What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 240 added, 343 removed, 637 unchanged (48% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

2022 December 31,

1 unchanged sentence

Cash and cash equivalents $ 14,846 $ 27,982

Accounts receivable, less allowances of $ 17,968 at September 30, 2021 and $ 17,013 at December 31, 2020

Accounts receivable, less allowances of $ 15,599 at March 31, 2022 and $ 16,544 at December 31, 2021

117,301 175,076

20 unchanged sentences

DEFERRED INCOME TAXES 12,963 12,842

REVOLVING CREDIT FACILITY 1,600 27,302

TERM LOAN 240,703 241,873

4 unchanged sentences

Common stock, $ 0.01 par value, shares authorized:

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

50,000,000 at March 31, 2022 and December 31, 2021;

shares issued and outstanding:

22,018,193 at September 30, 2021 and 21,755,195 at December 31, 2020

22,318,096 at March 31, 2022 and 22,018,016 at December 31, 2021

Paid-in capital 271,698 271,556

Retained earnings

16,839 17,419

Accumulated other comprehensive loss

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Net sales $ 182,717 $ 195,653

3 unchanged sentences

Selling, general and administrative expenses 39,488 38,108

Restructuring expenses — — — 253

Goodwill and other impairments — — — 20,100

Income from operations

21,680 21,506 41,927 557

Interest expense ( 3,767 ) ( 4,014 )

Mark to market gain (loss) on interest rate derivatives

120 99 664 ( 2,316 )

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

17,965 17,477 30,923 ( 14,853 )

Mark to market gain on interest rate derivatives

Income before income taxes and equity in earnings (losses)

Income tax provision

2 unchanged sentences

$ 380 $ 3,067

NET INCOME (LOSS)

$ 12,571 $ 13,913 $ 21,427 $ ( 18,228 )

BASIC INCOME (LOSS) PER COMMON SHARE

BASIC INCOME PER COMMON SHARE

$ 0.02 $ 0.15

DILUTED INCOME (LOSS) PER COMMON SHARE

DILUTED INCOME PER COMMON SHARE

$ 0.02 $ 0.14

1 unchanged sentence

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

Three Months Ended

September 30, Nine Months Ended

September 30,

$ 380 $ 3,067

Net income (loss)

$ 12,571 $ 13,913 $ 21,427 $ ( 18,228 )

Other comprehensive income (loss), net of taxes:

Other comprehensive income, net of taxes:

Translation adjustment ( 116 ) 1,829

1 unchanged sentence

Effect of retirement benefit obligations 29 27

Other comprehensive income (loss), net of taxes

1,265 2,381 5,619 ( 7,328 )

Comprehensive income (loss)

Other comprehensive income, net of taxes

Comprehensive income

$ 901 $ 4,750

9 unchanged sentences

BALANCE AT DECEMBER 31, 2021

Comprehensive income (loss):

22,018 $ 220 $ 271,556 $ 17,419 $ ( 33,549 ) $ 255,646

Translation adjustment — — — — 1,829 1,829

Net change in cash flow hedges — — — — ( 173 ) ( 173 )

Effect of retirement benefit obligations — — — — 27 27

Total comprehensive income

— — — 380 — 380

Other comprehensive income, net of taxes

— — — — 521 521

Performance shares issued to employees 167 2 ( 2 ) — — —

3 unchanged sentences

Shares effectively repurchased for required employee withholding taxes ( 45 ) — ( 568 ) — — ( 568 )

Repurchased stock ( 51 ) ( 1 ) ( 670 ) — — ( 671 )

Dividends (1)

1 unchanged sentence

BALANCE AT MARCH 31, 2022

Comprehensive income:

22,318 $ 223 $ 271,698 $ 16,839 $ ( 33,028 ) $ 255,732

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

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

Effect of retirement benefit obligations — — — — 41 41

Total comprehensive income

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

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

Net exercise of stock options 50 1 550 — — 551

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

Dividends (1)

— — — ( 914 ) — ( 914 )

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

Comprehensive income:

— — — 12,571 — 12,571

Translation adjustment — — — — 240 240

Net change in cash flow hedges — — — — 992 992

Effect of retirement benefit obligations — — — — 33 33

Total comprehensive income

Stock compensation expense — — 1,192 — — 1,192

Net exercise of stock options 12 — 142 — — 142

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

Dividends (1)

— — — ( 995 ) — ( 995 )

BALANCE AT SEPTEMBER 30, 2021 22,018 $ 220 $ 270,309 $ 18,999 $ ( 33,553 ) $ 255,975

(1) Cash dividends declared per share of common stock were $ 0.1275 and $ 0.1275 in the nine months ended September 30, 2021 and 2020, respectively.

Common stock Paid-in

capital Retained earnings

(accumulated deficit) Accumulated other

Accumulated other

comprehensive

1 unchanged sentence

BALANCE AT DECEMBER 31, 2020

Comprehensive (loss) income:

21,755 $ 218 $ 268,666 $ 424 $ ( 39,172 ) $ 230,136

Translation adjustment — — — — ( 4,458 ) ( 4,458 )

Net change in cash flow hedges — — — — ( 2,877 ) ( 2,877 )

Effect of retirement benefit obligations — — — — 20 20

Total comprehensive loss

— — — 3,067 — 3,067

Other comprehensive income, net of taxes

— — — — 1,683 1,683

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

1 unchanged sentence

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

Net exercise of stock options 44 — 184 — — 184

Shares effectively repurchased for required employee withholding taxes ( 146 ) ( 1 ) ( 2,159 ) — — ( 2,160 )

2 unchanged sentences

BALANCE AT MARCH 31, 2021

Comprehensive (loss) income:

21,980 $ 220 $ 268,127 $ 2,548 $ ( 37,489 ) $ 233,406

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

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

Effect of retirement benefit obligations — — — — 19 19

Total comprehensive loss

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

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

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

Dividends (1)

— — — ( 913 ) — ( 913 )

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

Comprehensive income

— — — 13,913 — 13,913

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

Derivative fair value adjustment — — — — 216 216

Effect of retirement benefit obligations — — — — 20 20

Total comprehensive income

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

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

Dividends (1)

— — — ( 942 ) — ( 942 )

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

(1) Cash dividends declared per share of common stock were $ 0.1275 and $ 0.1275 in the nine months ended September 30, 2021 and 2020, respectively.

(1) Cash dividends declared per share of common stock were $ 0.0425 and $ 0.0425 in the three months ended March 31, 2022 and 2021, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

OPERATING ACTIVITIES

Net income (loss)

$ 380 $ 3,067

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

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

Depreciation and amortization 4,899 5,958

Goodwill and other impairments — 20,100

Amortization of financing costs 426 443

Mark to market (gain) loss on interest rate derivatives

Mark to market (gain) on interest rate derivatives

( 1,049 ) ( 498 )

Non-cash lease expense ( 335 ) ( 409 )

Provision (recovery) for doubtful accounts

( 166 ) 3,011

(Recovery) provision for doubtful accounts

Stock compensation expense 1,174 1,444

Undistributed (earnings) losses from equity investment, net of taxes

Changes in operating assets and liabilities

Changes in operating assets and liabilities (excluding the effects of business acquisitions)

Accounts receivable 59,657 38,961

2 unchanged sentences

Accounts payable, accrued expenses and other liabilities ( 50,021 ) ( 10,746 )

Income taxes receivable — 1,577

Income taxes payable 1,175 2,156

3 unchanged sentences

Purchases of property and equipment ( 382 ) ( 674 )

Proceeds from sale of shares of equity method investment 3,061 —

Acquisition ( 178 ) —

Acquisitions ( 17,977 ) ( 178 )

NET CASH USED IN INVESTING ACTIVITIES

7 unchanged sentences

Proceeds from the exercise of stock options 233 184

Payments for stock repurchase ( 671 ) —

Cash dividends paid ( 1,004 ) ( 1,010 )

2 unchanged sentences

Effect of foreign exchange on cash ( 26 ) 42

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

DECREASE IN CASH AND CASH EQUIVALENTS

( 13,136 ) ( 5,322 )

4 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

14 unchanged sentences

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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

In 2021 and 2020, net sales for the third and fourth quarters accounted for 56 % and 62 % of total annual net sales, respectively.

The increase in the Company's net sales in the first half of the year in 2021 compared to historical trend was a result of increased demand for the Company's products due shifts in consumer purchasing patterns.

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

The Company's inventory levels at March 31, 2022, did not decrease from the previous two quarters, as a result of increased inventory purchases, to maintain inventory availability and meet expected demand, and higher inventory cost.

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

7 unchanged sentences

Cost of sales

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

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.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

Distribution expenses

11 unchanged sentences

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

Pursuant to the Receivable Purchase Agreement, the Company sold to HSBC $ 33.7 million and $ 113.2 million of receivables during the three and nine months ended September 30, 2021, respectively, and $ 43.0 million and $ 116.9 million of receivables during the three and nine months ended September 30, 2020, respectively.

Charges of $ 0.1 million and $ 0.3 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021, respectively.

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

At September 30, 2021 and 2020, $ 15.8 million and $ 26.7 million, respectively, of receivables sold were outstanding and due to HSBC from customers.

Pursuant to the Receivable Purchase Agreement, the Company sold to HSBC $ 46.3 million and $ 40.6 million of receivables during the three months ended March 31, 2022 and 2021, respectively.

Charges of $ 0.1 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for both the three months ended March 31, 2022 and 2021.

At March 31, 2022 and 2021, $ 28.1 million and $ 25.6 million, respectively, of receivables sold were outstanding and due to HSBC from customers.

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

5 unchanged sentences

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

September 30,

2022 December 31, 2021

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

Fair value of financial instruments

22 unchanged sentences

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.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

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.

Long-lived assets, including intangible assets deemed to have finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

24 unchanged sentences

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

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

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

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

Adoption of new accounting pronouncements

Effective January 1, 2021, the Company adopted ASU 2019-12, Income Taxes (Topic 740):

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

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

Effective January 1, 2022, the Company adopted 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 adoption did not have a material impact on the Company’s condensed consolidated financial statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

New accounting pronouncements

17 unchanged sentences

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

Shipping and handling fees that are billed to customers in sales transactions are included in net sales and amounted to $ 1.0 million and $ 2.4 million for the three and nine months ended September 30, 2021, respectively, and $ 0.9 million and $ 2.6 million for the three and nine months ended September 30, 2020, respectively.

Shipping and handling fees that are billed to customers in sales transactions are included in net sales and amounted to $ 1.0 million and $ 0.7 million for the three months ended March 31, 2022 and 2021, respectively.

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

10 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

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

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

March 31, 2022

The following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended

Kitchenware $ 114,130 $ 119,995

9 unchanged sentences

NOTE 3 — ACQUISITION

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

On March 2, 2022, the Company acquired certain assets of Can't Live Without It, LLC.

(dba S'well Bottle and which the Company refers to as “S'well”).

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.

The purchase price was comprised of the following (in thousands):

Cash paid $ 17,977

Value of contingent consideration 650

Total purchase price $ 18,627

The value of contingent consideration represents the present value of estimated contingent payments of $ 0.7 million, related to the attainment of certain gross contribution targets for the year 2024.

The maximum undiscounted contingent consideration to be paid under the agreement is $ 5.0 million.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

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

Purchase Price Allocation

Accounts receivable $ 2,280

Inventory 3,845

Intangible assets 13,000

Goodwill 3,102

Accounts payable and accrued expenses ( 3,600 )

Total allocated value $ 18,627

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

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

The fair values of net assets acquired are based on the Company’s preliminary estimate of the respective fair values.

The preliminary estimated fair values that are not yet finalized relate to the valuation of accounts receivable, inventory, accounts payable, accrued expenses, intangibles, deferred taxes and valuation of the contingent consideration.

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

The associated goodwill is deductible for tax purposes.

Goodwill and the trade name intangible asset are included in the U.S.

The trade name intangible asset is amortized on a straight-line basis over its estimated useful life of 12 years (see Note 6).

The condensed consolidated statement of operations for the three months ended March 31, 2022 includes $ 0.9 million of net sales attributable to the S'well brand.

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

805, Business Combinations, commencing from the acquisition date.

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

The Year & Day acquisition did not have a material impact on the Company's consolidated statement of operations for the three and nine months ended September 30, 2021.

The purchase price was allocated based on the fair values of the assets acquired which consisted of inventory of $ 0.3 million and liabilities assumed of $ 0.1 million.

NOTE 4 — LEASES

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

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

The components of lease expense for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021 2020 2021 2020

Operating lease expenses (1) :

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

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

Nine Months Ended

September 30,

March 31, 2022

Supplemental cash flow information for lease related liabilities and assets for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

Three Months Ended

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

Operating cash flows for operating leases $ 4,743 $ 4,904

Nine Months Ended

September 30,

Three Months Ended

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

Operating leases $ 1,528 $ 847

During the three and nine months ended September 30, 2020, in response to the COVID-19 pandemic, the Company negotiated COVID-19 related rent concessions for several of its leased properties.

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

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

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

The COVID-19 related deferred rent payments as of September 30, 2020, totaled $1.4 million and were deferred to the fourth quarter of fiscal year 2020 and into fiscal year 2021.

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

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

2021 (excluding the nine months ended September 30, 2021)

The aggregate future lease payments for operating leases as of March 31, 2022 were as follows (in thousands):

2022 (excluding the three months ended March 31, 2022)

Thereafter 24,786

3 unchanged sentences

Average lease terms and discount rates were as follows:

September 30, 2021

March 31, 2022

Operating leases:

1 unchanged sentence

Weighted-average discount rate 6.1 %

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

NOTE 5 — INVESTMENTS

As of September 30, 2021, the Company owned approximately 25 % of the outstanding capital stock of Grupo Vasconia S.A.B.

As of March 31, 2022, the Company owned 24.7 % of the outstanding capital stock of Grupo Vasconia S.A.B.

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

1 unchanged sentence

The Quotation Key is VASCONI.

For the period ended March 31, 2021, the Company's investment ownership was 30.0 %.

The Company's investment ownership decreased to approximately 27.0 % on June 30, 2021 and was further reduced to 24.7 % on July 29, 2021 as a result of transactions that occurred in those periods.

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

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

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

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

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

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

On July 29, 2021, the Company sold 2.2 million shares further reducing its ownership from approximately 27 % to approximately 25 % 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 (losses), net of taxes, in the accompanying unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021.

The Company continues to apply the equity method of accounting.

Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired) for the three months ended March 31, 2022 and 2021 in the accompanying unaudited condensed consolidated statements of operations.

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

Dollars (“USD”) using the spot rates of MXN 20.54 and MXN 19.88 at September 30, 2021 and December 31, 2020, respectively.

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

Dollars (“USD”) using the spot rates of MXN 19.88 and MXN 20.46 at March 31, 2022 and December 31, 2021, respectively.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021 2020 2021 2020

Average exchange rate (USD to MXN) 20.50

22.06 20.01 - 20.33

19.91 - 23.31

The effect of the translation of the Company’s investment, as well as the translation of Vasconia’s balance sheet, resulted in an increase to the investment of $ 1.3 million and a decrease of $ 3.4 million during the nine months ended September 30, 2021 and 2020, respectively.

The effect of the translation of the Company’s investment, as well as the translation of Vasconia’s balance sheet, resulted in an increase to the investment of $ 0.1 million and $ 1.3 million during the three months ended March 31, 2022 and 2021, respectively.

These translation effects are recorded in accumulated other comprehensive loss.

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

Summarized income statement information for the three months ended March 31, 2022 and 2021 for Vasconia in USD and MXN is as follows (in thousands):

Three Months Ended

September 30,

USD MXN USD MXN

3 unchanged sentences

4,685 96,040 3,784 76,933

2,952 59,063 536 11,812

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

Nine Months Ended

September 30,

USD MXN USD MXN

Net sales $ 174,468 $ 3,508,858 $ 99,932 $ 2,171,695

40,837 821,125 21,025 459,731

Income from operations

14,169 284,799 3,821 87,229

Net income (loss)

1,731 35,479 ( 770 ) ( 15,661 )

The Company recorded equity in earnings of Vasconia, net of taxes, of $ 0.7 million and $ 1.2 million for the three and nine months ended September 30, 2021, respectively.

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

The Company recorded equity in earnings (losses) of Vasconia, net of taxes, of $ 0.4 million and $( 0.2 ) million for the three months ended March 31, 2022 and 2021, respectively.

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

Vasconia due to and due from balances Balance Sheet

Location September 30, 2021 December 31, 2020

Vasconia due to and due from balances Balance Sheet Location March 31, 2022 December 31, 2021

Amounts due from Vasconia Prepaid expenses and other current assets $ 57 $ 80

Amounts due to Vasconia Accrued expenses and Accounts payable ( 105 ) ( 146 )

As of September 30, 2021 and December 31, 2020, the fair value (based on Level 1 inputs using the quoted stock price) of the Company’s investment in Vasconia was $ 33.7 million and $ 32.8 million, respectively.

The carrying value of the Company’s investment in Vasconia was $ 22.1 million and $ 20.0 million as of September 30, 2021 and December 31, 2020, respectively.

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

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

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

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

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

As of March 31, 2022 and December 31, 2021, the fair value (based on Level 1 inputs using the quoted stock price) of the Company’s investment in Vasconia was $ 28.7 million and $ 31.5 million, respectively.

The carrying value of the Company’s investment in Vasconia was $ 22.8 million and $ 22.3 million as of March 31, 2022 and December 31, 2021, respectively.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

NOTE 6 — INTANGIBLE ASSETS

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

September 30, 2021 December 31, 2020

Intangible assets consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Gross Accumulated

7 unchanged sentences

Trade names (1)

54,962 ( 17,197 ) 37,765 51,856 ( 2,546 ) ( 23,829 ) 25,481

Customer relationships (1)

Other 6,567 ( 2,922 ) 3,645 6,582 — ( 2,482 ) 4,100

143,158 ( 46,053 ) 97,105 177,245 ( 11,766 ) ( 65,863 ) 99,616

5,885 ( 2,957 ) 2,928 6,566 ( 448 ) ( 3,057 ) 3,061

Total $ 302,825 $ ( 77,594 ) $ 225,231 $ 331,385 $ ( 14,760 ) $ ( 103,947 ) $ 212,678

In the first quarter of 2020, as a result of the economic downturn caused by the COVID-19 pandemic, the Company concluded that a triggering event had occurred and performed an interim impairment test of goodwill and certain intangible assets as of March 31, 2020, which resulted in an impairment charge of $ 20.1 million.

The Company performed the first quarter 2020 interim impairment test of goodwill by comparing its fair value with its carrying value.

The analysis was performed by using a discounted cash flow method and market multiple method.

For goodwill, the outcome of the valuation is largely dependent upon estimates made by the Company with respect to significant assumptions, including projected net sales, projected earnings before interest, tax, depreciation and amortization (“EBITDA”), terminal growth rates, and the cost of capital under the discounted cash flow method.

For the three and nine months ended September 30, 2021, there were no impairment triggering events identified.

(1) The gross value and accumulated amortization at March 31, 2022 reflect a reduction of $ 44.1 million and $( 29.4 ) million, respectively, for the net $ 14.8 million impairment charge on finite-lived intangible assets within the international segment during the period ended December 31, 2021.

A summary of the activities related to the Company’s intangible assets for the three months ended March 31, 2022 consists of the following (in thousands):

Assets Goodwill Total Intangible

Goodwill and Intangible Assets, December 31, 2021

$ 182,407 $ 30,271 $ 212,678

Acquisition of goodwill — 3,102 3,102

Acquisition of trade name 13,000 — 13,000

Foreign currency translation adjustment ( 60 ) — ( 60 )

Amortization ( 3,489 ) — ( 3,489 )

Goodwill and Intangible Assets, March 31, 2022

$ 191,858 $ 33,373 $ 225,231

NOTE 7 — DEBT

8 unchanged sentences

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

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

1 unchanged sentence

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

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

September 30, 2021

As of March 31, 2022 and December 31, 2021, the total availability under the ABL Agreement was as follows (in thousands):

March 31, 2022

December 31, 2021

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

Outstanding borrowings under the ABL Agreement ( 1,600 ) ( 27,302 )

Standby letters of credit ( 2,765 ) ( 3,659 )

5 unchanged sentences

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

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Current portion of Term Loan facility:

6 unchanged sentences

Total Non-current portion of Term Loan facility $ 240,703 $ 241,873

The estimated Excess Cash Flow principal payment recorded at September 30, 2021 represents the Company’s estimate for the 2022 Excess Cash Flow payment.

The estimated Excess Cash Flow principal payment recorded at March 31, 2022 represents the Company’s estimate for the 2023 Excess Cash Flow payment.

The 2022 Excess Cash Flow payment, paid on March 30, 2022, totaled $ 6.2 million.

5 unchanged sentences

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

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

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

The interest rate on outstanding borrowings under the ABL Agreement at September 30, 2021 was 3.5 %.

March 31, 2022

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

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 March 31, 2022.

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

1 unchanged sentence

(i) alternate base rate, defined, for any day, as the greater of (x) the prime rate, (y) a federal funds and overnight bank funding based rate plus 0.5 % or (z) one-month LIBOR, but not less than 1.0 %, plus 1.0 %, which alternate base rate shall not be less than 2.0 %, plus a margin of 2.5 % or (ii) LIBOR, but not less than 1.0 %, plus a margin of 3.5 %.

The interest rate on outstanding borrowings under the Term Loan at September 30, 2021 was 4.5 %.

The interest rate on outstanding borrowings under the Term Loan at March 31, 2022 was 4.5 %.

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

1 unchanged sentence

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

The Company was in compliance with the covenants of the Debt Agreements at September 30, 2021.

The Company was in compliance with the covenants of the Debt Agreements at March 31, 2022.

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

1 unchanged sentence

Interest Rate Swap Agreements

The Company's total outstanding notional value of interest rate swaps was $ 75.0 million at September 30, 2021.

The Company's total outstanding notional value of interest rate swaps was $ 69.0 million at March 31, 2022.

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

1 unchanged sentence

The original notional values are reduced over these periods.

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

In June 2019, the Company entered into additional interest rate swap agreements, with an aggregate notional value of $ 25.0 million at September 30, 2021.

The aggregate notional value of designated interest rate swaps was $ 44.0 million at March 31, 2022.

In June 2019, the Company entered into additional interest rate swap agreements, with an aggregate notional value of $ 25.0 million at March 31, 2022.

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.

3 unchanged sentences

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

The Company purchases foreign currency forward contracts with terms less than 18 months to protect against currency exchange risks associated with the payment of merchandise purchases to foreign suppliers.

The Company purchases foreign currency forward contracts with terms less than 18 months to protect against currency exchange risks associated with the payment of

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

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 September 30, 2021 was $ 31.3 million.

The aggregate gross notional values of foreign exchange contracts at March 31, 2022 was $ 18.0 million.

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

2 unchanged sentences

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

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

liquidity of the credit markets.

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

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

The Company does not enter into such contracts for speculative purposes, and as of September 30, 2021, the Company did not have any foreign currency forward contract derivatives that are not designated as hedges.

The Company does not enter into such contracts for speculative purposes, and as of March 31, 2022, the Company did 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.

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

Derivatives designated as hedging instruments Balance Sheet

Location September 30,

December 31, 2020

Derivatives designated as hedging instruments Balance Sheet Location March 31, 2022 December 31, 2021

Interest rate swaps Accrued expenses $ 203 $ 288

1 unchanged sentence

Foreign exchange contracts Prepaid expenses and other current assets 847 461

Other Assets 86 —

Derivatives not designated as hedging instruments Balance Sheet

Location September 30,

December 31, 2020

Interest rate swaps Other Long-Term Liabilities 1,077 1,742

Derivatives not designated as hedging instruments Balance Sheet Location March 31, 2022 December 31, 2021

Interest rate swaps Other assets $ 369 $ —

Other Long-Term Liabilities — 680

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

2 unchanged sentences

The Company is exposed to credit risk for the net exchanges under these agreements, but not for the notional amounts.

As of September 30, 2021, the Company did not anticipate non-performance by any of its counterparties.

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

As of March 31, 2022, the Company did not anticipate non-performance by any of its counterparties.

Three Months Ended

September 30, Nine Months Ended

September 30,

Derivatives designated as hedging instruments 2022 2021

3 unchanged sentences

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

The Company had no terminated or matured interest rate swaps during the three and nine months ended September 30, 2021.

The Company had no terminated or matured interest rate swaps during the three months ended March 31, 2022.

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

During the three months ended September 30, 2021, the Company reclassified $ 0.5 million of cash flow hedges in other comprehensive losses to earnings.

This was comprised of $ 0.2 million related to realized interest rate swap losses and a loss of $ 0.3 million related to foreign exchange contracts recognized in cost of sales.

During the nine months ended September 30, 2021, the Company reclassified $ 1.3 million of cash flow hedges in other comprehensive losses to earnings.

This was comprised of $ 0.7 million related to realized interest rate swap losses and a loss of $ 0.6 million related to foreign exchange contracts recognized in cost of sales.

At September 30, 2021, the estimated amount of existing losses expected to be reclassified into earnings within the next 12 months was $ 0.6 million.

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

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

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

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

March 31, 2022

During the three months ended March 31, 2022, the Company reclassified $ 0.1 million of cash flow hedges in accumulated other comprehensive losses to earnings.

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

At March 31, 2022, the estimated amount of existing net gains expected to be reclassified into earnings within the next 12 months was $ 0.5 million.

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

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

Derivatives not designated as hedging instruments Location of gain (loss) 2022 2021

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

Interest rate swaps Mark to market gain on interest rate derivatives

$ 1,049 $ 498

Interest expense ( 111 ) ( 111 )

$ 4 $ ( 12 ) $ 322 $ ( 2,529 )

NOTE 9 — STOCK COMPENSATION

Option Awards

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

A summary of the Company’s stock option activity and related information for the three months ended March 31, 2022 is as follows:

Options Weighted-

4 unchanged sentences

1,094,575 $ 13.64

Grants 48,000 14.18

Exercises ( 30,000 ) 11.64

( 235,325 ) 11.70

Expirations ( 4,000 ) 19.10

Options outstanding, September 30, 2021

Cancellations ( 5,125 ) 10.60

Options outstanding, March 31, 2022

1,059,450 13.71 4.7 $ 1,291

Options exercisable, September 30, 2021

Options exercisable, March 31, 2022

892,615 $ 14.40 4.2 $ 773

1 unchanged sentence

Weighted-average years expected to be recognized over 1.5

(1) Includes the exercise of 1,000 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 stock options on September 30, 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 September 30, 2021 and the exercise price.

The intrinsic value is calculated for each in-the-money stock option as the difference between the closing price of the Company’s common stock on March 31, 2022 and the exercise price.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

Restricted Stock

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

A summary of the Company’s restricted stock activity and related information for the three months ended March 31, 2022 is as follows:

Shares Weighted-

5 unchanged sentences

Cancellations ( 3,428 ) 10.97

Non-vested restricted shares, September 30, 2021

Non-vested restricted shares, March 31, 2022

592,834 $ 11.53

1 unchanged sentence

Weighted-average years expected to be recognized over 2.0

The total fair value of restricted stock that vested during the nine months ended September 30, 2021 was $ 8.4 million.

The total fair value of restricted stock that vested during the three months ended March 31, 2022 was $ 0.6 million.

Performance shares

2 unchanged sentences

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

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

A summary of the Company’s performance-based award activity and related information for the three months ended March 31, 2022 is as follows:

average grant

2 unchanged sentences

Grants 123,000 12.19

Achieved performance over target (2)

Vested ( 166,935 ) 9.20

Cancellations ( 2,525 ) 10.70

Non-vested performance-based awards, September 30, 2021

Non-vested performance-based awards, March 31, 2022

401,905 $ 11.56

2 unchanged sentences

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

The total fair value of performance-based awards that vested during the nine months ended September 30, 2021 was $ 2.1 million.

At September 30, 2021, there were 357,858 shares available for awards that could be granted under the Plan, assuming maximum performance of performance-based awards.

(2) Represents the number of shares earned over target for performance-based awards granted in 2019 based on performance goals attained.

These awards vested in the three months ended March 31, 2022.

The total fair value of performance-based awards that vested during the three months ended March 31, 2022 was $ 2.0 million.

At March 31, 2022, there were 40,288 shares available for awards that could be granted under the Plan, assuming maximum performance of performance-based awards.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

Cash-settled performance-based awards

Each cash-settled performance-based award represents the right to receive up to 150 % of the target number of deferred stock units with payment in cash equivalent to the value of one share of the Company's common stock.

The number of deferred stock units 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 cash-settled performance-based awards are subject to the terms and conditions of the Company’s Plan.

A summary of the Company’s cash-settled performance-based awards activity and related information for the three months ended March 31, 2022 is as follows:

Cash-settled performance-based awards (1)

Non-vested cash-settled performance-based awards, January 1, 2022

Grants 87,825 12.19

Cancellations ( 875 ) 12.19

Non-vested cash-settled performance-based awards, March 31, 2022

86,950 $ 12.84

Total unrecognized compensation expense remaining (in thousands) $ 1,089

Weighted-average years expected to be recognized over 2.8

(1) Represents the target number of units to be settled in cash.

Compensation expense for cash-settled performance-based awards is recognized over the 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 cash - settled performance-based awards are liability-classified awards and are recorded within other long-term liabilities in the Company's condensed consolidated balance sheet.

These awards are remeasured to fair value at the end of each reporting period until settlement.

The cash-settled performance-based awards vest at the end of a three year period, as determined by the Compensation Committee.

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Stock Compensation Expense Components 2022 2021

3 unchanged sentences

Liability based stock option expense ( 5 ) 5

Cash-settled performance-based awards 28 —

Total Stock Compensation Expense $ 1,174 $ 1,444

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

NOTE 10 — INCOME (LOSS) PER COMMON SHARE

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

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

March 31, 2022

NOTE 10 — INCOME PER COMMON SHARE

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

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

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

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

The calculations of basic and diluted income per common share for the three months ended March 31, 2022 and 2021 are as follows:

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands, except per share amounts)

Net income (loss) – Basic and Diluted

Net income – Basic and Diluted

$ 380 $ 3,067

2 unchanged sentences

Stock options and other stock awards

536 350 621 —

Weighted-average shares outstanding – Diluted 22,148 21,771

Basic income (loss) per common share

Basic income per common share

$ 0.02 $ 0.15

Diluted income (loss) per common share

Diluted income per common share

$ 0.02 $ 0.14

Antidilutive Securities (1)

337 1,850 394 2,133

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

NOTE 11— INCOME TAXES

Income tax provision of $ 5.6 million and $ 9.8 million for the three and nine months ended September 30, 2021, respectively, represent taxes on both U.S.

and foreign earnings at combined effective income tax provision rates of 31.1 % and 31.8 %, respectively.

The effective tax rate for the three and nine months ended September 30, 2021 differs from the federal statutory income tax rate of 21.0% primarily due to state and local tax expense, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

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

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

Income tax provision of $ 1.7 million and $ 2.4 million for the three months ended March 31, 2022 and 2021, respectively, represent taxes on both U.S.

and foreign earnings at combined effective income tax provision rates of 102.2 % and 42.2 %, respectively.

The effective tax rate for the three months ended September 30, 2020 is consistent with the federal statutory income tax rate of 21.0% and includes an increase for state and local tax expense offset by other items that are not material.

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

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

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

The effective tax rate for both the three months ended March 31, 2022 and 2021 differs from the federal statutory income tax rate of 21.0 % primarily due to state and local tax expenses, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

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

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

The Company's New York State tax returns for years 2015-2016 remain under audit.

The audit has been expanded to include tax years 2017-2019.

As of September 30, 2021, there are no material assessments in any given year.

The audit of the Company's New York State tax returns for years 2015-2019 closed during the quarter ended March 31, 2022 with an immaterial adjustment.

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

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

There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three-month periods ended March 31, 2022 and March 31, 2021.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

NOTE 12 – BUSINESS SEGMENTS

7 unchanged sentences

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 and consulting fees, are not allocated to the specific segments and are reflected as unallocated corporate 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.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands)

12 unchanged sentences

Total depreciation and amortization $ 4,899 $ 5,958

September 30,

2022 December 31,

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

NOTE 13 — CONTINGENCIES

25 unchanged sentences

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

The Department of Justice has asked the parties to extend the tolling agreements to November 2022, and we anticipate that all parties will do so.

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.

3 unchanged sentences

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.

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

The Company has reserved $ 0.5 million to cover probable and estimable liabilities with respect to the above testing and remedial design.

26 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

NOTE 14 — OTHER

Cash dividends

Dividends declared in the nine months ended September 30, 2021 were as follows:

Dividends declared in the three months ended March 31, 2022 were as follows:

Dividend per share Date declared Date of record Payment date

$ 0.0425 3/8/2022 5/2/2022 5/16/2022

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

$ 0.0425 8/3/2021 11/1/2021 11/15/2021

During the nine months ended September 30, 2021, the Company paid dividends of $ 2.9 million.

This included payments made on February 12, 2021, May 17, 2021 and August 16, 2021 of $ 0.9 million, $ 0.9 million and $ 0.9 million, respectively, to shareholders of record on January 29, 2021, May 3, 2021 and August 2, 2021 respectively, and payments of $ 0.2 million for dividends payable upon the vesting of restricted shares and performance shares.

In the three months ended September 30, 2021, the Company reduced retained earnings for the accrual of $ 1.0 million relating to the dividend payable on November 15, 2021.

For the nine months ended September 30, 2021, the Company reduced retained earnings for the accrual of $ 2.9 million relating to the dividend payable on May 17, 2021, August 16, 2021 and November 15, 2021.

On November 2, 2021, the Board of Directors declared a quarterly dividend of $ 0.0425 per share payable on February 14, 2022 to shareholders of record on January 31, 2022.

During the three months ended March 31, 2022, the Company paid dividends of $ 1.0 million.

This included payments made on February 14, 2022 of $ 0.9 million to shareholders of record on January 31, 2022 and payments of $ 0.1 million for dividends payable upon the vesting of restricted shares and performance shares.

In the three months ended March 31, 2022, the Company reduced retained earnings for the accrual of $ 1.0 million relating to the dividend payable on May 16, 2022.

Stock repurchase program

On March 14, 2022, the Company announced that its Board of Directors of the Company authorized the repurchase of up to $20.0 million of the Company’s common stock, replacing the Company’s previously-authorized $10 million share repurchase program.

The repurchase authorization permits the Company to effect the repurchases from time to time through open market purchases and privately negotiated transactions.

During the three months ended March 31, 2022, the Company repurchased 51,145 shares for a total cost of $ 0.7 million and thereafter retired the shares.

Please see Part II, Item 2—Unregistered Sales of Equity Securities and Use of Proceeds included in this Quarterly Report on Form 10-Q.

Supplemental cash flow information

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

3 unchanged sentences

Non-cash investing activities:

Translation income (loss) adjustment

Translation (loss) income adjustment

$ ( 116 ) $ 1,829

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

Components of accumulated other comprehensive loss, net

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

(in thousands)

1 unchanged sentence

Balance at beginning of period $ ( 31,752 ) $ ( 35,846 )

Translation (loss) income during period

( 1,122 ) 2,145 1,059 ( 5,062 )

Amounts reclassified from accumulated other comprehensive loss (1)

1,362 — 3,404 235

Translation Adjustment 240 2,145 4,463 ( 4,827 )

Translation adjustment during period ( 116 ) 1,829

Balance at end of period $ ( 31,868 ) $ ( 34,017 )

Accumulated deferred losses on cash flow hedges:

Accumulated deferred gains (losses) on cash flow hedges:

Balance at beginning of period $ 78 $ ( 1,125 )

Change in unrealized gain (losses)

528 ( 89 ) ( 255 ) ( 3,224 )

Change in unrealized gains (losses)

Amounts reclassified from accumulated other comprehensive loss:

Settlement of cash flow hedge (1)

464 305 1,310 664

Net change in cash flow hedges, net of taxes of $( 247 ), $( 73 ), $( 301 ), $ 856

992 216 1,055 ( 2,560 )

Net change in cash flow hedges, net of taxes of $ 170 and $( 19 )

Balance at end of period $ 686 $ ( 1,298 )

6 unchanged sentences

$ ( 33,028 ) $ ( 37,489 )

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

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

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements