIVITIES Proceeds from revolving credit facility 103,385 129,244 345,494 Repayments of revolving credit facility ( 130,662 ) ( 135,463 ) ( 355,730 ) Repayments of Term Loan ( 10,478 ) ( 7,583 ) ( 2,750 ) Cash dividends paid ( 3,843 ) ( 3,651 ) ( 3,571 ) Payments for finance lease obligations ( 117 ) ( 152 ) ( 92 ) Proceeds from the exercise of stock options 877 27 132 Payments of tax withholding for stock based compensation ( 3,189 ) ( 658 ) ( 399 ) NET CASH USED IN FINANCING ACTIVITIES ( 44,027 ) ( 18,236 ) ( 16,916 ) Effect of foreign exchange on cash 161 98 ( 64 ) (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ( 7,981 ) 24,593 3,723 Cash and cash equivalents at beginning of year 35,963 11,370 7,647 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 27,982 $ 35,963 $ 11,370 See Notes to consolidated financial statements. F -8 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES Organization and business The Company designs, sources and sells branded kitchenware, tableware and other products used in the home and markets its products under a number of widely-recognized brand names and trademarks, which are either owned or licensed by the Company or through retailers’ private labels and their licensed brands. The Company’s products, which are targeted primarily towards consumers purchasing moderately priced kitchenware, tableware and housewares, are sold through virtually every major level of trade. 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 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 The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for financial information and with the instructions to Form 10-K. The accompanying consolidated financial statements include estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with U.S. GAAP. The most significant of these estimates and assumptions relate to revenue recognition, allowances for doubtful accounts, reserves for sales returns and allowances and customer chargebacks, inventory mark-down provisions, impairment of goodwill, tangible and intangible assets, stock-based compensation expense, estimates for unpaid healthcare claims, derivative valuations, accruals related to the Company’s tax positions and tax valuation allowances. Although these and other estimates and assumptions are based on the best available information, actual results could be materially different from these estimates. Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Risk and uncertainties The Company’s current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from expectations, which could materially affect the Company’s results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing COVID-19 pandemic. The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict. Foreign currency Foreign currency denominated assets and liabilities are translated into U.S. dollars at exchange rates prevailing at the balance sheet dates. Revenues, costs and expenses are translated into U.S. dollars at average exchange rates for the relevant period. Income and losses resulting from translation are recorded as a component of accumulated other comprehensive income (loss). The Company may enter into foreign exchange derivative contracts to hedge the volatility of exchange rates related to a portion of its international inventory purchases. Realized gains and losses from designated foreign currency derivative contracts are recognized in cost of sales as the hedged inventory purchases are sold. Unrealized gains and losses from foreign currency transactions on the fair value of foreign exchange contracts designated as hedges are recorded as a component of accumulated other comprehensive income (loss). Realized and unrealized gains and losses from non-designated foreign currency hedges are recognized in selling, general and administrative expenses in the consolidated statements of operations. Foreign currency gains and losses included within selling, general and administrative expenses were a $ 1.3 million loss in 2021, a $ 0.5 million gain in 2020, and a $ 0.1 million gain in 2019. F -9 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Revenue recognition The Company sells products wholesale, to retailers and distributors, and retail, directly to the consumer. Wholesale sales and retail sales are primarily recognized at the point in time the customer obtains control of the products, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products. The Company offers various sales incentives and promotional programs to its customers in the normal course of business. These incentives and promotions typically include arrangements such as cooperative advertising, buydowns, volume rebates and discounts. These arrangements and an estimate for products expected to be returned are reflected as reductions of revenue at the time of sale. See NOTE 2 — REVENUE for additional information. Cost of sales Cost of sales consist primarily of costs associated with the production and procurement of product, inbound freight costs, purchasing costs, royalties and other product procurement related charges. In 2019, the Company implemented programs to improve the productivity of its inventory and simplify its U.S. business. In connection therewith, it initiated a stock keeping unit rationalization (“SKU Rationalization”) initiative to identify inventory to discontinue from active status, consistent with the objectives of these programs. During the year ended December 31, 2019, the Company recorded an $ 8.5 million charge to cost of sales associated with the SKU Rationalization initiative. The inventory charge, 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. Distribution expenses Distribution expenses consist primarily of warehousing expenses and freight-out expenses. Freight-out expenses were $ 19.2 million, $ 15.4 million and $ 15.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. Handling costs of products sold are included in cost of sales. Advertising expenses Advertising expenses are expensed as incurred and are included in selling, general and administrative expenses. Advertising expenses were $ 4.4 million, $ 3.4 million and $ 4.0 million for the years ended December 31, 2021, 2020 and 2019, respectively. Accounts receivable The Company periodically reviews the collectability of its accounts receivable and establishes allowances for estimated losses that could result from the inability of its customers to make required payments, taking into consideration customer credit history and financial condition, industry and market segment information, credit reports, and economic trends and conditions such as the impact of the COVID-19 pandemic. 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. The Company also maintains an allowance for anticipated customer deductions. The allowances for deductions are primarily based on contracts with customers. However, in certain cases the Company does not have a formal contract and, therefore, customer deductions are non-contractual. To evaluate the reasonableness of non-contractual customer deductions, the Company analyzes currently available information and historical trends of deductions. The sales of accounts receivable, under the Company’s Receivable Purchase Agreement with HSBC, are reflected as a reduction of accounts receivable in the Company’s consolidated balance sheet at the time of sale and any related expense is included in selling, general and administrative expenses in the Company’s consolidated statements of operations. Inventory Inventory consists principally of finished goods sourced from third-party suppliers. Inventory also includes finished goods, work in process and raw materials related to the Company’s manufacture of sterling silver products. Inventory is priced using the lower of cost (first-in, first-out basis) or net realizable value. The Company estimates the selling price of its inventory on a product by product basis based on the current selling environment. If the estimated selling price is lower than the inventory’s cost, the Company reduces the value of the inventory to its net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal and transportation. F -10 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Property and equipment Property and equipment is stated at cost. Equipment under finance leases is recorded at the present value of the total minimum lease payments. Property and equipment, other than leasehold improvements and equipment under finance leases, are depreciated using the straight-line method over the estimated useful lives of the assets. Buildings are depreciated over 30 years, machinery and equipment and computer hardware and software are depreciated over periods ranging from 3 years to 10 years. Leasehold improvements are amortized over the term of the lease or the estimated useful lives of the improvements, whichever is shorter. Equipment under finance leases are amortized over the shorter of the lease term or the assets' useful lives. Advances paid towards the acquisition of property and equipment and the cost of property and equipment not ready for use before the end of the period are classified as construction in progress. Cash equivalents The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Concentration of credit risk The Company’s cash and cash equivalents are potentially subject to concentration of credit risk. The Company maintains cash with several financial institutions that, in some cases, is in excess of Federal Deposit Insurance Corporation insurance limits. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company’s customer base. During the years ended December 31, 2021, 2020 and 2019, Wal-Mart Stores, Inc., including Sam’s Club and, in the U.K., Asda Superstore, (“Walmart”), accounted for 18 %, 20 % and 16 % of consolidated net sales, respectively. During the years ended December 31, 2021, 2020 and 2019, sales to Costco Wholesale Corporation (“Costco”) accounted for 12 %, 11 %, and 11 % of consolidated net sales. During the year ended December 31, 2021 and 2020, Amazon.com Inc., (“Amazon”), accounted for 12 % and 10 % of consolidated net sales. Sales to Walmart, Costco and Amazon are included in the Company's U.S. and International segments. No other customers accounted for 10% or more of the Company’s sales during these periods. Fair value measurements Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures , provides enhanced guidance for using fair value to measure assets and liabilities and establishes a common definition of fair value, provides a framework for measuring fair value under U.S. GAAP and expands disclosure requirements about fair value measurements. Fair value measurements included in the Company’s consolidated financial statements relate to the Company’s annual goodwill and other intangible asset impairment tests and derivatives, described in NOTE 7 — GOODWILL AND INTANGIBLE ASSETS and NOTE 9 — DERIVATIVES, respectively. Fair value of financial instruments 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 that the carrying amounts of borrowings outstanding under its ABL Agreement and Term Loan approximate fair value since such borrowings bear interest at variable market rates. Derivatives The Company accounts for derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging. ASC 815 requires that all derivative instruments be recognized on the balance sheet at fair value as either an asset or liability. Changes in the fair value of derivatives that qualify as hedges and have been designated as part of a hedging relationship for accounting purposes have no net impact on earnings until the hedged item is recognized in earnings. The change in the fair value of hedges are included in accumulated other comprehensive income (loss) and is subsequently recognized in the Company’s consolidated statements of operations to mirror the location of the hedged items impacting earnings. Changes in fair value of derivatives that do not qualify as hedging instruments for accounting purposes are recorded in the consolidated statements of operations. F -11 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Goodwill, intangible assets and long-lived assets Goodwill and intangible assets deemed to have indefinite lives are not amortized but, instead, are subject to an annual impairment assessment. Additionally, if events or conditions were to indicate the carrying value of a reporting unit may not be recoverable, the Company would evaluate goodwill and other intangible assets for impairment at that time. As it relates to the goodwill assessment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment testing described in the FASB's Accounting Standards Update No. (“ASU”) Topic 350, Intangibles – Goodwill and Other. If, after assessing qualitative factors, the Company determines that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative test is unnecessary and the Company’s goodwill is considered to be unimpaired. However, if based on the Company’s qualitative assessment it concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, or if the Company elects to bypass the qualitative assessment, the Company will proceed with performing the quantitative impairment test. See NOTE 7 — GOODWILL AND INTANGIBLE ASSETS for further discussion regarding goodwill impairment. The Company also evaluates qualitative factors to determine whether impairment indicators exist for its indefinite lived intangibles and performs quantitative tests if required. These tests can include the relief from royalty model or other valuation models. See NOTE 7 — GOODWILL AND INTANGIBLE ASSETS for further discussion regarding impairment of indefinite lived intangibles. Long-lived assets, including intangible assets deemed to have finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. 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 7 — GOODWILL AND INTANGIBLE ASSETS for further discussion regarding impairment of long-lived assets. Income taxes The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company accounts for foreign income taxes based upon anticipated reinvestment of profits into respective foreign tax jurisdictions. The Company applies the authoritative guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the Company’s financial statements . In accordance with this guidance, tax positions must meet a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position. A valuation allowance is required to be established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. Share-based compensation The Company accounts for its share-based compensation arrangements in accordance with ASC Topic 718, Compensation: Stock-based Compensation, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period. Forfeitures are accounted for as they occur. The Company uses the Black-Scholes option valuation model to estimate the fair value of its stock options. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s common stock and the risk-free interest rate. Changes in these subjective input assumptions can materially affect the fair value estimate of the Company’s stock options on the date of the option grant. Performance share awards are initially valued at the Company’s closing stock price on the date of grant. Each performance award represents the right to receive up to 150 % of the target number of shares of common stock. The number of shares of common stock earned will be determined based on the attainment of specified performance goals, as determined by the Compensation Committee of the Board of Directors, by the end of the performance period. Compensation expense for performance awards is recognized over the F -12 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 vesting period and will vary based on remeasurement during the performance period. If achievement of the performance metrics is not probable of achievement during the performance period, compensation expense is reversed. The awards are forfeited if the performance metrics are not achieved as of the end of the performance period. The performance share awards vest at the end of a three year period, as determined by the Compensation Committee. The Company bases the estimated fair value of restricted stock awards on the date of grant. The estimated fair value is determined based on the closing price of the Company’s common stock on the date of grant multiplied by the number of shares awarded. Compensation expense is recognized on a straight-line basis over the vesting period. Leases The Company determines if an arrangement is a lease at the inception of a contract. Operating lease right-of-use (“ROU”) assets are included in operating lease right-of-use assets on the consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of operating lease liability and operating lease liabilities, respectively, on the consolidated balance sheets. Finance leases are included in property and equipment, net, accrued expenses and other long-term liabilities. The Company's finance leases are not material to the Company’s consolidated balance sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The operating lease ROU asset may also include any lease payments made, adjusted for any prepaid or accrued rent payments, lease incentives, and initial direct costs incurred. Certain leases may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. For certain equipment leases, the Company applies a portfolio approach to effectively account for any ROU assets and lease liabilities. Leases with an initial term of twelve months or less are not recorded on the balance sheet. 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 The Company self-insures certain portions of its health insurance plan. The Company maintains an accrual for estimated unpaid claims and claims incurred but not yet reported (“IBNR”). Although management believes that it uses the best information available to estimate IBNR claims, actual claims may vary significantly from estimated claims. Restructuring expenses Costs associated with restructuring activities are recorded at fair value when a liability has been incurred. A liability has been incurred at the communication date for severance. Charges associated with lease terminations, related to restructuring activities, are recognized at the effective date of the lease modification. During the year ended December 31, 2020, the Company's International segment incurred $ 0.2 million of restructuring expenses related to severance associated with the strategic reorganization of the International segment’s product development and sales workforce. The strategic reorganization was the result of the Company's efforts for product development efficiencies and an international sales approach tailored to countries. During the year ended December 31, 2019, the Company's U.S. segment incurred $ 0.7 million of restructuring expense related to the integration of Filament. During the year ended December 31, 2019, the Company's International segment incurred $ 0.7 million of restructuring expense primarily related to the integration of its legal entities operating in Europe. Commitments and Contingencies The Company is subject to various claims and contingencies related to lawsuits, certain taxes and environmental matters, as well as commitments under contractual and other commercial obligations. The Company recognizes liabilities for contingencies and commitments when a loss is probable and estimable. F -13 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Adopted 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 adoption did not have a material impact on the Company’s consolidated financial statements. New accounting pronouncements Updates not listed below were assessed and either determined to not be applicable or are expected to have a minimal effect on the Company’s financial position, results of operations, and disclosures. In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. ASU 2016-13 also provides updated guidance regarding the impairment of available-for-sale debt securities and includes additional disclosure requirements. The new guidance is effective for public business entities that meet the definition of a Smaller Reporting Company as defined by the Securities and Exchange Commission for interim and annual periods beginning after December 15, 2022. The Company met the definition of a Smaller Reporting Company as of the one-time determination date of November 15, 2019. Early adoption is permitted. Management is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to account for contract modifications, hedging relationships and other transactions that reference the London Inter-Bank Offered Rate ("LIBOR") or another reference rate that is expected to be discontinued as a result of reference rate reform. The guidance in ASU 2020-04 may be applied to contract modifications and hedging relationships as of any date from March 12, 2020 but no later than December 31, 2022 and should be applied on a prospective basis. The Company has not yet applied the guidance in ASU 2020-04 and is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an acquirer of a business should recognize and measure contract assets and contract liabilities in a business combination in accordance with Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers. The new guidance is effective for public business entities for fiscal years beginning after December 15, 2022 on a prospective basis, with early adoption permitted. Management is currently evaluating the timing of adoption and the impact of this standard on its consolidated financial statements and related disclosures. NOTE 2 — REVENUE The Company sells products wholesale, to retailers and distributors, and sells products retail, directly to consumers. Wholesale sales and retail sales are recognized at the point in time the customer obtains control of the products in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products. To indicate the transfer of control, the Company must have a present right to payment, legal title must have passed to the customer, the customer must have the significant risks and rewards of ownership, and where acceptance is not a formality, the customer must have accepted the product or service. The Company’s principal terms of sale are Free on Board ("FOB") Shipping Point, or equivalent, and, as such, the Company primarily transfers control and records revenue for product sales upon shipment. Sales arrangements with delivery terms that are not FOB Shipping Point are not recognized upon shipment and the transfer of control for revenue recognition is evaluated based on the associated shipping terms and customer obligations. Shipping and handling fees that are billed to customers in sales transactions are included in net sales and amounted to $ 3.9 million, $ 3.9 million and $ 3.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. Net sales exclude taxes that are collected from customers and remitted to the taxing authorities. The Company offers various sales incentives and promotional programs to its wholesale customers from time to time in the normal course of business. These incentives and promotions typically include arrangements such as cooperative advertising, buydowns, volume rebates and discounts. These arrangements represent forms of variable consideration, and an estimate of sales returns are reflected as reductions in net sales in the Company’s consolidated statements of operations. These estimates are based on historical experience and other known factors or as the most likely amount in a range of possible outcomes. On a quarterly basis, variable consideration is assessed on a portfolio approach in estimating the extent to which the components of variable consideration are constrained. F -14 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Payment terms vary by customer, but generally range from 30 to 90 days or at the point of sale for the Company’s retail direct sales. As a result of the COVID-19 pandemic, beginning in the first quarter of 2020 and lasting through the fourth quarter of 2020, many of the Company's customers that operate retail locations temporarily closed their stores voluntarily or as mandated by government stay at home orders. In response to these closings, the affected customers had requested temporary extended payment terms. The Company incurs certain direct incremental costs to obtain contracts with customers, such as sales-related commissions, where the recognition period for the related revenue is less than one year. These costs are expensed as incurred and recorded within selling, general and administrative expenses in the consolidated statement of operations. Incidental items that are immaterial in the context of the contract are expensed as incurred. The following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the years ended December 31, 2021, 2020 and 2019 (in thousands). Year Ended December 31, 2021 2020 2019 (in thousands) U.S. segment Kitchenware $ 487,797 $ 426,883 $ 354,331 Tableware 167,181 141,113 156,061 Home Solutions 115,655 115,543 133,779 Total U.S. segment 770,633 683,539 644,171 International segment 92,291 85,630 90,731 Total net sales $ 862,924 $ 769,169 $ 734,902 Year ended December 31, 2021 2020 2019 (in thousands) United States $ 743,319 $ 658,285 $ 612,762 United Kingdom 54,150 54,364 62,991 Rest of World 65,455 56,520 59,149 Total net sales $ 862,924 $ 769,169 $ 734,902 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 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 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 year ended December 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. 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. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments that do not depend on changes in index rates or payments based on usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense. ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. ROU assets also include any advance F -15 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 lease payments. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The components of lease costs for the year ended December 31, 2021, 2020 and 2019 were as follows (in thousands): Year Ended December 31, 2021 2020 2019 Operating lease costs (1) : Fixed lease expense $ 17,860 $ 18,181 $ 18,898 Variable lease expense 5,833 $ 3,798 $ 4,571 Total $ 23,693 $ 21,979 $ 23,469 (1) Expenses are recorded within distribution expenses and selling, general and administrative expenses. Supplemental cash flow information for the year ended December 31, 2021, 2020 and 2019 were as follows (in thousands): Year Ended December 31, 2021 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows for operating leases $ 19,154 $ 15,802 $ 17,851 Total $ 19,154 $ 15,802 $ 17,851 Year Ended December 31, 2021 2020 2019 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ 1,299 $ — $ 118,447 Total $ 1,299 $ — $ 118,447 Included in machinery, furniture and equipment at each of December 31, 2021 and 2020 is $ 0.3 million and $ 0.4 million, respectively, related to assets recorded under finance leases. Included in accumulated depreciation and amortization at December 31, 2021 and December 31, 2020 is $ 0.2 million related to assets recorded under finance leases. During the period ended December 31, 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 December 31, 2020 were $ 1.0 million were deferred into fiscal year 2021. As of December 31, 2021, all deferred payments have been paid. F -16 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The aggregate future lease payments for operating leases as of December 31, 2021 were as follows (in thousands): Operating 2022 $ 18,534 2023 18,552 2024 18,133 2025 18,032 2026 17,459 Thereafter 38,590 Total lease payments 129,300 Less: Interest ( 25,864 ) Present value of lease payments $ 103,436 Average lease terms and discount rates were as follows: December 31, 2021 December 31, 2020 Weighted-average remaining lease term (years) Operating leases 7.3 8.2 Weighted-average discount rate Operating leases 6.2 % 6.2 % NOTE 5 — SALE OF ACCOUNTS RECEIVABLE To improve its liquidity during seasonally high working capital periods, the Company has an uncommitted Receivables Purchase Agreement with HSBC Bank USA, as Purchaser (the “Receivables Purchase Agreement”). Under the Receivables Purchase Agreement, the Company may offer to sell certain eligible accounts receivables (the “Receivables”) to HSBC Bank USA, which may accept such offer, and purchase the offered Receivables. Under the Receivables Purchase Agreement, following each purchase of Receivables, the outstanding aggregate purchased Receivables shall not exceed $ 30.0 million. HSBC Bank USA will assume the credit risk of the Receivables purchased; and, the Company will continue to be responsible for all non-credit risk matters. The Company will service the Receivables, and as such servicer, collect and otherwise enforce the Receivables on behalf of HSBC Bank USA. The term of the agreement is for 364 days and automatically extends for annual successive terms unless terminated. Either party may terminate the agreement at any time upon 60 days prior written notice to the other party. Pursuant to this agreement, the Company sold $ 150.7 million and $ 159.4 million of Receivables during the years ended December 31, 2021 and 2020, respectively. At December 31, 2021 and 2020, $ 28.8 million and $ 24.7 million, respectively, of receivables sold are outstanding and are due to HSBC Bank USA from customers. A charge of $ 0.4 million related to the sale of the Receivables is included in selling, general and administrative expenses in the consolidated statements of operations for both the years ended December 31, 2021 and 2020. NOTE 6 — EQUITY INVESTMENTS The Company owns 24.7 % of the outstanding capital stock of Vasconia, an integrated manufacturer of aluminum products and one of Mexico’s largest housewares companies. Shares of Vasconia’s capital stock are traded on the Bolsa Mexicana de Valores, the Mexican Stock Exchange. The Quotation Key is VASCONI. The Company accounts for its investment in Vasconia using the equity method of accounting and records its proportionate share of Vasconia’s net income in the Company’s statement of operations. Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired) for the years ended December 31, 2021, 2020 and 2019 in the accompanying 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 Company recorded a non-cash gain of $ 1.7 million, increasing the Company’s investment balance. Additionally, a loss of $ 2.0 million was recognized for the proportionate share of the diluted ownership for amounts previously recognized in accumulated other comprehensive loss. The net loss of $ 0.3 million was included in equity in earnings, net of taxes, in the accompanying consolidated statements of operations for the year ended December 31, 2021. F -17 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 On July 29, 2021, the Company sold 2.2 million shares further reducing its ownership from approximately 27 % to 24.7 % in Vasconia for net cash proceeds of approximately $ 3.1 million, as a result the Company recorded a gain of $ 1.0 million, after decreasing the Company’s investment balance. The gain on the sale resulted in a tax expense of $ 0.1 million. Additionally, a loss of $ 1.4 million was recognized for the proportionate share of the reduced ownership for amounts previously recognized in accumulated other comprehensive loss. The net loss, including taxes, of $ 0.5 million was included in equity in earnings, net of taxes, in the accompanying consolidated statements of operations for the year ended December 31, 2021. The Company continues to apply the equity method of accounting. The value of the Company’s investment balance has been translated from Mexican pesos (“MXN”) to U.S. dollars (“USD”) using the spot rate of M XN 20.46 an d MXN 19.88 at December 31, 2021 and 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: Year Ended December 31, 2021 2020 2019 Average exchange rate (MXN to USD) 20.01 - 20.74 19.91 - 23.31 19.11 - 19.42 The effect of the translation of the Company’s investment, as well as the translation of Vasconia’s balance sheet, resulted in an increase of the investment of $ 1.0 million during the year ended December 31, 2021 and a decrease of the investment of $ 2.7 million during the year ended December 31, 2020. These translation effects are recorded in accumulated other comprehensive loss. The Company received cash dividends of $ 0.2 million, $ 0.1 million and $ 0.1 million, from Vasconia during the years ended December 31, 2021, 2020 and 2019, respectively. The amounts due to and due from Vasconia as of December 31, 2021 and 2020 are as follows (in thousands): Vasconia due to and due from balances Balance Sheet Location December 31, 2021 December 31, 2020 Amounts due from Vasconia Prepaid expenses and other current assets $ 80 $ 55 Amounts due to Vasconia Accrued expenses and Accounts payable $ ( 146 ) ( 91 ) Summarized income statement information for the years ended December 31, 2021, 2020 and 2019, as well as summarized balance sheet information as of December 31, 2021 and 2020, for Vasconia, calculated in accordance with U.S. GAAP, in USD and MXN is as follows: Year Ended December 31, 2021 2020 2019 (in thousands) USD MXN USD MXN USD MXN Income Statement Net sales $ 240,186 $ 4,871,845 $ 156,391 $ 3,330,855 $ 159,746 $ 3,074,398 Gross profit 52,574 1,064,557 24,947 540,244 34,032 654,342 Income (loss) from operations 15,536 313,156 ( 102 ) 6,674 8,620 165,287 Net income 7,017 141,972 5,566 108,678 1,757 28,892 December 31, 2021 2020 (in thousands) USD MXN USD MXN Balance Sheet Current assets $ 127,544 $ 2,609,038 $ 94,820 $ 1,885,323 Non-current assets 123,938 2,535,273 100,140 1,991,116 Current liabilities 93,365 1,909,870 69,241 1,376,742 Non-current liabilities 57,753 1,181,398 48,419 962,723 The Company recorded equity in earnings of Vasconia, net of taxes, of $ 1.8 million, $ 1.5 million and $ 0.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. F -18 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 As of December 31, 2021, the fair value (based on Level 1 inputs using the quoted stock price) of the Company’s investment in Vasconia was $ 31.5 million. The carrying value of the Company’s investment in Vasconia was $ 22.3 million. Lifetime Brands Do Brasil Participacoes Ltda., a 100 % owned subsidiary of Lifetime Brands, Inc., was dissolved on May 5, 2020. The subsidiary held a note receivable relating to the 2016 sale of its 40 % equity interest in GS International S/A (“GSI”), a wholesale distributor of branded housewares products in Brazil, which was accounted for as an equity method investment. The final installment due on the note receivable was received prior to dissolution of the subsidiary. Foreign currency translation losses of $ 0.2 million, which were previously recorded as a component of stockholder’s equity within accumulated other comprehensive loss, were recognized in earnings upon dissolution of this subsidiary during the year ended December 31, 2020. The Company included this loss within equity in earnings, net of taxes. NOTE 7 — GOODWILL AND INTANGIBLE ASSETS The Company’s intangible assets consist of the following (in thousands): Year Ended December 31, 2021 2020 Gross Impairment Accumulated Amortization Net Gross Impairment Accumulated Amortization Net Goodwill $ 30,271 $ — $ — $ 30,271 $ 49,371 $ ( 19,100 ) $ — $ 30,271 Indefinite -lived intangible assets: Trade names (1) 49,600 — — 49,600 50,600 ( 1,000 ) — 49,600 Finite -lived intangible assets: Licenses 15,847 — ( 11,198 ) 4,649 15,847 — ( 10,742 ) 5,105 Trade names (1) 51,856 ( 2,546 ) ( 23,829 ) 25,481 52,030 — ( 20,874 ) 31,156 Customer relationships 177,245 ( 11,766 ) ( 65,863 ) 99,616 177,801 — ( 54,008 ) 123,793 Other 6,566 ( 448 ) ( 3,057 ) 3,061 6,582 — ( 2,482 ) 4,100 Total $ 331,385 $ ( 14,760 ) $ ( 103,947 ) $ 212,678 $ 352,231 $ ( 20,100 ) $ ( 88,106 ) $ 244,025 (1) During 2020, as part of the Company’s annual impairment analysis of indefinite-lived trade names it was determined that certain of the Company’s trade names, previously estimated to contribute to cash flows indefinitely, have definite lives. Accordingly, these trade names were reclassified from indefinite-lived to finite-lived or amortizable intangible assets as of October 1, 2020. These trade names are being amortized over an estimated useful life of 18 years. F -19 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 A summary of the activities related to the Company’s intangible assets for the years ended December 31, 2021, 2020 and 2019 consists of the following (in thousands): Intangible Assets Goodwill Total Intangible Assets and Goodwill Goodwill and Intangible Assets, December 31, 2018 $ 247,157 $ 91,690 $ 338,847 Purchase price adjustment — 972 972 Foreign currency translation adjustment 786 ( 301 ) 485 Amortization ( 16,843 ) — ( 16,843 ) Impairment of goodwill — ( 42,990 ) ( 42,990 ) Goodwill and Intangible Assets, December 31, 2019 231,100 49,371 280,471 Foreign currency translation adjustment 607 — 607 Amortization ( 16,953 ) — ( 16,953 ) Impairment of indefinite -lived intangible assets ( 1,000 ) — ( 1,000 ) Impairment of goodwill — ( 19,100 ) ( 19,100 ) Goodwill and Intangible Assets, December 31, 2020 213,754 30,271 244,025 Foreign currency translation adjustment ( 364 ) — ( 364 ) Amortization ( 16,223 ) — ( 16,223 ) Impairment of finite -lived intangible assets ( 14,760 ) — ( 14,760 ) Goodwill and Intangible Assets, December 31, 2021 $ 182,407 $ 30,271 $ 212,678 The weighted-average amortization periods for the Company’s finite-lived intangible assets as of December 31, 2021 are as follows: Years Trade names 15 Licenses 33 Customer relationships 14 Other 10 Estimated amortization expense for each of the five succeeding fiscal years is as follows (in thousands): Year ending December 31, 2022 $ 13,654 2023 13,652 2024 13,317 2025 13,066 2026 12,716 Goodwill impairment test The Company reviews goodwill and other intangibles that have indefinite lives for impairment annually as of October 1st or when events or changes in circumstances indicate the carrying value of these assets might exceed their current fair values. For goodwill, impairment testing is based upon the best information available using a combination of the discounted cash flow method, a form of the income approach, and the guideline public company method, a form of the market approach. The significant assumptions used under the income approach, or discounted cash flow method, are projected net sales, projected earnings before interest, tax, depreciation and amortization (“EBITDA”), terminal growth rates, and the cost of capital. Projected net sales, projected EBITDA and terminal growth rates were determined to be significant assumptions because they are three primary drivers of the projected cash flows in the discounted cash flow fair value model. Cost of capital was also determined to be a significant assumption as it is the discount rate used to calculate the current fair value of those projected cash flows. For the guideline public company method, significant assumptions relate to the selection of appropriate guideline companies and related valuation multiples used in the market analysis. F -20 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Although the Company believes the assumptions and estimates made are reasonable and appropriate, different assumptions and estimates could materially impact its reported financial results. In addition, sustained declines in the Company's stock price and related market capitalization could impact key assumptions in the overall estimated fair values of its reporting units and could result in non-cash impairment charges that could be material to the Company's consolidated balance sheet or results of operations. Should the carrying value of a reporting unit be in excess of the estimated fair value of that reporting unit, an impairment charge will be recorded to reduce the reporting unit to fair value. The Company also evaluates qualitative factors to determine whether or not its indefinite lived intangibles have been impaired and then performs quantitative tests if required. These tests can include the relief from royalty model or other valuation models. The significant assumptions used in the relief from royalty model are future net sales for the related brands, royalty rates and the cost of capital to determine the fair value of the indefinite lived intangibles. International Reporting Unit The carrying value of the goodwill for the International reporting unit was zero as of December 31, 2021 and 2020. During 2019 several impairment indicators for the European kitchenware business were considered by the Company including the continued uncertainties of the macro-environment in Europe as a result of the then-ongoing Brexit negotiations. In addition, the Company considered the decline in operating performance for the European kitchenware business, which included slower fulfillment of orders and labor inefficiencies associated with setting up the new warehouse in the U.K. These factors resulted in a decline in the long-term forecast for the European kitchenware business. In the third quarter of 2019, the Company performed an interim assessment of its European kitchenware business by comparing the fair value of the reporting unit with its carrying value as of September 30, 2019. The Company performed the analysis using a discounted cash flow and market multiple approach. Based upon the analysis performed, the Company recognized a $ 9.7 million non-cash goodwill impairment charge during the third quarter of 2019. The goodwill impairment charge was the result of a decline in operating performance and reduced expectations for future cash flows of the European kitchenware business. The fair value of the business was approximately 30.1 % below its carrying value as of September 30, 2019. During the third quarter of 2019 the Company also determined its European kitchenware and tableware reporting units had met the criteria to be combined into one reporting unit based on the guidance of ASC Topic No. 350, Intangibles - Goodwill and Other and ASC Topic No. 280, Segment Reporting. U.S. Reporting Unit The Company performed its annual impairment assessment of its U.S. reporting unit as of October 1, 2021 by comparing the fair value of the reporting unit with its carrying value. The Company performed the analysis using a discounted cash flow and market multiple method. As of October 1, 2021, the fair value of the U.S. reporting unit exceeded the carrying value of goodwill. Management’s projections used to estimate the cash flows included organic net sales growth and net sales growth through new customer channels as well as continued operating efficiencies in future periods. Changes in any of the significant assumptions used in the valuation of the reporting unit could materially affect the expected cash flows, and such impacts could potentially result in a material non-cash impairment charge. As of December 31, 2021, the Company assessed the carrying value of goodwill and determined, based on qualitative factors, that no impairment indicators existed for goodwill. During the first quarter of 2020, as a result of the economic downturn caused by the COVID-19 pandemic, the Company performed an interim assessment of the goodwill for the U.S. reporting unit as of March 31, 2020, by comparing the fair value of the reporting unit with its carrying value. The Company performed the analysis using a discounted cash flow and market multiple method. Based upon the analysis performed, the Company recognized a non-cash goodwill impairment charge of $ 19.1 million during the first quarter of 2020. The goodwill impairment charge resulted from, among other factors, the uncertain market conditions arising from the COVID-19 pandemic, which impacted the Company's market capitalization, as well as a reduction of forecasted future cash flows associated with the effects of the COVID-19 pandemic. The fair value of the U.S. reporting unit was approximately 3.9 % below its carrying value as of March 31, 2020. In 2019, the Company recognized a non-cash goodwill impairment charge of $ 33.2 million, during the three months ended December 31, 2019. The Company performed the analysis using a discounted cash flow and market multiple method. The goodwill impairment charge resulted from, among other factors, a sustained decline in the Company's market capitalization observed in the fourth quarter of 2019. The fair value of the U.S, reporting unit was approximately 6.1 % below its carrying value at October 1, 2019. F -21 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Annual indefinite-lived trade name impairment test The Company values its indefinite-lived trade names using a relief-from-royalty approach, which assumes the value of the trade name is the discounted cash flows of the amount that would be paid by a hypothetical market participant had they not owned the trade name and instead licensed the trade name from another company. The Company bypassed the optional qualitative impairment analysis for its indefinite-lived trade name assets annual October 1, 2021 impairment test. As of October 1, 2021, the Company completed the quantitative impairment analysis by comparing the fair value of the indefinite-lived trade names to their respective carrying value. The Company determined that the fair value of all its indefinite-lived trade names were above their respective carrying values. While the indefinite-lived trade names were not determined to be impaired, the indefinite-lived trade names are at risk of future impairment in the event the trade names do not perform as projected or if market factors utilized in the impairment analysis deteriorate, including an unfavorable change in long-term growth rates or the weighted average cost of capital. As of December 31, 2021, the Company assessed the carrying value of its indefinite-lived trade names and determined based on qualitative factors that no impairment existed. During the first quarter of 2020, as a result of the economic decline caused by the COVID-19 pandemic, the Company determined its indefinite-lived trade names had indicators for impairment. As a result, the Company bypassed the optional qualitative impairment analysis for its indefinite-lived trade names and performed an interim quantitative impairment analysis as of March 31, 2020, by comparing the fair value of the indefinite-lived trade names to their respective carrying values. As a result of the impairment testing performed in connection with the COVID-19 pandemic triggering event, the Company determined that certain of its indefinite-lived intangible assets in the U.S. segment were impaired. As a result, the Company recorded a $ 1.0 million non-cash impairment charge during the first quarter of 2020. Long-lived assets impairment test During the fourth quarter of 2021, due to lower than expected operating results for the International segment caused by continuing impacts of COVID-19 and the exit of the U.K. from the European Union, impairment indicators were identified for the International asset group. The Company tested the recoverability of the asset group, concluding it was not recoverable and performed an analysis of the fair value of the international long-lived assets. For the finite-lived intangible assets, the Company performed discounted cash flow analysis and recorded an impairment of $ 14.8 million within the international segment. NOTE 8 — DEBT The Company’s credit agreement (the “ABL Agreement”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), includes a senior secured asset-based revolving credit facility in the maximum aggregate principal amount of $ 150.0 million, which 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 facility will be repaid in quarterly payments, which commenced June 30, 2018, of principal equal to 0.25 % of the original aggregate principal amount of the Term Loan facility. The Term Loan requires the Company to make an annual prepayment of principal based upon excess cash flow (the “Excess Cash Flow”), if any. This estimated amount is recorded in the current maturity of term loan on the consolidated balance sheets. Per the Debt Agreements, when the Company makes an Excess Cash Flow payment, the payment is first applied to satisfy the future quarterly required payments in order of maturity. The maximum borrowing amount under the ABL Agreement may be increased to up to $ 200.0 million if certain conditions are met. One or more tranches of Incremental Facilities may be added under the Term Loan if certain conditions are met. The Incremental Facilities may not exceed the sum of (i) $ 50.0 million plus (ii) an unlimited amount so long as, in the case of (ii) only, the Company’s secured net leverage ratio, as defined in and computed pursuant to the Term Loan, is no greater than 3.75 to 1.00 subject to certain limitations and for the period defined pursuant to the Term Loan. As of December 31, 2021 and 2020, the total availability under the ABL Agreement were as follows (in thousands): December 31, 2021 December 31, 2020 Maximum aggregate principal allowed $ 150,000 $ 150,000 Outstanding borrowings under the ABL Agreement — ( 27,302 ) Standby letters of credit ( 3,659 ) ( 2,698 ) Total availability under the ABL Agreement $ 146,341 $ 120,000 F -22 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Availability under the ABL Agreement depends on the valuation of certain current assets comprising the borrowing base. Due to the seasonality of the Company’s business, this may mean that the Company will have greater borrowing availability during the third and fourth quarters of each year. The borrowing capacity under the ABL Agreement will depend, in part, on eligible levels of accounts receivable and inventory that fluctuate regularly. Consequently, the $ 150.0 million commitment thereunder may not represent actual borrowing capacity. The current and non-current portions of the Company’s Term Loan facility included in the consolidated balance sheets are presented as follows (in thousands): December 31, 2021 December 31, 2020 Current portion of Term Loan facility: Estimated Excess Cash Flow principal payment $ 7,200 $ 19,120 Estimated unamortized debt issuance costs ( 1,429 ) ( 1,463 ) Total Current portion of Term Loan facility $ 5,771 $ 17,657 Non-current portion of Term Loan facility: Term Loan facility, net of current portion $ 244,927 $ 243,485 Estimated unamortized debt issuance costs ( 3,054 ) ( 4,508 ) Total Non-current portion of Term Loan facility $ 241,873 $ 238,977 The estimated Excess Cash Flow principal payment recorded at December 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 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. subsidiary guarantors, subject to certain exceptions. Such security interest consists of (1) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and its domestic subsidiaries (the “ABL Collateral”) pledged as collateral in favor of lenders under the ABL Agreement and a second-priority lien in the ABL Collateral in favor of the lenders under the Term Loan and (2) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and its domestic subsidiaries (the “Term Loan Collateral”) pledged as collateral in favor of lenders under the Term Loan and a second-priority lien in the Term Loan Collateral in favor of the lenders under the ABL Agreement. Borrowings under the revolving credit facility bear interest, at the Company’s option, at one of the following rates: (i) an alternate base rate, defined, for any day, as the greater of the prime rate, a federal funds and overnight bank funding based rate plus 0.5 % or one-month LIBOR plus 1.0 %, plus a margin of 0.25 % to 0.75 %, or (ii) LIBOR (or Euro Interbank Offered Rate “EURIBOR” for borrowings denominated in Euro; or Sterling Overnight Index Average “SONIA” for borrowings denominated in Pounds Sterling), 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 December 31, 2021. In addition, the Company paid a commitment fee of 0.375 % on the unused portion of the ABL Agreement during the year ended December 31, 2021. The Term Loan facility bears interest, at the Company’s option, at one of the following rates: (i) an alternate base rate, defined, for any day, as the greater of the prime rate, a federal funds and overnight bank funding based rate plus 0.50 % or one-month LIBOR plus 1.0 %, plus a margin of 2.50 % or (ii) LIBOR plus a margin of 3.50 %. The interest rate on outstanding borrowings under the Term Loan at December 31, 2021 was 4.5 %. The debt agreements provide for customary restrictions and events of default. Restrictions include limitations on additional indebtedness, acquisitions, investments and payment of dividends, among other things. Further, the ABL Agreement provides that F -23 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 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 or 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 or 10 % of the aggregate commitment under the ABL Agreement for forty-five (45) consecutive days, the Company is required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 as of the last day of any period of four consecutive fiscal quarters. The Company was in compliance with the covenants of the Debt Agreements at December 31, 2021. The Company expects that it will continue to borrow and repay funds, subject to availability, under the ABL Agreement based on working capital and other corporate needs. Other Credit Agreements A subsidiary of the Company holds a credit facility (“HSBC Facility”) with HSBC Bank (China) Company Limited, Shanghai Branch (“HSBC”) for up to $ 10.0 million Chinese renminbi ($ 1.6 million). The HSBC Facility is subject to annual renewal and may be used to fund general working capital needs of the Company’s subsidiary, which is a trading company in the China. Borrowings under the HSBC Facility were guaranteed by the Company and were granted at the sole discretion of HSBC. No borrowings were outstanding under the HSBC Facility at December 31, 2021 and 2020. NOTE 9 — DERIVATIVES Interest Rate Swap Agreements The Company's net total outstanding notional value of interest rate swaps was $ 75 million at December 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 original notional values are reduced over these periods. The aggregate notional value was $ 50.0 million at December 31, 2021. In June 2019, the Company entered into additional interest rate swap agreements, with an aggregate notional value of $ 25.0 million at December 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 The Company is a party from time to time to certain foreign exchange contracts, primarily to offset the earnings impact related to fluctuations in foreign currency exchange rates associated with inventory purchases denominated in foreign currencies. Fluctuations in the value of certain foreign currencies as compared to the USD may positively or negatively affect the Company’s revenues, gross margins, operating expenses, and retained earnings, all of which are expressed in USD. Where the Company deems it prudent, the Company engages in hedging programs using foreign currency forward contracts aimed at limiting the impact of foreign currency exchange rate fluctuations on earnings. The Company purchases foreign currency forward contracts with terms less then 18 months to protect against currency exchange risks associated with the payment of merchandise purchases to foreign suppliers. The Company does not hedge the translation of foreign currency profits into USD, as the Company regards this as an accounting exposure rather than an economic exposure. The aggregate gross notional values of foreign exchange contracts at December 31, 2021 was $ 22.6 million. The Company had no outstanding foreign exchange contracts at December 31, 2020. The Company is exposed to market risks, as well as changes in foreign currency exchange rates, as measured against the USD and each other, and changes to credit risk of derivative counterparties. The Company attempts to minimize these risks by primarily using foreign currency forward contracts and by maintaining counterparty credit limits. These hedging activities provide only limited protection against currency exchange and credit risk. Factors that could influence the effectiveness of the Company’s hedging programs include currency markets and availability of hedging instruments and liquidity of the credit markets. All foreign currency forward contracts that the Company enters into are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure. The Company does not enter into such contracts for speculative purposes and, as of December 31, 2021, the Company does not have any foreign currency forward contract derivatives that are not designated as hedges. These foreign exchange contracts have been designated as hedges in to order to apply hedge accounting. F -24 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows (in thousands): December 31, Derivatives designated as hedging instruments Balance Sheet Location 2021 2020 Interest rate swaps Accrued expenses $ 288 $ 504 Other Long-Term Liabilities 292 1,034 Foreign exchange contracts Prepaid expenses and other current assets 461 — December 31, Derivatives not designated as hedging instruments Balance Sheet Location 2021 2020 Interest rate swaps Other Long-Term Liabilities $ 680 $ 1,742 The fair value of the interest rate swaps have been obtained from the counterparties to the agreements and were based on Level 2 observable inputs using proprietary models and estimates about relevant future market conditions. The fair value 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. The Company is exposed to credit risk for the net exchanges under these agreements, but not for the notional amounts. The Company does not anticipate non-performance by any of its counterparties. The amounts of the gains and (losses), realized and unrealized, net of taxes, related to the Company’s derivative financial instruments designated as hedging instruments are recognized in other comprehensive income (loss) as follows (in thousands): Year ended December 31, Derivatives designated as hedging instruments 2021 2020 2019 Interest rate swaps $ 718 $ ( 2,406 ) $ 1,120 Foreign exchange contracts 485 117 ( 117 ) Total $ 1,203 $ ( 2,289 ) $ 1,003 Realized gains or (losses) on the interest rate swaps are reclassified into earnings as interest expense as the interest expense on the debt is recognized. The Company had no terminated or matured interest rate swaps during the year ended December 31, 2021. Realized gains or (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 year ended December 31, 2021, the Company reclassified $ 1.5 million of cash flow hedges in accumulated other comprehensive losses to earnings. This comprised of a charge of $ 0.9 million related to interest rate swaps recognized in interest expense and a loss of $ 0.6 million related to foreign exchange contracts recognized in cost of sales. At December 31, 2021, the estimated amount of existing losses expected to be reclassified into earnings within the next 12 months was $ 0.5 million. During the year ended December 31, 2020, the Company reclassified $ 1.0 million of cash flow hedges in accumulated other comprehensive losses to earnings. This comprised of $ 1.2 million related to interest rate swaps recognized in interest expense and a gain of $ 0.2 million related to foreign exchange contracts recognized in cost of sales. The amounts of the gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are recognized in earnings as follows (in thousands): Year Ended December 31, Derivatives not designated as hedging instruments Location of Gain or (Loss) 2021 2020 2019 Interest rate swaps Mark to market gain (loss) on interest rate derivatives $ 1,062 $ ( 2,144 ) $ 402 Interest expense ( 458 ) ( 327 ) 5 $ 604 $ ( 2,471 ) $ 407 F -25 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 NOTE 10 — CAPITAL STOCK Cash dividends Dividends were declared in 2021 and 2020 as follows: Dividend per share Date declared Date of record Payment date $ 0.0425 March 10, 2020 November 16, 2020 December 16, 2020 $ 0.0425 June 25, 2020 August 3, 2020 August 17, 2020 $ 0.0425 August 4, 2020 November 2, 2020 November 16, 2020 $ 0.0425 November 3, 2020 January 29, 2021 February 12, 2021 $ 0.0425 March 9, 2021 May 3, 2021 May 17, 2021 $ 0.0425 June 24, 2021 August 2, 2021 August 16, 2021 $ 0.0425 August 3, 2021 November 1, 2021 November 15, 2021 $ 0.0425 November 2, 2021 January 31, 2022 February 14, 2022 On March 8, 2022, the Board of Directors declared a quarterly dividend of $ 0.0425 per share payable on May 16, 2022 to shareholders of record on May 2, 2022. Stock repurchase program On April 30, 2013, Lifetime’s Board of Directors authorized the repurchase of up to $ 10.0 million of the Company’s common stock. The repurchase authorization permits the Company to effect repurchases from time to time through open market purchases and privately negotiated transactions. No shares were repurchased during the years ended December 31, 2021, 2020 and 2019. Preferred stock The Company is authorized to issue 100 shares of Series A Preferred Stock and 2,000,000 shares of Series B Preferred Stock, none of which has been issued or is outstanding at December 31, 2021. Long-term incentive plan The Company’s Amended and Restated 2000 Long-Term Incentive Plan (the “Plan”) provides for the granting of awards of up to 7,037,500 shares of common stock. These shares of the Company’s common stock are available for grants to directors, officers, employees, consultants and service providers and affiliates in the form of stock options or other equity-based awards. The Plan authorizes the Board of Directors of the Company, or a duly appointed committee thereof, to issue incentive stock options, non-qualified options, restricted stock, performance-based awards and other stock-based awards. Options that have been granted under the Plan expire over a range of 5 years to 10 years from the date of grant and vest over a range of up to 4 years from the date of grant. Shares of restricted stock that have been granted under the Plan vest over a range of up to 4 years from the date of grant. Performance-based awards that have been granted under the Plan vest after 3 years based upon the attainment of specified performance goals. As of December 31, 2021, there were 357,858 shares available for the grant of awards under the Plan. F -26 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Stock options A summary of the Company’s stock option activity and related information for the three years ended December 31, 2021, is as follows: Options Weighted- average exercise price Weighted- average remaining contractual life (years) Aggregate intrinsic value (in thousands) Options outstanding at December 31, 2018 1,548,825 $ 13.87 Grants 296,500 9.21 Exercises ( 75,000 ) 4.28 Cancellations ( 19,625 ) 12.94 Expirations ( 242,375 ) 13.95 Options outstanding at December 31, 2019 1,508,325 13.43 Grants 37,500 6.36 Exercises ( 2,500 ) 10.79 Cancellations ( 14,313 ) 11.09 Expirations ( 242,112 ) 13.27 Options outstanding at December 31, 2020 1,286,900 13.28 Grants 48,000 14.18 Exercises (1) ( 236,325 ) 11.71 Expirations ( 4,000 ) 19.10 Options outstanding at December 31, 2021 1,094,575 13.64 4.9 $ 3,386 Options exercisable at December 31, 2021 911,115 $ 14.31 4.2 $ 2,345 (1) Includes the exercise of 2,000 options settled in cash in accordance with the Company’s Amended and Restated 2000 Long-Term Incentive Plan ("the Plan"). The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been received by the option holders had all option holders exercised their exercisable in-the-money stock options on December 31, 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 December 31, 2021 and the exercise price. The total intrinsic value of those stock options that were exercised in the year ended December 31, 2021 was $ 0.8 million. The total intrinsic values of those stock options that were exercised in the year ended December 31, 2020 was less than $ 0.1 million and in the year ended December 31, 2019 was $ 0.3 million. The intrinsic value of a stock option that is exercised is calculated at the date of exercise. Total unrecognized stock option compensation expense at December 31, 2021, before the effect of income taxes, was $ 0.5 million and is expected to be recognized over a weighted-average period of 1.5 years. The Company values stock options using the Black-Scholes option valuation model. The Black-Scholes option valuation model, as well as other available models, was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected stock price volatility and risk-free interest rate. Because the Company’s stock options have characteristics significantly different from those of traded options, changes in the subjective input assumptions can materially affect the fair value estimates of the Company’s stock options. The weighted-average per share grant date fair value of stock options granted during the years ended December 31, 2021, 2020 and 2019, was $ 6.31 , $ 2.26 and $ 2.77 , respectively. F -27 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The fair values for these stock options were estimated at the dates of grant using the following weighted-average assumptions: 2021 2020 2019 Historical volatility 52 % 49 % 35 % Expected term (years) 6.3 6.3 6.0 Risk-free interest rate 1.08 % 0.45 % 1.82 % Expected dividend yield 1.20 % 2.67 % 1.80 % Restricted Stock A summary of the Company’s restricted stock activity and related information for the three years ended December 31, 2021 is as follows: Restricted Shares Weighted- average grant date fair value Non-vested restricted shares, December 31, 2018 326,545 $ 14.63 Grants 439,747 9.25 Vested ( 148,414 ) 14.54 Cancellations ( 24,537 ) 13.97 Non-vested restricted shares, December 31, 2019 593,341 10.70 Grants 534,940 5.94 Vested ( 322,398 ) 10.64 Cancellations ( 10,296 ) 9.06 Non-vested restricted shares, December 31, 2020 795,587 7.54 Grants 220,658 14.27 Vested ( 586,244 ) 7.19 Cancellations ( 400 ) 11.42 Non-vested restricted shares, December 31, 2021 429,601 $ 11.47 Total unrecognized compensation expense remaining (in thousands) $ 3,678 Weighted-average years expected to be recognized over 1.6 The total fair value of restricted stock that vested during the year ended December 31, 2021 was $ 8.9 million. Performance shares Each performance award represents the right to receive up to 150 % of the target number of shares of common stock. The number of shares of common stock earned will be determined based on the attainment of specified performance goals at the end of the performance period, as determined by the Compensation Committee of the Board of Directors. The shares are subject to the terms and conditions of the Plan. F -28 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 A summary of the Company’s performance-based award activity and related information for the three years ended December 31, 2021 is as follows: Performance - based awards (1) Weighted- average grant date fair value Non-vested performance-based awards, December 31, 2018 339,287 $ 14.82 Grants 158,525 9.19 Vested ( 66,761 ) 15.69 Cancellations ( 25,992 ) 15.44 Non-vested performance-based awards, December 31, 2019 405,059 12.43 Grants 106,275 6.36 Vested ( 62,215 ) 18.45 Cancellations ( 18,073 ) 15.49 Non-vested performance-based awards, December 31, 2020 431,046 9.94 Grants 176,915 14.18 Vested ( 150,273 ) 12.79 Cancellations ( 21,358 ) 12.76 Non-vested performance-based awards, December 31, 2021 436,330 $ 10.54 Total unrecognized compensation expense remaining (in thousands) $ 2,415 Weighted-average years expected to be recognized over 1.9 (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 year ended December 31, 2021 was $ 2.1 million. On March 8, 2022, the Compensation Committee of the Board of Directors determined the performance goals set forth in the performance-based awards granted in 2019 were attained and 166,935 shares vested. The Company recorded stock compensation expense as follows (in thousands): Year Ended December 31, Stock Compensation Expense Components 2021 2020 2019 Equity based stock option expense $ 417 $ 570 $ 617 Restricted and performance-based stock awards expense 4,787 5,346 4,404 Stock compensation expense for equity based awards $ 5,204 $ 5,916 $ 5,021 Liability based stock option expense 13 35 20 Total Stock Compensation Expense $ 5,217 $ 5,951 $ 5,041 F -29 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 NOTE 11 — INCOME (LOSS) PER COMMON SHARE Basic income (loss) per common share has been computed by dividing net income (loss) by the weighted-average number of shares of the Company’s common stock outstanding. Diluted income (loss) per common share adjusts net income (loss) and basic income (loss) per common share for the effect of all potentially dilutive shares of the Company’s common stock. Anti-dilutive securities are not included in the computation of diluted earnings per share under the treasury stock method. The calculations of basic and diluted income (loss) per common share for the years ended December 31, 2021, 2020 and 2019, are as follows: 2021 2020 2019 (in thousands - except per share amounts) Net income (loss) – Basic and Diluted $ 20,801 $ ( 3,007 ) $ ( 44,415 ) Weighted-average shares outstanding – Basic 21,397 20,860 20,597 Effect of dilutive securities: Stock options and other stock awards 640 — — Weighted-average shares outstanding – Diluted 22,037 20,860 20,597 Basic income (loss) per common share $ 0.97 $ ( 0.14 ) $ ( 2.16 ) Diluted income (loss) per common share $ 0.94 $ ( 0.14 ) $ ( 2.16 ) Antidilutive shares (1) 380 2,167 2,120 (1) Stock options and other stock awards that have been excluded from the denominator as their inclusion would have been anti-dilutive. NOTE 12 — INCOME TAXES The components of income (loss) before income taxes and equity in earnings are as follows: Year Ended December 31, 2021 2020 2019 (in thousands) Domestic $ 61,045 $ 18,012 $ ( 21,311 ) Foreign ( 24,665 ) ( 12,463 ) ( 22,462 ) Total income (loss) before income taxes and equity in earnings $ 36,380 $ 5,549 $ ( 43,773 ) The provision for income taxes (before equity in earnings) consists of: Year Ended December 31, 2021 2020 2019 (in thousands) Current: Federal $ 10,361 $ 8,522 $ 906 State and local 3,558 2,540 884 Foreign 823 665 392 Deferred 1,799 ( 1,861 ) ( 1,073 ) Income tax provision $ 16,541 $ 9,866 $ 1,109 On March 27, 2020, H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into legislation which includes business tax provisions that impact taxes related to 2018, 2019 and 2020. Some of the significant tax law changes in accordance with the CARES Act are to increase the limitation on deductible business interest expense for 2019 and 2020, allow for the five-year carryback of net operating losses for 2018-2020, suspend the 80% limitation of taxable income for net operating loss carryforwards for 2018-2020, and accelerate the ability to claim refunds of Alternative Minimum Tax (“AMT”) credit carryforwards. The CARES Act remedied certain aspects of the Tax Act such as accelerated depreciation recovery for assets defined as qualified improvement property and carryback of operating losses to fiscal tax years. The latter required carryback of Filament losses to pre- F -30 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 acquisition fiscal years ended March 31, 2017 and March 31, 2016, which resulted in a tax expense that exceeded the benefit received from the various CARES Act provisions claimed by the Company. The Company received a tax refund of $ 2.3 million in the third quarter of 2020. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income tax assets and (liabilities) are as follows: December 31, 2021 2020 (in thousands) Deferred income tax assets: Operating lease liabilities $ 26,158 $ 27,502 Stock options 1,825 2,178 Inventory 2,612 2,438 Operating loss carryforwards 15,684 9,894 Accounts receivable allowances 1,696 1,461 Accrued compensation 1,310 1,839 Deferred compensation 1,167 1,310 Other 1,536 3,061 Total deferred income tax assets $ 51,988 $ 49,683 Deferred income tax liabilities: Operating lease right-of-use assets $ ( 21,857 ) $ ( 23,127 ) Fixed assets ( 1,784 ) ( 1,920 ) Intangibles ( 26,117 ) ( 28,447 ) Total deferred income tax liabilities ( 49,758 ) ( 53,494 ) Net deferred income tax asset (liability) 2,230 ( 3,811 ) Valuation allowance ( 15,072 ) ( 6,903 ) Net deferred income tax liability $ ( 12,842 ) $ ( 10,714 ) The Company has capital loss carryforwards of $ 7.6 million in foreign jurisdictions and $ 0.9 million in the U.S. federal jurisdiction at December 31, 2021 that are offset entirely by a valuation allowance. The Company has net operating losses in foreign jurisdictions of $ 52.1 million and $ 12.2 million in state jurisdictions at December 31, 2021 that are offset entirely by a valuation allowance. The state net operating losses begin to expire in 2026. F -31 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 The provision for income taxes (before equity in earnings) differs from the amounts computed by applying the applicable federal statutory rates as follows: Year Ended December 31, 2021 2020 2019 Federal income taxes at the statutory rate 21.0 % 21.0 % 21.0 % Increases (decreases): State and local income taxes, net of Federal income tax benefit 8.8 38.9 ( 1.7 ) Foreign rate differences ( 8.0 ) ( 43.9 ) 2.1 Impairment of goodwill (1) — 65.5 ( 20.8 ) Non-deductible expenses 3.3 16.4 ( 1.2 ) Uncertain tax positions 0.1 4.0 ( 0.3 ) Research and development credit ( 1.1 ) ( 7.2 ) 1.4 Federal return to provision ( 0.4 ) 6.8 0.4 Loss of Filament pre-acquisition attributes due to CARES Act — 8.6 — Equity-based compensation ( 0.6 ) 19.4 — Valuation Allowance 22.4 48.3 ( 3.1 ) Other — — ( 0.3 ) Provision for income taxes 45.5 % 177.8 % ( 2.5 ) % (1) In 2019, the rate for the impairment of goodwill was ( 20.8 )% due to a pretax loss position. The estimated values of the Company’s gross uncertain tax positions at December 31, 2021, 2020 and 2019 are liabilities of $ 1.1 million, $ 1.6 million and $ 1.5 million, respectively, and consist of the following: Year Ended December 31, 2021 2020 2019 (in thousands) Balance at January 1 $ ( 1,648 ) $ ( 1,508 ) $ ( 1,975 ) Additions based on tax positions related to the current year ( 49 ) ( 149 ) ( 29 ) Reductions for tax position of prior years 626 9 496 Balance at December 31 $ ( 1,071 ) $ ( 1,648 ) $ ( 1,508 ) The Company had approximately $ 0.2 million and $ 0.1 million, net of federal and state tax benefit, accrued at December 31, 2021 and 2020, respectively, for the payment of interest. The Company’s policy for recording interest and penalties is to record such items as a component of the provision for income taxes. If the Company’s tax positions are ultimately sustained, the Company’s liability, including interest, would be reduced by $ 1.5 million, all of which would impact the Company’s tax provision. On a quarterly basis, the Company evaluates its tax positions and revises its estimates accordingly. The Company believes that it is reasonably possible that an immaterial amount of its tax positions will be resolved within the next twelve months. The Company is no longer subject to U.S. Federal income tax examinations for the years prior to 2017. The Company has identified the following jurisdictions as “major” tax jurisdictions: U.S. Federal, California, Georgia, Illinois, Massachusetts, New Jersey, New York, and the United Kingdom. At December 31, 2021, the periods subject to examination by the Company’s major state jurisdictions, except for New York State, are generally for the years ended 2017 through 2020. In certain jurisdictions Filament may have additional periods subject to examination. The Company's New York State tax returns for years 2015-2016 remain under audit. The audit has been expanded to include tax years 2017-2019. As of December 31, 2021, there are no material assessments in any given year. F -32 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 NOTE 13 — BUSINESS SEGMENTS Segment information The Company has two reportable segments, U.S. and International. The Company has segmented its operations to reflect the manner in which management reviews and evaluates the results of its operations. The U.S. segment includes the Company’s primary domestic business that designs, markets and distributes its products to retailers, distributors and directly to consumers through its own websites. The International segment consists of certain business operations conducted outside the U.S. Management evaluates the performance of the U.S. and International segments based on net sales and income (loss) from operations. Such measures give recognition to specifically identifiable operating costs such as cost of sales, distribution expenses and selling, general and administrative expenses. Certain general and administrative expenses, such as senior executive salaries and benefits, stock compensation, director fees and accounting, legal fees and consulting fees, are not allocated to the specific segments and are reflected as unallocated corporate expenses. Year Ended December 31, 2021 2020 2019 (in thousands) Net sales: U.S. $ 770,633 $ 683,539 $ 644,171 International 92,291 85,630 90,731 Total net sales $ 862,924 $ 769,169 $ 734,902 Income (loss) from operations: U.S. (1)(2) $ 100,336 $ 60,378 $ 19,826 International (3)(4) ( 25,051 ) ( 12,835 ) ( 22,962 ) Unallocated corporate expenses ( 24,443 ) ( 22,573 ) ( 20,259 ) Total income (loss) from operations $ 50,842 $ 24,970 $ ( 23,395 ) Depreciation and amortization: U.S. $ 18,504 $ 20,018 $ 20,653 International 4,016 4,646 4,462 Total depreciation and amortization $ 22,520 $ 24,664 $ 25,115 Capital expenditures: U.S. $ 3,838 $ 1,467 $ 2,078 International 148 615 7,091 Total capital expenditures $ 3,986 $ 2,082 $ 9,169 (1) In 2019, income from operations for the U.S. segment include $ 0.7 million of restructuring expenses related to the U.S. restructuring plan and the Filament integration, respectively, as described in NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (2) In 2020 and 2019, the Company recognized non-cash impairment charges of $ 20.1 million and $ 33.2 million, respectively, related to the U.S. segment as described in NOTE 7 — GOODWILL AND INTANGIBLE ASSETS (3) In 2020 and 2019, income from operations for the International segment includes $ 0.2 million and $ 0.7 million, respectively, of restructuring expenses, as described in NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES (4) In 2021 and 2019, the Company recognized non-cash impairment charges of $ 14.8 million and $ 9.7 million, respectively, related to the international segment as described in NOTE 7 — GOODWILL AND INTANGIBLE ASSETS December 31, 2021 2020 (in thousands) Assets: U.S. $ 706,000 $ 661,321 International 95,092 110,222 Unallocated corporate 27,982 35,938 Total assets $ 829,074 $ 807,481 F -33 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Year Ended December 31, 2021 2020 (in thousands) Goodwill: U.S. Beginning balance $ 30,271 $ 49,371 Impairment — ( 19,100 ) Total goodwill $ 30,271 $ 30,271 Geographical information The following table sets forth long-lived assets by the major geographic locations: December, 2021 2020 (in thousands) Long-lived assets, excluding intangible assets, at period-end: United States $ 81,659 $ 92,093 Mexico 22,295 20,032 United Kingdom 26,429 28,764 Rest of World 940 1,274 Total $ 131,323 $ 142,163 NOTE 14 — COMMITMENTS AND CONTINGENCIES Royalties The Company has license agreements that require the payment of royalties on sales of licensed products which expire through 2048. The estimated f uture minimum royalties payable under these agreements are as follows (in thousands): Year ending December 31, 2022 $ 10,237 2023 649 2024 416 2025 171 2026 171 Thereafter 1,723 Total $ 13,367 Legal proceedings Wallace EPA Matter Wallace Silversmiths de Puerto Rico, Ltd. (“WSPR”), a wholly-owned subsidiary of the Company, operates a manufacturing facility in San Germán, Puerto Rico that is leased from the Puerto Rico Industrial Development Company (“PRIDCO”). In March 2008, the United States Environmental Protection Agency (the “EPA”) announced that the San Germán Ground Water Contamination site in Puerto Rico (the “Site”) had been added to the Superfund National Priorities List due to contamination present in the local drinking water supply. F -34 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 In May 2008, WSPR received from the EPA a Notice of Potential Liability and Request for Information pursuant to 42 U.S.C. Sections 9607(a) and 9604(e) of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). In July 2011, WSPR received a letter from the EPA requesting access to the property that it leases from PRIDCO to conduct an environmental investigation, and the Company granted such access. In February 2013, the EPA requested access to conduct a further environmental investigation at the property. PRIDCO agreed to such access and the Company consented. The EPA conducted a further investigation during 2013 and, in April 2015, notified the Company and PRIDCO that the results from vapor intrusion sampling may warrant the implementation of measures to mitigate potential exposure to sub-slab soil gas. The Company reviewed the information provided by the EPA and requested that PRIDCO, as the property owner, find and implement a solution acceptable to the EPA. While WSPR did not cause the sub-surface condition that resulted in the potential for vapor intrusion, in order to protect the health of its employees and continue its business operations, it has nevertheless implemented corrective action measures to prevent vapor intrusion, such as sealing the floors of the building and conducting periodic air monitoring to address potential exposure. On August 13, 2015, the EPA released its remedial investigation and feasibility study (“RI/FS”) for the Site. On December 11, 2015, the EPA issued the Record of Decision (“ROD”) for an initial operable unit, electing to implement its preferred remedy which consists of soil vapor extraction and dual-phase extraction/in-situ treatment. This selected remedy includes soil vapor extraction (“SVE”) to address soil (vadose zone) source areas at the Site, impermeable cover as necessary for the implementation of SVE, dual phase extraction in the shallow saprolite zone, and in-situ treatment as needed to address residual sources. The EPA’s total net present worth estimated cost for its selected remedy is $ 7.3 million. The EPA also designated a second operable unit under which the EPA has and will continue to conduct further investigations to determine the nature and extent of groundwater contamination, as well as a determination by the EPA on the necessity of any further response actions to address groundwater contamination. In February 2017, the EPA indicated that it planned to expand its field investigation for the RI/FS to a second operable unit to further determine the nature and extent of the groundwater contamination at and from the Site and to determine the nature of the remedial action needed to address the contamination. The EPA has requested access to the property occupied by WSPR to install monitoring wells and to undertake groundwater sampling as part of this expanded investigation. WSPR has consented to the EPA’s access request, provided that the EPA receives PRIDCO’s consent, as the property owner. WSPR never used the primary contaminant of concern and did not take up its tenancy at the Site until after the EPA had discovered the contamination in the local water supply. The EPA has also issued notices of potential liability to a number of other entities affiliated with the Site, which used the contaminants of concern. In December 2018, the Company, WSPR, and other identified Potentially Responsible Parties affiliated with the Site entered into tolling agreements to extend the statute of limitations for potential claims for the recovery of response costs for the initial operable unit under Section 107 of CERCLA. In February 2020, the tolling agreements were extended to November 2020. In November 2020, the tolling agreements were extended to November 2021. In October 2021, the tolling agreements were extended to November 2022. 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. The EPA released its proposed plan for a second operable unit in July 2019. The public comment period for the proposed plan ended on September 10, 2019. On September 30, 2019, the EPA issued the ROD for operable unit 2 (“OU-2”), electing to implement its preferred remedy which consists of in-situ treatment of groundwater and a monitored natural attenuation program including monitoring of the plume fringe at the Site. The EPA’s estimated total net present worth cost for its selected remedy is $ 17.3 million. In August 2021, WSPR received a Notice of Liability from the Department of Justice on behalf of the EPA, and in September 2021, WSPR submitted a good faith offer to conduct additional testing and remedial design, which is under consideration by the EPA. The Company has reserved $ 0.5 million to cover probable and estimable liabilities with respect to the above testing and remedial design. However, it is not possible at this time for the Company to estimate its share of liability, if any, related to this matter. 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. U.S. Customs and Border Protection matter By letter dated August 26, 2019, the Company was advised that U.S. Customs and Border Protection ("CBP") had commenced an investigation, pursuant to 19,000 U.S.C. §1592, regarding the Company’s tariff classification of certain tableware and kitchenware. The issue centers on whether such merchandise meets the criteria for reduced duty rates as specified sets as those terms are defined in Chapter 69, Note 6(b), Harmonized Tariff System of the United States. The period of investigation is stated to be from August 26, 2014 to the present. Since being notified of the investigation, the Company has obtained a significant amount of evidence that, the Company believes, supports that the imported products were properly classified as specified sets. The Company's counsel filed a Lead F -35 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Protest and Application for Further Review with CBP on February 5, 2020 (the "Lead Protest") relating to a single shipment made during the investigation period. CBP approved the Company’s Lead Protest on June 8, 2020 stating that the specified set requirement was fulfilled with respect to the protested shipment based on information provided by the Company. Based on this decision, no additional duties will be owed for the seven tableware collections imported in this shipment. The Company also compiled and submitted to CBP a complete set of supporting documents for three additional protests (for the remaining 29 tableware collections that were imported by the Company under the protested shipments). One of these three was approved on October 15, 2020; the other two remain pending. If the CBP approves these additional claims and accepts the evidence presented as it did with the Lead Protest, then no additional duties will be owed for the remaining protested shipments. Because the period of investigation covers a five-year period, the Company is compiling supporting documentation packages for all tableware collections imported during this period. In the event CBP accepts the evidence presented, then no additional duties or penalties will be owed. If CBP rejects the Company’s position, then the estimated amount of duties that could be owed is $ 1.7 million. In such event, it is reasonably possible that additional penalties could be assessed, depending upon the level of culpability found, of up to $ 3.4 million for negligence and up to $ 6.8 million for gross negligence. In the event penalties are assessed, the Company will have the opportunity to further contest CBP’s findings and seek cancellation or mitigation of such assessments. Accordingly, based on the above uncertainties and variables, the Company considers the potential losses related to this matter to be reasonably possible, but not probable. 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. Other 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. NOTE 15 — RETIREMENT PLANS 401(k) plan and other defined contribution plans The Company maintains a defined contribution retirement plan for eligible employees under Section 401(k) of the Internal Revenue Code. Participants can make voluntary contributions up to the Internal Revenue Service limit of $19,500 ($26,000 for employees 50 years or over) for 2021. The Company suspended its matching contribution in 2009 as an expense savings measure. The Company’s United Kingdom-based subsidiary, Lifetime Brands Europe Limited, maintains a defined contribution pension plan. Retirement benefit obligations The Company assumed retirement benefit obligations, which are paid to certain former executives of a business acquired in 2006. The obligations under the agreements with these former executives are unfunded and amounted to $ 7.4 million at December 31, 2021 and $ 8.0 million at December 31, 2020. The discount rate used to calculate the retirement benefit obligations was 2.46 % at December 31, 2021 and 2.02 % at December 31, 2020. The retirement benefit obligations are included in accrued expenses and other long-term liabilities. The Company expects to recognize $ 0.2 million of actuarial losses included in accumulated other comprehensive loss in net periodic benefit cost in 2022. F -36 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Expected benefit payments for each of the next five fiscal years and in the aggregate for the five fiscal years thereafter are as follows (in thousands): Year ending December 31, 2022 $ 493 2023 471 2024 449 2025 429 2026 410 2027 through 2031 1,804 NOTE 16 — OTHER Inventory The components of inventory are as follows: December 31, 2021 2020 (in thousands) Finished goods $ 259,916 $ 194,209 Work in process 159 45 Raw materials 10,441 8,910 Total $ 270,516 $ 203,164 Property and equipment Property and equipment (including finance leases) consist of: December 31, 2021 2020 (in thousands) Machinery, furniture and equipment $ 77,005 $ 74,494 Leasehold improvements 38,433 38,467 Computer hardware and software 37,544 36,997 Building and improvements 787 791 Construction in progress 715 87 Land 100 100 Total 154,584 150,936 Less: accumulated depreciation and amortization ( 133,836 ) ( 127,816 ) Total $ 20,748 $ 23,120 Depreciation and amortization expense of property and equipment for the years ended December 31, 2021, 2020 and 2019 was $ 6.0 million, $ 7.4 million and $ 8.0 million, respectively. F -37 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Other long-term liabilities Other l ong-term liabilities consist of: December 31, 2021 2020 (in thousands) Retirement benefit obligations $ 6,918 $ 7,534 Other non-income tax liabilities 2,927 2,824 Unearned revenue 1,159 1,444 Derivative financial instruments 972 2,776 Deferred payroll non-income tax liabilities — 1,261 Royalty obligations — 475 Other long term obligations 140 169 Total $ 12,116 $ 16,483 Accrued expenses Accrued expenses consist of: December 31, 2021 2020 (in thousands) Customer allowances and rebates $ 36,290 $ 30,913 Compensation and benefits 21,258 19,016 Freight 16,110 6,669 Vendor invoices 16,082 6,536 Other non-income tax liabilities 7,496 4,136 Royalties 4,406 3,007 Professional fees 2,954 2,060 Commissions 813 1,380 Interest 402 749 Other 6,930 5,584 Total $ 112,741 $ 80,050 Supplemental disclosure of cash flow information Year Ended December 31, 2021 2020 2019 (in thousands) Cash paid for interest $ 13,702 $ 15,476 $ 18,859 Cash paid for taxes, net of refunds 19,012 5,161 2,057 Non-cash investing activities: Translation adjustment $ 690 $ ( 2,062 ) $ ( 292 ) Translation loss recognized on change in Vasconia ownership 3,404 — — Non-cash gain on dilution of Vasconia ownership ( 1,732 ) $ — $ — F -38 Table of Contents LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2021 Components of accumulated other comprehensive loss, net Year Ended December 31, 2021 2020 2019 (in thousands) Accumulated translation adjustment: Balance at beginning of year $ ( 35,846 ) $ ( 34,019 ) $ ( 33,727 ) Translation adjustment during period 690 ( 2,062 ) ( 292 ) Amount reclassified from accumulated other comprehensive loss (1) 3,404 235 — Balance at end of year $ ( 31,752 ) $ ( 35,846 ) $ ( 34,019 ) Accumulated deferred gains (losses) on cash flow hedges: Balance at beginning of year $ ( 1,125 ) $ 1,164 $ 161 Derivative fair value adjustment, net of tax ( 311 ) ( 3,273 ) 1,212 Amounts reclassified from accumulated other comprehensive loss: (2) Settlement of cash flow hedges 1,514 984 ( 209 ) Balance at end of year $ 78 $ ( 1,125 ) $ 1,164 Accumulated effect of retirement benefit obligations: Balance at beginning of year $ ( 2,201 ) $ ( 1,600 ) $ ( 1,050 ) Net income (loss) arising from retirement benefit obligations, net of tax 191 ( 680 ) ( 601 ) Amount reclassified from accumulated other comprehensive loss: (3) Amortization of loss, net of tax 135 79 51 Balance at end of year $ ( 1,875 ) $ ( 2,201 ) $ ( 1,600 ) Total accumulated other comprehensive loss at end of period $ ( 33,549 ) $ ( 39,172 ) $ ( 34,455 ) (1) Amount is recorded in equity in earnings on the consolidated statements of operations. (2) Amounts reclassified are recorded in interest expense and cost of goods sold on the consolidated statements of operations. (3) Amount is recorded in selling, general and administrative expenses on the consolidated statements of operations. NOTE 17 — SUBSEQUENT EVENTS On March 2, 2022, the Company completed the acquisition of certain assets of Can't Live Without It, LLC. (dba S'well Bottle and which the Company refers to as “S'well”). S'well is a global designer, wholesaler and retailer of reusable, vacuum-insulated products. The Company paid consideration of $ 18.0 million in cash upon closing of the transaction, subject to working capital adjustments. The transaction also includes up to $ 5.0 million in contingent consideration, subject to the acquired brand reaching certain milestones. F -39 Item 15(a) LIFETIME BRANDS, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands) COL. A COL. B COL. C COL. D COL. E Description Balance at beginning of period Charged to costs and expenses Deductions Balance at end of period Year ended Year ended December 31, 2021 Deducted from asset accounts: Allowance for doubtful accounts $ 4,624 $ 367 $ ( 335 ) (a) $ 4,656 Reserve for sales returns and allowances 12,389 8,716 (c) ( 9,217 ) (b) 11,888 17,013 9,083 ( 9,552 ) 16,544 Year ended Year ended December 31, 2020 Deducted from asset accounts: Allowance for doubtful accounts $ 1,333 $ 4,512 $ ( 1,221 ) (a) $ 4,624 Reserve for sales returns and allowances 8,348 11,280 (c) ( 7,239 ) (b) 12,389 $ 9,681 $ 15,792 $ ( 8,460 ) $ 17,013 Year ended Year ended December 31, 2019 Deducted from asset accounts: Allowance for doubtful accounts $ 1,496 $ 536 $ ( 699 ) (a) $ 1,333 Reserve for sales returns and allowances 6,359 6,390 (c) ( 4,401 ) (b) 8,348 $ 7,855 $ 6,926 $ ( 5,100 ) $ 9,681 (a) Uncollectible accounts written off, net of recoveries. (b) Allowances granted. (c) Charged to net sales. S-1