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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 10-Q
__________________________
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 2023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 0-19254
__________________________
LIFETIME BRANDS, INC.
(Exact name of registrant as specified in its charter)
__________________________
Delaware11-2682486
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
1000 Stewart Avenue, Garden City, New York 11530
(Address of principal executive offices) (Zip Code)
(516) 683-6000
(Registrant’s telephone number, including area code)
__________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)		Name of each exchange
on which registered
Common Stock, $.01 par valueLCUTThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☒
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ☐    No  ☒
The number of shares of the registrant’s common stock outstanding as of October 31, 2023 was 21,814,236.


Table of Contents
LIFETIME BRANDS, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2023
INDEX
Page No.
Part I.
Item 1.
Condensed Consolidated Statements of Operations (unaudited) – Three and Nine Months Ended September 30, 2023 and 2022
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) – Three and Nine Months Ended September 30, 2023 and 2022
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) –Three and Nine Months Ended September 30, 2023 and 2022
Condensed Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended September 30, 2023 and 2022
Item 2.
Item 3.
Item 4.
Part II.
Item 1.
Item 1A.
Item 5.
Item 6.























Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30,
2023		December 31,
2022
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents$6,318 $23,598 
Accounts receivable, less allowances of $16,810 at September 30, 2023 and $14,606 at December 31, 2022
153,456 141,195 
Inventory217,696 222,209 
Prepaid expenses and other current assets12,139 13,254 
Income taxes receivable1,254 — 
TOTAL CURRENT ASSETS390,863 400,256 
PROPERTY AND EQUIPMENT, net16,824 18,022 
OPERATING LEASE RIGHT-OF-USE ASSETS71,834 74,869 
INVESTMENTS3,963 12,516 
INTANGIBLE ASSETS, net202,872 213,887 
OTHER ASSETS5,312 6,338 
TOTAL ASSETS$691,668 $725,888 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturity of term loan$13,866 $— 
Accounts payable57,188 38,052 
Accrued expenses69,320 77,602 
Income taxes payable— 224 
Current portion of operating lease liabilities13,585 14,028 
TOTAL CURRENT LIABILITIES153,959 129,906 
OTHER LONG-TERM LIABILITIES14,796 14,995 
INCOME TAXES PAYABLE, LONG-TERM1,589 1,591 
OPERATING LEASE LIABILITIES72,808 76,420 
DEFERRED INCOME TAXES9,560 9,607 
REVOLVING CREDIT FACILITY29,305 10,424 
TERM LOAN183,234 242,857 
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 September 30, 2023 and December 31, 2022; shares issued and outstanding: 21,814,236 at September 30, 2023 and 21,779,799 at December 31, 2022
218 218 
Paid-in capital276,813 274,579 
(Accumulated deficit) retained earnings
(15,333)1,145 
Accumulated other comprehensive loss
(35,281)(35,854)
TOTAL STOCKHOLDERS’ EQUITY226,417 240,088 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$691,668 $725,888 
See accompanying notes to unaudited condensed consolidated financial statements.
- 2 -
Table of Contents
LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2023202220232022
Net sales$191,669 $186,590 $483,540 $520,621 
Cost of sales120,718 118,757 302,756 334,553 
Gross margin70,951 67,833 180,784 186,068 
Distribution expenses17,125 18,641 49,742 55,239 
Selling, general and administrative expenses40,214 36,462 113,984 114,208 
Restructuring expenses— — 856 — 
Wallace facility remediation expense— 5,140 — 5,140 
Income from operations
13,612 7,590 16,202 11,481 
Interest expense(5,246)(4,581)(16,110)(12,080)
Mark to market (loss) gain on interest rate derivatives
(98)637 (135)1,990 
Gain on early retirement of debt— — 1,520 — 
Income before income taxes and equity in losses
8,268 3,646 1,477 1,391 
Income tax provision
(3,015)(1,845)(2,909)(3,420)
Equity in losses, net of taxes
(1,047)(8,159)(9,687)(7,409)
NET INCOME (LOSS)
$4,206 $(6,358)$(11,119)$(9,438)
BASIC INCOME (LOSS) PER COMMON SHARE
$0.20 $(0.30)$(0.52)$(0.44)
DILUTED INCOME (LOSS) PER COMMON SHARE
$0.20 $(0.30)$(0.52)$(0.44)
See accompanying notes to unaudited condensed consolidated financial statements.
- 3 -
Table of Contents
LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
Three Months Ended
September 30,		Nine Months Ended
September 30,
 2023202220232022
Net income (loss)
$4,206 $(6,358)$(11,119)$(9,438)
Other comprehensive (loss) income, net of taxes:
Translation adjustment(1,242)(2,686)1,556 (7,109)
Net change in cash flow hedges435 354 (1,018)1,912 
Effect of retirement benefit obligations12 29 35 87 
Other comprehensive (loss) income, net of taxes
(795)(2,303)573 (5,110)
Comprehensive income (loss)
$3,411 $(8,661)$(10,546)$(14,548)
See accompanying notes to unaudited condensed consolidated financial statements.
- 4 -
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LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(unaudited)
 Common stockPaid-in
capital
Retained earnings (accumulated deficit)
Accumulated other
comprehensive
 loss
Total
SharesAmount
BALANCE AT DECEMBER 31, 2022
21,780 $218 $274,579 $1,145 $(35,854)$240,088 
Net loss
— — — (8,805)— (8,805)
Other comprehensive income, net of taxes
— — — — 420 420 
Performance shares issued to employees120 1 (1)— — — 
Net issuance of restricted shares granted to employees185 2 (2)— — — 
Stock compensation expense— — 866 — — 866 
Shares effectively repurchased for required employee withholding taxes(74)(1)(438)— — (439)
Stock repurchase(320)(3)— (2,536)— (2,539)
Dividends (1)
— — — (930)— (930)
BALANCE AT MARCH 31, 2023
21,691 $217 $275,004 $(11,126)$(35,434)$228,661 
Net loss
— — — (6,520)— (6,520)
Other comprehensive income, net of taxes
— — — — 948 948 
Net issuance of restricted shares granted to employees and directors141 1 (1)— — — 
Stock compensation expense— — 1,010 — — 1,010 
Shares effectively repurchased for required employee withholding taxes(18)— (98)— — (98)
Dividends (1)
— — — (950)— (950)
BALANCE AT JUNE 30, 2023
21,814 $218 $275,915 $(18,596)$(34,486)$223,051 
Net income
— — — 4,206 — 4,206 
Other comprehensive loss, net of taxes
— — — — (795)(795)
Stock compensation expense— — 898 — — 898 
Dividends (1)
— — — (943)— (943)
BALANCE AT SEPTEMBER 30, 2023
21,814 $218 $276,813 $(15,333)$(35,281)$226,417 
(1) Cash dividends declared per share of common stock were $0.1275 and $0.1275 in the nine months ended September 30, 2023 and 2022, respectively.
- 5 -
Table of Contents
Common stockPaid-in
capital
Retained earnings
Accumulated other
comprehensive
 loss
 Total
SharesAmount
BALANCE AT DECEMBER 31, 2021
22,018 $220 $271,556 $17,419 $(33,549)$255,646 
Net income
— — — 380 — 380 
Other comprehensive income, net of taxes
— — — — 521521 
Performance shares issued to employees167 2 (2)— — — 
Net issuance of restricted shares granted to employees207 2 (2)— — — 
Stock compensation expense— — 1,151 — — 1,151 
Net exercise of stock options22 — 233 — — 233 
Shares effectively repurchased for required employee withholding taxes(45)— (568)— — (568)
Stock repurchase(51)(1)(670)— (671)
Dividends (1)
— — — (960)— (960)
BALANCE AT MARCH 31, 2022
22,318 $223 $271,698 $16,839 $(33,028)$255,732 
Net loss
— — — (3,460)— (3,460)
Other comprehensive loss, net of taxes
(3,328)(3,328)
Net issuance of restricted shares granted to employees and directors54 1 (1)— — — 
Stock compensation expense— — 1,280 — — 1,280 
Net exercise of stock options3 — — — — — 
Shares effectively repurchased for required employee withholding taxes(30)(1)(369)— — (370)
Stock repurchase(286)(2)671 (4,197)(3,528)
Dividends (1)
— — — (958)— (958)
BALANCE AT JUNE 30, 2022
22,059 $221 $273,279 $8,224 $(36,356)$245,368 
Net loss
— — — (6,358)— (6,358)
Other comprehensive loss, net of taxes
(2,303)(2,303)
Net issuance of restricted shares granted to employees and directors(1)— — — — — 
Stock compensation expense— — 1,023 — — 1,023 
Shares effectively repurchased for required employee withholding taxes(1)— — — — — 
Stock repurchase(53)(1)(1)(477)(479)
Dividends (1)
— — — (952)— (952)
BALANCE AT SEPTEMBER 30, 2022
22,004 $220 $274,301 $437 $(38,659)$236,299 
(1) Cash dividends declared per share of common stock were $0.1275 and $0.1275 in the nine months ended September 30, 2023 and 2022, respectively.
See accompanying notes to unaudited condensed consolidated financial statements.
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LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Nine Months Ended
September 30,
 20232022
OPERATING ACTIVITIES
Net loss
$(11,119)$(9,438)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization14,616 14,535 
Amortization of financing costs1,397 1,305 
Mark to market loss (gain) on interest rate derivatives
135 (1,990)
Non-cash lease adjustment(1,617)(1,055)
Provision (recovery) for doubtful accounts
2,193 (140)
Deferred income taxes5 — 
Stock compensation expense2,770 3,565 
Undistributed losses from equity investment, net of taxes
9,687 7,409 
Contingent consideration fair value adjustments(50)— 
Gain on early retirement of debt(1,520)— 
Changes in operating assets and liabilities (excluding the effects of business acquisitions)
Accounts receivable(14,279)38,765 
Inventory4,828 (3,694)
Prepaid expenses, other current assets and other assets1,784 (177)
Accounts payable, accrued expenses and other liabilities9,615 (66,062)
Income taxes receivable(1,254)(2,583)
Income taxes payable(230)(525)
 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
16,961 (20,085)
INVESTING ACTIVITIES
Purchases of property and equipment(1,765)(1,975)
Acquisition— (17,956)
NET CASH USED IN INVESTING ACTIVITIES
(1,765)(19,931)
FINANCING ACTIVITIES
Proceeds from revolving credit facility69,954 264,184 
Repayments of revolving credit facility(51,123)(230,365)
Repayments of term loan(44,866)(6,216)
Payment of financing costs(433)(882)
Payments for finance lease obligations(20)(24)
Payments of tax withholding for stock based compensation(537)(938)
Proceeds from the exercise of stock options— 233 
Payments for stock repurchase(2,539)(4,678)
Cash dividends paid(2,832)(2,887)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
(32,396)18,427 
Effect of foreign exchange on cash(80)(463)
DECREASE IN CASH AND CASH EQUIVALENTS
(17,280)(22,052)
Cash and cash equivalents at beginning of period23,598 27,982 
CASH AND CASH EQUIVALENTS AT END OF PERIOD$6,318 $5,930 
See accompanying notes to unaudited condensed consolidated financial statements.
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)

NOTE 1 — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES
Organization and business
Lifetime Brands, Inc. (“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 unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, which consist of normal recurring accruals and non-recurring adjustments, considered necessary for a fair presentation have been included.
These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.
The Company’s business and working capital needs are seasonal, with a majority of sales occurring in the third and fourth quarters. In 2022 and 2021, net sales for the third and fourth quarters accounted for 54% and 56% of total annual net sales, respectively. The current market conditions and shifts in both consumer and retailer purchasing patterns has impacted the seasonality of the Company's net sales compared to historical trends. In anticipation of the pre-holiday shipping season, inventory levels increase primarily in the June through October time period. In 2023, the Company's inventory trends may deviate from historical trends due to a change in inventory strategy to react to the current market conditions impacting the Company and retailers.
The Company’s current estimates contemplate current and expected future conditions, as applicable, however it is reasonably possible that actual conditions could differ from expectations, which could materially affect the Company’s results of operations and financial position.
Revenue recognition
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 to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.


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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
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.
Distribution expenses
Distribution expenses consist primarily of warehousing expenses and freight-out expenses. Handling costs of products sold are included in cost of sales.
Accounts receivable
The Company periodically reviews the collectability of its accounts receivable and establishes allowances for estimated credit 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 expectations of current and future economic conditions. 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.
Receivable purchase agreement
The Company has an uncommitted Receivables Purchase Agreement with HSBC Bank USA, National Association (“HSBC”) as Purchaser (the “Receivables Purchase Agreement”). 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. The Company did not sell receivables to HSBC during the three and nine months ended September 30, 2023. Pursuant to the Receivable Purchase Agreement, the Company sold to HSBC $30.0 million and $109.8 million of receivables during the three and nine months ended September 30, 2022, respectively. Charges of $0.2 million and $0.5 million, respectively, related to the sale of the receivables were included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022. At September 30, 2023 and 2022, zero and $20.2 million, respectively, of receivables sold were outstanding and due to HSBC from customers.
At September 30, 2023, $24.8 million of accounts receivables were available for sale to HSBC, net of applicable charges.
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.
The components of inventory were as follows (in thousands):
September 30,
2023		December 31, 2022
Finished goods$208,775 $213,450 
Work in process165 70 
Raw materials8,756 8,689 
Total$217,696 $222,209 
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
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 (each as defined in NOTE 7 — DEBT to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q) approximate fair value since such borrowings bear interest at variable market rates.
Derivatives
The Company accounts for derivative instruments in accordance with Accounting Standard Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”). 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 changes in the fair value of hedges are included in accumulated other comprehensive loss and are subsequently recognized in the Company’s unaudited condensed consolidated statements of operations to mirror the location of the hedged items impacting earnings. Changes in fair value of derivatives that do not qualify as hedging instruments for accounting purposes are recorded in the Company’s unaudited condensed consolidated statements of operations.
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 Financial Accounting Standards Board's (“FASB”) 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.
The Company reviews goodwill and other intangibles that have indefinite lives for impairment annually as of October 1 or when events or changes in circumstances indicate the carrying value of these assets might exceed their current fair values. Impairment testing is based upon the best information available, including estimates of fair value which incorporate assumptions marketplace participants would use in making their estimates of fair value.
The significant assumptions used under the income approach, or discounted cash flow method, are projected net sales, projected earnings before interest, tax, depreciation and amortization (“EBITDA”), terminal growth rates, and the cost of capital. Projected net sales, projected EBITDA and terminal growth rates were determined to be significant assumptions because they are three primary drivers of the projected cash flows in the discounted cash flow fair value model. Cost of capital was also determined to be a significant assumption as it is the discount rate used to calculate the current fair value of those projected cash flows. For the guideline public company method, significant assumptions relate to the selection of appropriate guideline companies and related valuation multiples used in the market analysis.
Although the Company believes the assumptions and estimates made are reasonable and appropriate, different assumptions and estimates could materially impact its reported financial results. In addition, sustained declines in the Company’s stock price and 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.
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
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. 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.
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 6 — INTANGIBLE ASSETS to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.
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 condensed 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 condensed consolidated balance sheets. Finance leases are included in property and equipment, net, accrued expenses and other long-term liabilities. The Company’s finance leases are not material to the Company’s condensed consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term. 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. Generally, 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.
In the fourth quarter of 2022, the Company's U.S. segment incurred $0.4 million of restructuring expense in connection with the reorganization the U.S. segment’s sales management structure. At September 30, 2023, the accrual balance was $0.1 million, and the remaining payments are expected to be paid within fiscal year 2023.
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
During the nine months ended September 30, 2023, the Company incurred $0.8 million of unallocated corporate expense related to the termination payment with its Executive Chairman, Jeffrey Siegel (the “Executive Chairman”). On November 1, 2022, the Company entered into a transition agreement with its Executive Chairman which terminated his employment with the Company, effective March 31, 2023. The employment agreement provided for a one-time termination payment. The one-time payment of $1.4 million was recognized over the remaining employment period with $0.6 million recognized in the fourth quarter of 2022. The termination payment was paid on April 7, 2023.
Adoption of new accounting pronouncements
Effective January 1, 2023, the Company adopted 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, to include historical experience, current conditions and reasonable and supportable forecasts. The Company adopted this guidance on a modified retrospective basis and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.
New accounting pronouncements
All recent accounting pronouncements 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.
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 $0.8 million and $1.7 million for the three and nine months ended September 30, 2023, respectively and $1.2 million and $3.2 million for the three and nine months ended September 30, 2022, 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, which represent forms of variable consideration and an estimate of sales returns, are reflected as reductions in net sales in the Company’s unaudited condensed consolidated statements of operations. These estimates are based on historical experience and other known factors or as the most likely amount in a range of possible outcomes. 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. 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.
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 unaudited condensed consolidated statements of operations. Incidental items that are immaterial in the context of the contract are expensed as incurred.
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Table of Contents
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
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, 2023 and 2022 (in thousands):
Three Months EndedNine Months Ended
September 30,September 30,
2023202220232022
U.S. segment
Kitchenware$97,656 $92,587 $267,403 $291,062 
Tableware48,881 44,515 99,029 101,035 
Home Solutions32,856 35,716 81,425 84,130 
Total U.S. segment179,393 172,818 447,857 476,227 
International segment12,276 13,772 35,683 44,394 
Total net sales$191,669 $186,590 $483,540 $520,621 
United States$166,917 $163,304 $421,458 $454,356 
United Kingdom8,129 8,676 24,420 27,515 
Rest of World16,623 14,610 37,662 38,750 
Total net sales$191,669 $186,590 $483,540 $520,621 
NOTE 3 —ACQUISITIONS
S’well
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 cash consideration of $18.0 million. 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(1)
$17,956 
Value of contingent consideration650 
Total purchase price$18,606 
(1) Reflects final working capital adjustment of $21k pursuant to the terms of the Asset Purchase Agreement.
The value of contingent consideration represents the present value of estimated contingent payments of $0.7 million, related to the attainment of certain net sales contribution targets for the year 2024. Acquisition related costs of $0.9 million were recorded within selling, general and administrative expenses in the unaudited condensed consolidated statements of operations.
The purchase price was allocated based on the Company’s final estimate of the fair values of the assets acquired and liabilities assumed at the acquisition date, as follows (in thousands):
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Table of Contents
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
Purchase Price Allocation
Accounts receivable$2,280 
Inventory4,005 
Fixed assets40 
Intangible assets13,000 
Goodwill2,966 
Accounts payable and accrued expenses(3,685)
Total allocated value$18,606 
The acquisition was accounted for as a business combination using the acquisition method of accounting in accordance with FASB ASC Topic 805, Business Combinations (“ASC Topic 805”), which established a new basis of accounting for all identifiable assets acquired and liabilities assumed at fair value.
The goodwill and intangible assets are included in the U.S. segment. The trade name intangible asset is amortized on a straight-line basis over its estimated useful life of 12 years (see NOTE 6 — INTANGIBLE ASSETS). 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 over 15 years.
A credit of $(0.1) million is included in Selling, general and administrative expenses for the nine months ended September 30, 2023 to reflect the change in fair value of a contingent consideration obligation acquired by the Company in connection with its acquisition of S'well. There was no such adjustment in the three months ended September 30, 2023.
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, 2023 and 2022 were as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Operating lease expenses(1):
Fixed lease expense$4,256 $4,463 $12,662 $13,392 
Variable lease expense1,444 1,187 4,194 3,532 
Total$5,700 $5,650 $16,856 $16,924 
(1) Expenses are recorded within distribution expenses and selling, general and administrative expenses on the unaudited condensed consolidated statement of operations.
Supplemental cash flow information for lease related liabilities and assets for the nine months ended September 30, 2023 and 2022 were as follows (in thousands):
Nine Months Ended
September 30,
2023
2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$14,279 $14,447 
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Table of Contents
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
Nine Months Ended
September 30,
2023
2022
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$5,582 $2,477 
The aggregate future lease payments for operating leases as of September 30, 2023 were as follows (in thousands):
 Operating
2023 (excluding the nine months ended September 30, 2023)
$4,500 
202418,853 
202518,614 
202618,236 
202714,110 
202812,724 
Thereafter18,002 
Total lease payments105,039 
Less: Interest(18,646)
Present value of lease payments$86,393 
Average lease terms and discount rates were as follows:
 September 30, 2023
Operating leases:
Weighted-average remaining lease term (years)6.1
Weighted-average discount rate6.4 %
NOTE 5 —INVESTMENTS
As of September 30, 2023, 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. 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 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, 2023 and 2022 in the accompanying unaudited condensed consolidated statements of operations.
The Company’s equity in losses, net of taxes, for the three and nine months ended September 30, 2023 and 2022 included the following:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023
2022
2023
2022
Vasconia equity in losses, net of taxes
$(707)$(1,991)$(2,853)$(1,241)
Impairment on investment in Vasconia(340)(6,168)(6,834)(6,168)
Equity in losses, net of taxes
$(1,047)$(8,159)$(9,687)$(7,409)
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 17.41 and MXN 19.47 at September 30, 2023 and December 31, 2022, respectively.
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Table of Contents
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
The Company’s proportionate share of Vasconia’s net loss has been translated from MXN to USD using the following exchange rates:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Average exchange rate (USD to MXN)
17.06
20.22
17.06 - 18.66
20.02 - 20.50
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 $1.1 million and a decrease of $0.5 million during the nine months ended September 30, 2023 and 2022, respectively. These translation effects are recorded in accumulated other comprehensive loss.
Summarized income statement information for the three and nine months ended September 30, 2023 and 2022 for Vasconia in USD and MXN is as follows (in thousands):
Three Months Ended
September 30,
20232022
USDMXNUSDMXN
Net sales$38,745 $660,991 $56,488 $1,142,171 
Gross profit
10,994 187,559 4,405 89,061 
Loss from operations
(1,060)(18,081)(5,459)(110,380)
Net loss
(2,858)(48,771)(8,009)(161,936)
Nine Months Ended
September 30,
20232022
USDMXNUSDMXN
Net sales$121,537 $2,164,683 $187,001 $3,785,921 
Gross profit
29,330 520,224 29,629 600,976 
Loss from operations
(1,874)(33,464)(256)(3,974)
Net loss
(11,544)(205,204)(4,875)(98,366)
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 balancesBalance Sheet LocationSeptember 30, 2023December 31, 2022
Amounts due from VasconiaPrepaid expenses and other current assets$42 $48 
Amounts due to VasconiaAccrued expenses and Accounts payable(220)(16)
The fair value (based on Level 1 inputs using the quoted stock price) of the Company’s investment in Vasconia declined in 2023. As a result of the decline in the quoted stock price, the continued decline in the operating results of Vasconia and the recent downgrade in Vasconia’s debt rating, the Company determined the decline in fair value was other than temporary. The Company reduced its investment by $0.3 million during the three months ended September 30, 2023 to its fair value, and recognized the non-cash impairment charge within equity in losses in the unaudited condensed consolidated statement of operations. The carrying value of the Company’s investment in Vasconia, after the recorded impairment, was $4.0 million as of September 30, 2023. For the nine months ended September 30, 2023, the Company has recognized non-cash impairment charges of $6.8 million.
As of December 31, 2022, the fair value (based on Level 1 inputs using the quoted stock price) of the Company’s investment in Vasconia was $15.0 million, respectively. The carrying value of the Company’s investment in Vasconia was $12.5 million as of December 31, 2022.
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
NOTE 6 — INTANGIBLE ASSETS
Intangible assets consisted of the following as of September 30, 2023 and December 31, 2022 (in thousands):
 September 30, 2023December 31, 2022
GrossAccumulated
Amortization		NetGrossAccumulated
Amortization		Net
Goodwill(1)
$33,237 $— $33,237 $33,237 $— $33,237 
Indefinite-lived intangible assets:
Trade names(1)
49,600 — 49,600 49,600 — 49,600 
Finite-lived intangible assets:
Licenses15,847 (11,996)3,851 15,847 (11,654)4,193 
Trade names(2)
54,802 (22,790)32,012 54,785 (20,030)34,755 
Customer relationships(2)
143,157 (61,119)82,038 143,157 (53,586)89,571 
Other (2)
5,858 (3,724)2,134 5,856 (3,325)2,531 
Total$302,501 $(99,629)$202,872 $302,482 $(88,595)$213,887 
(1)The gross and net value at September 30, 2023 and December 31, 2022 reflect a reduction of $91.7 million in impairment charges on goodwill and $1.0 million in impairment charges on indefinite-lived intangible assets.
(2)The gross value and accumulated amortization at September 30, 2023 reflect a reduction of $44.1 million and $(29.3) million, respectively, for the net $14.8 million previous impairment charge on finite-lived intangible assets within the international segment and a $6.5 million reduction in gross value for previous impairment charges on finite-lived intangible assets within the U.S. segment.
In the third quarter of 2023, the Company observed a sustained decline in the market valuation of the Company's common stock over a twelve month period and an increase in the risk free interest rate. Based on these factors and considering the limited excess fair value over carrying value observed in the last annual impairment test on October 1, 2022, the Company concluded that a triggering event had occurred and performed an interim impairment test of goodwill and certain intangible assets as of September 30, 2023.
Goodwill
The Company performed an interim impairment test of the goodwill in the U.S. reporting unit by comparing its fair value with its carrying value. The analysis was performed by using a discounted cash flow and market multiple method. Based upon the analysis performed, the Company determined that the fair value of the Company's U.S. reporting unit exceeded its carrying value, and therefore goodwill was not impaired. As of September 30, 2023, the fair value of the U.S. reporting unit exceeded the carrying value of goodwill by 4%.
Indefinite-lived trade names
The Company performed an interim quantitative impairment analysis of its indefinite-lived trade names by comparing the fair value of the indefinite-lived trade names to their respective carrying values. 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 determined that the fair value of all its indefinite-lived trade names were above their respective carrying values, and therefore its indefinite-lived intangible assets were not impaired. In connection with the interim impairment analysis, the Company determined that one trade name, previously estimated to contribute to cash flows indefinitely, has a definite life. Accordingly, the trade name will be reclassified from indefinite-lived to finite-lived or amortizable intangible assets as of October 1, 2023. The trade name will be amortized over an estimated useful life of 15 years. As of September 30, 2023, the fair value of the Company’s indefinite-lived trade name exceeded the respective carrying value by 7%.





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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
NOTE 7 — DEBT
On August 26, 2022, the Company entered into Amendment No. 2 (the “Amendment”) to the Company’s credit agreement, dated as of March 2, 2018 (as amended, the “ABL Agreement”) among the Company, as a Borrower, certain subsidiaries of the Company, as Borrowers and/or Loan Parties, JPMorgan Chase Bank, N.A., as Administrative Agent and a Lender, HSBC Bank USA, National Association and Wells Fargo Bank, National Association, as Co-Documentation Agents and Lenders, and Manufacturers and Traders Trust Company. The ABL Agreement provides for a senior secured asset-based revolving credit facility in the maximum aggregate principal amount of $200.0 million, which facility will mature on August 26, 2027 (subject to an earlier springing maturity date that is 90 days prior to the Term Loan maturity date of February 28, 2025 if the Company’s Term Loan has not been repaid or refinanced by such date).
The Company’s loan agreement, dated as of March 2, 2018, (the “Term Loan” and together with the ABL Agreement, the “Debt Agreements”) provides for a senior secured term loan credit in the original principal amount of $275.0 million, which matures on February 28, 2025. On December 29, 2022, the Company entered into Amendment No. 1 to the Term Loan, which replaces the LIBOR-based interest rates with SOFR-based interest rates and modifies the provisions for determining the alternative rate of interest upon the occurrence of certain events relating to the availability of interest rate benchmarks. The Term Loan requires the Company to make an annual prepayment of principal based upon a percentage of the Company's excess cash flow, (“Excess Cash Flow”), if any. The percentage applied to the Company’s excess cash flow is based on the Company’s Total Net Leverage Ratio (as defined in the Debt Agreements). When an Excess Cash Flow payment is required, each lender has the option to decline a portion or all of the prepayment amount payable to it. An estimate of the amount of the Excess Cash Flow payment is recorded in current maturity of term loan on the unaudited condensed consolidated balance sheets. Additionally, the Term Loan requires quarterly payments, which commenced on June 30, 2018, of principal equal to 0.25% of the original aggregate principal amount of the Term Loan, which payments are to be adjusted from time to time to account for prepayments made. Per the Term Loan, when the Company makes an Excess Cash Flow payment, the payment is first applied to satisfy the next eight (8) scheduled future quarterly required payments of the Term Loan in order of maturity and then to the remaining scheduled installments on a pro rata basis. The quarterly principal payments have been satisfied through maturity of the Term Loan by the annual Excess Cash Flow payments made to date.
The maximum borrowing amount under the ABL Agreement may be increased to up to $250.0 million if certain conditions are met but limited to $220.0 million pursuant to the Term Loan. One or more tranches of additional term loans (the “Incremental Term 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 on a pro forma basis pursuant to the Term Loan, after giving effect to such increase, is no greater than 3.75 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan but not to mature earlier than the maturity date of the then existing term loans.
As of September 30, 2023 and December 31, 2022, the total availability under the ABL Agreement was as follows (in thousands):
September 30, 2023
December 31, 2022
Maximum aggregate principal allowed$200,000 $189,411 
Outstanding borrowings under the ABL Agreement(29,305)(10,424)
Standby letters of credit(2,974)(2,765)
Total availability under the ABL Agreement$167,721 $176,222 
Availability under the ABL Agreement is limited to the lesser of the $200.0 million commitment thereunder and the borrowing base and therefore depends on the valuation of certain current assets comprising the borrowing base. The borrowing capacity under the ABL Agreement will depend, in part, on eligible levels of accounts receivable and inventory that fluctuate regularly. Due to the seasonality of the Company’s business, this means that the Company may have greater borrowing availability during the third and fourth quarters of each year. Consequently, the $200.0 million commitment thereunder may not represent actual borrowing capacity.
On June 8, 2023, the Company completed the repurchase of $47.2 million in principal amount of the Term Loan, for $95 per $100 of principal. The repurchase was executed by way of a reverse Dutch auction, pursuant to and in accordance with the
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
terms and conditions provided for in the Term Loan. In connection therewith, debt issuance costs of $0.5 million were written off and fees of $0.4 million were incurred. The gain on the early retirement of the Term Loan was $1.5 million, net of fees and expenses.
The current and non-current portions of the Company’s Term Loan included in the condensed consolidated balance sheets were as follows (in thousands):
September 30, 2023December 31, 2022
Current portion of Term Loan:
Estimated Excess Cash Flow principal payment$15,000 $— 
Estimated unamortized debt issuance costs(1,134)— 
Total Current portion of Term Loan$13,866 $— 
Non-current portion of Term Loan:
Term Loan, net of current portion$183,684 $245,911 
Estimated unamortized debt issuance costs(450)(3,054)
Total Non-current portion of Term Loan$183,234 $242,857 
The estimated Excess Cash Flow principal payment recorded at September 30, 2023 represents the Company’s estimate for the 2024 Excess Cash Flow Payment. There was no Excess Cash Flow payment due in 2023.
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 foreign subsidiary borrowers under the ABL Agreement are secured by security interests in substantially all of the assets of, and stock in, such foreign subsidiary borrowers, subject to certain limitations. 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 security interests in 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 interests consist of (1) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and certain of its 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 (2) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and certain of its 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 Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 1.0% as of a specified date in advance of the determination, but in each case not less than 1.0%, plus a margin of 0.25% to 0.50%, or (ii) Adjusted Term SOFR, which is the Term SOFR Rate for the selected 1, 3 or 6 month interest period plus 0.10% (or Euro Interbank Offered Rate “EURIBOR” for borrowings denominated in Euro; or Sterling Overnight Index Average “SONIA” for borrowings denominated in Pounds Sterling), but in each case not less than zero, plus a margin of 1.25% to 1.50%. The respective margins are based upon average quarterly availability, as defined in and computed pursuant to the ABL Agreement. In addition, the Company pays a commitment fee of 0.20% to 0.25% per annum based on the average daily unused portion of the aggregate commitment under the ABL Agreement. The interest rate on outstanding borrowings under the ABL Agreement at September 30, 2023 was between 6.44% and 8.75%. The Company paid a commitment fee of 0.25% during the nine months ended September 30, 2023.
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
The Term Loan bears interest, at the Company’s option, at one of the following rates: (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 Adjusted Term SOFR, but not less than 1.0%, plus 1.0%, plus a margin of 2.5% or (ii) SOFR for the applicable interest period, multiplied by any statutory reserve rate, 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, 2023 was 8.93%.
The Debt Agreements provide for customary restrictions and events of default. Restrictions include limitations on additional indebtedness, liens, acquisitions, investments and payment of dividends, among other things. 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 $20.0 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 $20.0 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, 2023.
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.
NOTE 8 — DERIVATIVES
Interest Rate Swap Agreements
The Company’s total outstanding notional value of interest rate swaps was $25.0 million at September 30, 2023. These non-designated interest rate swaps were entered into in June 2019 and serve as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings and expire in February 2025.
The Company’s interest rate swaps that were designated as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings expired in March 2023. The Company has no designated interest rate swaps at September 30, 2023.
Foreign Exchange Contracts
The Company is 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 than 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 value of foreign exchange contracts at September 30, 2023 was $8.8 million. These foreign exchange contracts have been designated as hedges in order to apply hedge accounting.
The Company is exposed to market risks as well as changes in foreign currency exchange rates as measured against the USD and each other, and to changes to the credit risk of derivative counterparties. The Company attempts to minimize these risks primarily by using foreign currency forward contracts and by maintaining counterparty credit limits. These hedging activities provide only limited protection against currency exchange and credit risk. Factors that could influence the effectiveness of the Company’s hedging programs include those impacting currency markets and the availability of hedging instruments and liquidity of the credit markets. All foreign currency forward contracts that the Company enters into are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure. The Company does
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
not enter into such contracts for speculative purposes, and as of September 30, 2023, these foreign exchange contracts have been designated as hedges in to order to apply hedge accounting.
The fair values of the Company’s derivative financial instruments included in the condensed consolidated balance sheets are presented as follows (in thousands):
Derivatives designated as hedging instrumentsBalance Sheet LocationSeptember 30, 2023December 31, 2022
Interest rate swapsPrepaid expenses and other current assets$— $122 
Foreign exchange contractsPrepaid expenses and other current assets152 — 
Other Assets33 — 
Accrued expenses39 260 

Derivatives not designated as hedging instrumentsBalance Sheet LocationSeptember 30, 2023December 31, 2022
Interest rate swapsOther assets$1,156 $1,292 
The fair values of the interest rate swaps have been obtained from the counterparties to the agreements and were based on Level 2 observable inputs using proprietary models and estimates about relevant future market conditions. The fair values of the foreign exchange contracts were based on Level 2 observable inputs using quoted market prices for similar assets in an active market. The counterparties to the derivative financial instruments are major international financial institutions. The Company is exposed to credit risk for the net exchanges under these agreements, but not for the notional amounts. As of September 30, 2023, the Company did not anticipate non-performance by any of its counterparties.
The amounts of gains and losses, realized and unrealized, related to the Company’s derivative financial instruments designated as hedging instruments are recognized in other comprehensive (loss) income, net of taxes, as follows (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
Derivatives designated as hedging instruments2023202220232022
Interest rate swaps$— $87 $(120)$570 
Foreign exchange contracts435 267 (898)1,342 
$435 $354 $(1,018)$1,912 
Realized gains and losses on the interest rate swaps that are reported in other comprehensive (loss) income are reclassified into earnings as the interest expense on the debt is recognized. The Company’s interest rate swaps that were designated as hedging instruments had an aggregate notional value of $25.0 million and matured during the three months ended March 31, 2023.
Realized gains and losses on foreign exchange contracts that are reported in other comprehensive (loss) income are reclassified into cost of sales as the underlying inventory purchased is sold.
During the three months ended September 30, 2023, the Company reclassified $0.2 million of cash flow hedges in accumulated other comprehensive losses to earnings. This was a loss of $0.2 million related to foreign exchange contracts recognized in cost of sales. During the nine months ended September 30, 2023, the Company reclassified $0.8 million of cash flow hedges in accumulated other comprehensive losses to earnings. This was comprised of a gain of $0.1 million related to realized interest rate swap and a gain of $0.7 million related to foreign exchange contracts recognized in cost of sales. At September 30, 2023, the estimated amount of existing net losses expected to be reclassified into earnings within the next 12 months was $0.2 million.
During the three months ended September 30, 2022, the Company reclassified $0.3 million of cash flow hedges in accumulated other comprehensive losses to earnings. This was comprised of $0.03 million related to realized interest rate swap losses and a gain of $0.3 million related to foreign exchange contracts recognized in cost of sales. During the nine months ended September 30, 2022, the Company reclassified $0.3 million of cash flow hedges in accumulated other comprehensive losses to earnings. This was comprised of a $0.3 million related to realized interest rate swap losses and a gain of $0.6 million related to foreign exchange contracts recognized in cost of sales.
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
Interest and mark to market (losses) gains 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 instrumentsLocation of gain (loss)2023202220232022
Interest rate swaps
Mark to market (loss) gain on interest rate derivatives
$(98)$637 $(135)$1,990 
Interest expense218 18 579 (165)
$120 $655 $444 $1,825 
NOTE 9 — STOCK COMPENSATION
As of September 30, 2023, there were 622,812 shares available for the grant of awards under the Company's Amended and Restated 2000 Long Term Incentive Plan (“Plan”), assuming maximum performance of performance-based awards.
Option Awards
A summary of the Company’s stock option activity and related information for the nine months ended September 30, 2023 is as follows:
OptionsWeighted-
average
exercise price		Weighted-
average
remaining
contractual
life (years)		Aggregate
intrinsic
value
(in thousands)
Options outstanding, January 1, 2023
1,065,750 $13.66 
Grants50,000 5.92 
Cancellations(4,375)11.27 
Expirations(111,875)13.38 
Options outstanding, September 30, 2023
999,500 13.31 4.4$— 
Options exercisable, September 30, 2023
883,875 $13.85 3.8$— 
Total unrecognized stock option expense remaining (in thousands)$405 
Weighted-average years expected to be recognized over1.7
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been received by the option holders had all option holders exercised their stock options on September 30, 2023. 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, 2023 and the exercise price.
On March 8, 2023, the exercise period for the Executive Chairman’s outstanding vested stock options were extended to remain exercisable until ninety days following termination of his service on the Company's Board of Directors (the “Board”). The outstanding stock options remain subject to original expiration dates of such awards. The Company recorded $0.1 million of stock compensation expense in connection with this extension during the three months ended March 31, 2023.





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Table of Contents
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
Restricted Stock
A summary of the Company’s restricted stock activity and related information for the nine months ended September 30, 2023 is as follows:
Restricted
Shares		Weighted-
average grant
date fair
value
Non-vested restricted shares, January 1, 2023
484,143 $11.79 
Grants333,300 5.37 
Vested(212,162)11.20 
Cancellations(6,783)11.07 
Non-vested restricted shares, September 30, 2023
598,498 $8.44 
Total unrecognized compensation expense remaining (in thousands)$3,967 
Weighted-average years expected to be recognized over1.5
The total fair value of restricted stock that vested during the nine months ended September 30, 2023 was $1.2 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. 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, 2023 is as follows:
Performance-
based stock
awards (1)
Weighted-
average grant
date fair
value
Non-vested performance-based awards, January 1, 2023
400,302 $11.56 
Grants191,075 5.92 
Achieved performance over target (2)
16,942 6.36 
Vested(119,739)6.36 
Cancellations(858)14.18 
Non-vested performance-based awards, September 30, 2023
487,722 $10.44 
Total unrecognized compensation expense remaining (in thousands)(3)
$1,030 
Weighted-average years expected to be recognized over1.9
(1)Represents the target number of shares to be issued for each performance-based award.
(2)Represents the number of shares earned over target for performance-based awards granted in 2020 based on performance goals attained. These awards vested in the nine months ended September 30, 2023.
(3)The performance metric for the performance-based awards granted in 2022 is not probable of achievement. Therefore, no compensation expense has been recorded on these awards.
The total fair value of performance-based awards that vested during the nine months ended September 30, 2023 was $0.7 million.



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Table of Contents
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
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. 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 nine months ended September 30, 2023 is as follows:
Cash-settled performance-based awards (1)
Weighted-
average fair
value
Non-vested cash-settled performance-based awards, January 1, 2023
85,776 $7.59 
Cancellations(1,790)5.63 
Non-vested cash-settled performance-based awards, September 30, 2023
83,986 $5.63 
Total unrecognized compensation expense remaining (in thousands)(2)
$— 
Weighted-average years expected to be recognized over0.0
(1) Represents the target number of units to be settled in cash.
(2) The performance metric for the cash-settled performance-based awards granted in 2022 is not probable of achievement. Therefore, no compensation expense has been recorded on these awards.
The Company recorded stock compensation expense as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
Stock Compensation Expense Components2023202220232022
Equity based stock option expense$46 $51 $225 $231 
Restricted and performance-based stock awards expense852 972 2,549 3,223 
Stock compensation expense for equity based awards$898 $1,023 $2,774 $3,454 
Liability based stock option expense— (11)(4)(17)
Cash-settled performance-based awards expense— 14 — 128 
Total Stock Compensation Expense$898 $1,026 $2,770 $3,565 
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
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. 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, 2023 and 2022 are as follows:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
(in thousands, except per share amounts)
Net income (loss) – Basic and Diluted
$4,206 $(6,358)$(11,119)$(9,438)
Weighted-average shares outstanding – Basic 21,216 21,522 21,188 21,602 
Effect of dilutive securities:
        Stock options and other stock awards
77 — — — 
Weighted-average shares outstanding – Diluted21,293 21,522 21,188 21,602 
Basic income (loss) per common share
$0.20 $(0.30)$(0.52)$(0.44)
Diluted income (loss) per common share
$0.20 $(0.30)$(0.52)$(0.44)
Antidilutive Securities(1)
1,2371,6821,6001,675
(1) Stock options and other stock awards that have been excluded from the denominator as their inclusion would have been anti-dilutive.
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
NOTE 11— INCOME TAXES
Income tax provision of $3.0 million and $2.9 million for the three and nine months ended September 30, 2023, respectively, represent taxes on both U.S. and foreign earnings at a combined effective income tax provision rate of 36.5% and 197.0%, respectively. The effective tax rate for the three months ended September 30, 2023 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance. The effective tax rate for the nine months ended September 30, 2023 differs from the federal statutory income tax rate of 21.0% primarily due to the impact of non-deductible expenses, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.
Income tax provision of $1.8 million and $3.4 million for the three and nine months ended September 30, 2022, respectively, represent taxes on both U.S. and foreign earnings at a combined effective income tax provision rate of 50.6% and 245.9%, respectively. The effective tax rate for the three and nine months ended September 30, 2022 differs from the federal statutory income tax rate of 21.0% primarily due to 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: U.S. Federal, California, Massachusetts, New Jersey, New York and the United Kingdom.
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, 2023 and September 30, 2022.

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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
NOTE 12 – BUSINESS SEGMENTS
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 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.
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
(in thousands)
Net sales
U.S.$179,393 $172,818 $447,857 $476,227 
International12,276 13,772 35,683 44,394 
Total net sales$191,669 $186,590 $483,540 $520,621 
Income from operations
U.S.$21,480 $19,548 $39,170 $41,404 
International(2,995)(2,501)(7,716)(9,691)
Unallocated corporate expenses(4,873)(9,457)(15,252)(20,232)
Income from operations
$13,612 $7,590 $16,202 $11,481 
Depreciation and amortization
U.S.$4,549 $4,321 $13,813 $13,568 
International272 277 803 967 
Total depreciation and amortization$4,821 $4,598 $14,616 $14,535 

September 30,
2023		December 31,
2022
(in thousands)
Assets
U.S.$596,787 $608,496 
International87,309 93,794 
Unallocated corporate7,572 23,598 
Total Assets$691,668 $725,888 

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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
NOTE 13 — CONTINGENCIES
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 U.S. 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.
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 (“OU-1”), 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. In February 2017, the EPA indicated that it planned to expand its field investigation for the RI/FS to a second operable unit (“OU-2”) to 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 requested access to the property occupied by WSPR to install monitoring wells and to undertake groundwater sampling as part of this expanded investigation. WSPR consented to the EPA’s access request, provided that the EPA received 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 with the U.S. government 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. The tolling agreements have been extended multiple times and currently expire in November 2025. 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 OU-2 in July 2019, and on September 30, 2019, the EPA issued the ROD OU-2. The EPA elected to implement its preferred remedy consisting 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 for OU-2 is $17.3 million, and the EPA is currently leading remediation of OU-2.
In August 2021, WSPR received a Notice of Liability for the Site from the Department of Justice on behalf of the EPA, and in September 2021, WSPR responded with a good faith offer to conduct additional testing and remedial design work for OU-1. Since that time, WSPR has been actively participating in negotiations among the U.S. Government (the Department of Justice and the EPA) and other potentially responsible parties with respect to the remedial work at OU-1. While the U.S. Government and the potentially responsible parties (including WSPR) all signed the Consent Decree as of July 19, 2023, several procedural steps remain before the Consent Decree is effective. On July 26, 2023, the U.S. Government filed a complaint in United States
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
District Court for the District of Puerto Rico for the purpose of seeking judicial approval of the Consent Decree, which is required for the Consent Decree to be effective. As required by applicable regulations, the U.S. Government simultaneously lodged the Consent Decree for public comment. No comments were received during the public comment period. On September 6, 2023, at the conclusion of the public comment period, the U.S. Government filed a Motion to Enter the Consent Decree. The Consent Decree will be effective once the Court grants the U.S. Government’s Motion.
The Company has reserved $5.6 million to cover probable and estimable liabilities with respect to the above remedial design and remedial action for the initial operable unit. However, it is not possible at this time for the Company to estimate its share of its ultimate liability for the Site. 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 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 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 the additional protests was approved on October 15, 2020; the other two remain pending. If the CBP approves these additional claims and accepts the evidence presented, 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 $0.6 million. In such event, it is reasonably possible that additional penalties could be assessed, depending upon the level of culpability found, of up to $1.2 million for negligence and up to $2.4 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.
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
NOTE 14 — OTHER
Cash dividends
Dividends declared in the nine months ended September 30, 2023 were as follows:
Dividend per shareDate declaredDate of recordPayment date
$0.04253/8/20235/1/20235/15/2023
$0.04256/22/20238/1/20238/15/2023
$0.04258/2/202311/1/202311/15/2023
During the nine months ended September 30, 2023, the Company paid dividends of $2.8 million. This included payments made on February 15, 2023, May 15, 2023 and August 15, 2023 of $0.9 million, $0.9 million and $0.9 million to stockholders of record on February 1, 2023, May 1, 2023, and August 1, 2023 respectively, and payments of $0.1 million for dividends payable upon the vesting of restricted shares and performance shares.
In the three months ended September 30, 2023, the Company reduced retained earnings for the accrual of $0.9 million relating to the dividend payable on November 15, 2023.
On November 7, 2023, the Board declared a quarterly dividend of 0.0425 per share of common stock payable on February 15, 2024 to stockholders of record on February 1, 2024.
Stock repurchase program
On March 14, 2022, the Company announced that its Board authorized the repurchase of up to $20.0 million of the Company’s common stock, replacing the Company’s previously-authorized $10.0 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 nine months ended September 30, 2023, the Company repurchased 320,204 shares for a total cost of $2.5 million and thereafter retired the shares. No repurchases were effected during the three months ended September 30, 2023. As of September 30, 2023, the remaining dollar amount available for repurchases under the Board authorized plan was $11.1 million.
Supplemental cash flow information
Nine Months Ended
September 30,
20232022
(in thousands)
Supplemental disclosure of cash flow information:
Cash paid for interest$15,204 $10,804 
Cash paid for taxes, net of refunds4,388 6,527 
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LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(unaudited)
Components of accumulated other comprehensive loss, net
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
(in thousands)
Accumulated translation adjustment:
Balance at beginning of period$(33,274)$(36,175)$(36,072)$(31,752)
Translation adjustment during period(1,242)(2,686)1,556 (7,109)
Balance at end of period$(34,516)$(38,861)$(34,516)$(38,861)
Accumulated deferred (losses) gains on cash flow hedges:
Balance at beginning of period$(530)$1,636 $923 $78 
Change in unrealized gains (losses)
254 624 (257)2,201 
Amounts reclassified from accumulated other comprehensive loss:
Settlement of cash flow hedge (1)
181 (270)(761)(289)
Net change in cash flow hedges, net of taxes of $0, $92, $(2), $505
435 354 (1,018)1,912 
Balance at end of period$(95)$1,990 $(95)$1,990 
Accumulated effect of retirement benefit obligations:
Balance at beginning of period$(682)$(1,817)$(705)$(1,875)
Amounts reclassified from accumulated other comprehensive loss: (2)
Amortization of actuarial loss, net of taxes of $(4), $(10), $(12), $(29)
12 29 35 87 
Balance at end of period$(670)$(1,788)$(670)$(1,788)
Total accumulated other comprehensive loss at end of period
$(35,281)$(38,659)$(35,281)$(38,659)
(1)Amounts reclassified are recorded in interest expense and cost of sales on the unaudited condensed consolidated statement of operations.
(2)Amounts are recorded in selling, general and administrative expense on the unaudited condensed consolidated statements of operations.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q of Lifetime Brands, Inc. (the “Company” and, unless the context otherwise requires, references to the “Company” shall include its consolidated subsidiaries), contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. These forward-looking statements include information concerning the Company’s plans, objectives, goals, strategies, future events, future revenues, performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, in particular, in Management’s Discussion and Analysis of Financial Condition and Results of Operations. When used in this Quarterly Report on Form 10-Q, the words “estimates,” “expects,” “intends,” “predicts,” “plans,” “believes,” “may,” “should,” “would,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, those based on the Company’s examination of historical operating trends, are based upon the Company’s current expectations and various assumptions. The Company believes there is a reasonable basis for its expectations and assumptions, but there can be no assurance that the Company will realize its expectations or that the Company’s assumptions will prove correct.
There are a number of risks and uncertainties that could cause the Company’s actual results to differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Important factors that could cause the Company’s actual results to differ materially from those expressed as forward-looking statements include, without limitation, those set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report on Form 10-K”) in Part I, Item 1A under the heading Risk Factors, and in the Company’s subsequent filings with the U.S. Securities and Exchange Commission (the “SEC”). Such risks, uncertainties and other important factors include, among others, risks related to:
•Macroeconomic conditions, including inflationary impacts and disruptions to the global supply chain;
•Increase in supply chain costs, including raw materials, sourcing, transportation and energy;
•The impact of the United Kingdom's exit from the European Union on the Company's U.K. operations;
•The impact of tariffs and trade policies, particularly with respect to China;
•Legislative or regulatory risks relating to climate change;
•Indebtedness, compliance with credit agreements, and access to credit markets;
•Access to the capital markets and credit markets;
•The seasonality of the Company's cash flows;
•The Company's ability to complete acquisitions or successfully integrate acquisitions, such as the recent acquisition of S'well;
•Intense market competition and changing customer practices or preferences;
•Dependence on third-party manufacturers;
•Technology, cybersecurity and data privacy risks;
•Geopolitical conditions, including war, conflict, unrest and sanctions, including those related to the conflicts in Ukraine, Israel and surrounding areas;
•Product liability claims; and
•Reputational risks.
There may be other factors that may cause the Company’s actual results to differ materially from the forward-looking statements. Except as may be required by law, the Company undertakes no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.
The Company is required to file its Annual Reports on Forms 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Form 8-K, and other reports and documents as required from time to time with the SEC. The Company also maintains a website at http://www.lifetimebrands.com. Information contained on this website is not a part of or incorporated by reference into this Quarterly Report on Form 10-Q. The Company makes available on its website the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to these reports as soon as reasonably practicable after these reports are filed with or furnished to the SEC. Users can access these reports free of charge on the
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Company’s website. The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding the Company’s electronic filings with the SEC at http://www.sec.gov.
The Company intends to use its website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD. Such disclosures will be included on the Company’s website in the ‘Investor Relations’ section. Accordingly, investors should monitor such portion of the Company’s website, in addition to following the Company's press releases, SEC filings and public conference calls and webcasts.
ABOUT THE COMPANY
The Company designs, sources and sells branded kitchenware, tableware and other products used in the home. The Company’s product categories include two categories of products used to prepare, serve, and consume foods: Kitchenware (kitchen tools and gadgets, cutlery, kitchen scales, thermometers, cutting boards, shears, cookware, pantryware, spice racks, and bakeware) and Tableware (dinnerware, stemware, flatware, and giftware); and one category, Home Solutions, which comprises other products used in the home (thermal beverageware, bath scales, weather and outdoor household products, food storage, neoprene travel products and home décor). In 2022, Kitchenware products and Tableware products accounted for approximately 82% of the Company’s U.S. segment’s net sales and 84% of the Company’s consolidated net sales.
The Company markets several product lines within each of its product categories and under most of the Company’s brands, primarily targeting moderate price points through virtually every major level of trade. The Company believes it possesses certain competitive advantages based on its brands, its emphasis on innovation and new product development, and its sourcing capabilities. The Company owns or licenses a number of leading brands in its industry, including Farberware®, Mikasa®, KitchenAid®, Taylor®, Rabbit®, Pfaltzgraff®, Built NY®, Sabatier®, Fred® & Friends, Kamenstein®, and S'well®. Historically, the Company’s sales growth has come from expanding product offerings within its product categories, developing existing brands, acquiring new brands (including complementary brands in markets outside the United States), and establishing new product categories. Key factors in the Company’s growth strategy have been the selective use and management of the Company’s brands and the Company’s ability to provide a stream of new products and designs. A significant element of this strategy is the Company’s in-house design and development teams that create new products, packaging and merchandising concepts.
RECENT DEVELOPMENTS
The global economy continues to experience relatively high inflation, which has in part been caused by the supply chain disruptions and higher consumer spending. The rise in inflation has contributed to higher prices, resulting in increased transportation and labor cost and consumer spending and buying patterns. Retailers have responded to the economic challenges by rightsizing inventory levels, and further reducing safety stock and weekly supply on hand. The recent rise in interest rates has lessened inflationary pressures in the U.S., but has also resulted in higher interest expense on the Company’s outstanding borrowings. Further, the U.K. economy has been facing unfavorable economic and market conditions, with high inflation and low consumer confidence due to uncertain geopolitical and economic outlooks. The Company has been adversely impacted by these trends in 2022 and these trends have continued in 2023.
BUSINESS SEGMENTS
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 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.
EQUITY INVESTMENT
As of September 30, 2023, 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. 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
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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, 2023 and 2022 in the accompanying unaudited condensed consolidated statements of operations. Pursuant to a Shares Subscription Agreement, the Company may designate four persons to be nominated as members of Vasconia’s Board of Directors (the "Vasconia Board"). As of September 30, 2023, the Vasconia Board was comprised of eleven members, of whom the Company had no designated members.
SEASONALITY
The Company’s business and working capital needs are seasonal, with a majority of sales occurring in the third and fourth quarters. In 2022 and 2021, net sales for the third and fourth quarters accounted for 54% and 56% of total annual net sales, respectively. The current market conditions and shifts in both consumer and retailer purchasing patterns has impacted the seasonality of the Company's net sales compared to historical trends. In anticipation of the pre-holiday shipping season, inventory levels increase primarily in the June through October time period. In 2023, the Company's inventory trends may deviate from historical trends due to a change in inventory strategy to react to the current market conditions impacting the Company and retailers.
Consistent with the seasonality of the Company’s net sales and inventory levels, the Company also experiences seasonality in its inventory turnover and turnover days from one quarter to the next.
CRITICAL ACCOUNTING ESTIMATES
There have been no material changes to the Company’s critical accounting estimates discussed in the 2022 Annual Report on Form 10-K in Item 7 under the heading Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.
RESULTS OF OPERATIONS
The following table sets forth statements of operations data of the Company as a percentage of net sales for the periods indicated:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2023202220232022
Net sales100.0 %100.0 %100.0 %100.0 %
Cost of sales63.0 63.6 62.6 64.3 
Gross margin37.0 36.4 37.4 35.7 
Distribution expenses8.9 10.0 10.3 10.6 
Selling, general and administrative expenses21.0 19.5 23.6 21.9 
Wallace facility remediation expense— 2.8 — 1.0 
Restructuring expenses— — 0.1 — 
Income from operations
7.1 4.1 3.4 2.2 
Interest expense(2.7)(2.5)(3.4)(2.3)
Mark to market (loss) gain on interest rate derivatives
(0.1)0.4 — 0.4 
Gain on early retirement of debt— — 0.3 — 
Income before income taxes and equity in losses
4.3 2.0 0.3 0.3 
Income tax provision
(1.6)(1.0)(0.6)(0.7)
Equity in losses, net of taxes
(0.5)(4.4)(2.0)(1.4)
Net income (loss)
2.2 %(3.4)%(2.3)%(1.8)%






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MANAGEMENT’S DISCUSSION AND ANALYSIS
THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2022
Net Sales
Consolidated net sales for the three months ended September 30, 2023 were $191.7 million, representing an increase of $5.1 million, or 2.7%, as compared to net sales of $186.6 million for the corresponding period in 2022. In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2023 average rates to 2022 local currency amounts, consolidated net sales increased by $4.1 million, or 2.2%, as compared to consolidated net sales in the corresponding period in 2022.
Net sales for the U.S. segment for the three months ended September 30, 2023 were $179.4 million, an increase of $6.6 million, or 3.8%, as compared to net sales of $172.8 million for the corresponding period in 2022.
Net sales for the U.S. segment’s Kitchenware product category were $97.7 million for the three months ended September 30, 2023, an increase of $5.1 million, or 5.5%, as compared to $92.6 million for the corresponding period in 2022. The increase was driven by sales for kitchen tools and gadgets and cutlery and boards, partially offset by lower sales in bakeware products.
Net sales for the U.S. segment’s Tableware product category were $48.9 million for the three months ended September 30, 2023, an increase of $4.4 million, or 9.9%, as compared to $44.5 million for the corresponding period in 2022. The increase was attributable to higher dinnerware sales due to a new warehouse club program in 2023.
Net sales for the U.S. segment’s Home Solutions product category were $32.8 million for the three months ended September 30, 2023, a decrease of $2.9 million, or 8.1%, as compared to $35.7 million for the corresponding period in 2022. The decrease was in hydration products, partially offset by Taylor branded bath measurement products.
Net sales for the International segment were $12.3 million for the three months ended September 30, 2023, a decrease of $1.5 million, or 10.9%, as compared to net sales of $13.8 million for the corresponding period in 2022. In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales decreased $2.4 million, or 16.6%, as compared to consolidated net sales in the corresponding period in 2022. The decrease was driven by the Company's global trading business in Asia due to a general slowing of replenishment orders in part caused by macroeconomic factors in the region.
Gross margin
Gross margin for the three months ended September 30, 2023 was $71.0 million, or 37.0%, as compared to $67.8 million, or 36.4%, for the corresponding period in 2022.
Gross margin for the U.S. segment was $67.0 million, or 37.3%, for the three months ended September 30, 2023, as compared to $63.3 million, or 36.6%, for the corresponding period in 2022. The improvement in the gross margin percentage for the U.S. segment was driven by product mix.
Gross margin for the International segment was $4.0 million, or 32.5%, for the three months ended September 30, 2023, as compared to $4.5 million, or 32.6%, for the corresponding period in 2022. The decrease in the gross margin percentage was attributable to higher inventory reserves recorded in the current period compared to the prior quarter, mostly offset by lower product and inbound freight costs.
Distribution expenses
Distribution expenses for the three months ended September 30, 2023 were $17.1 million, as compared to $18.6 million for the corresponding period in 2022. Distribution expenses as a percentage of net sales were 8.9% for the three months ended September 30, 2023, as compared to 10.0% for the three months ended September 30, 2022.
Distribution expenses as a percentage of net sales for the U.S. segment were approximately 7.8% and 9.0% for the three months ended September 30, 2023 and 2022, respectively. Distribution expenses during the three months ended September 30, 2023 included $0.2 million for redesign costs related to the Company's U.S. warehouses. As a percentage of sales shipped from the Company’s U.S. warehouses, excluding non-recurring expenses, distribution expenses were 9.1% and 10.4% for the three months ended September 30, 2023 and 2022, respectively. The decrease in expenses as a percentage of sales was attributable to
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lower storage expenses, improved labor management efficiencies resulting in a decrease of employee expenses, and lower pallet expenses.
Distribution expenses as a percentage of net sales for the International segment were 26.1% for the three months ended September 30, 2023, compared to 22.5% for the corresponding period in 2022. As a percentage of sales shipped from the Company’s international warehouses distribution expenses were 22.4% and 22.9% for the three months ended September 30, 2023 and 2022, respectively. The increase in expenses as a percentage of sales was attributable to lower sales.
Selling, general and administrative expenses
Selling, general and administrative expenses for the three months ended September 30, 2023 were $40.2 million, an increase of $3.7 million, or 10.1%, as compared to $36.5 million for the corresponding period in 2022.
Selling, general and administrative expenses for the U.S. segment were $31.6 million for the three months ended September 30, 2023, as compared to $28.3 million for the corresponding period in 2022. As a percentage of net sales, selling, general and administrative expenses were 17.6% and 16.4% for the three months ended September 30, 2023 and 2022, respectively. The increase in expenses was attributable to higher incentive compensation expense.
Selling, general and administrative expenses for the International segment were $3.7 million for the three months ended September 30, 2023, as compared to $3.9 million for the corresponding period in 2022. As a percentage of net sales, selling, general and administrative expenses were 30.1% and 28.3% for the three months ended September 30, 2023 and 2022, respectively. The decrease in expenses was attributable to lower foreign currency exchange losses.
Unallocated corporate expenses for the three months ended September 30, 2023 were $4.9 million, as compared to $4.3 million for the corresponding period in 2022. The current period increase was driven by higher incentive compensation expense, partially offset by a decrease in salary costs. The decrease in salary is due to the elimination of the Executive Chairman role as of March 31, 2023.
Wallace facility remediation expense
In connection with the Wallace EPA matter, the Company recorded an expense of $5.1 million for the three months ended September 30, 2022, to increase its estimated liability for remediation cost related to the Wallace facility. Refer to NOTE 13 — CONTINGENCIES for further discussion on this matter.
Interest expense
Interest expense was $5.2 million and $4.6 million for the three months ended September 30, 2023 and 2022, respectively. The increase in expense was a result of higher interest rates on outstanding borrowings, partially offset by lower average outstanding borrowings.
Mark to market (loss) gain on interest rate derivatives
Mark to market loss on interest rate derivatives was $0.1 million for the three months ended September 30, 2023, as compared to a mark to market gain on interest rate derivatives of $0.6 million for the three months ended September 30, 2022. The gain recognized for the three months ended September 30, 2022 was attributable to the change in the fair value due to the change in the projected interest rate environment. The mark to market amount represents the change in fair value on the Company’s interest rate derivatives that have not been designated as hedging instruments. These derivatives were entered into for purposes of locking-in a fixed interest rate on a portion of the Company’s variable interest rate debt. As of September 30, 2023, the intent of the Company is to hold these derivative contracts until their maturity.
Income taxes
Income tax provision of $3.0 million and $1.8 million for the three months ended September 30, 2023 and 2022, respectively, represent taxes on both U.S. and foreign earnings at a combined effective income tax provision rate of 36.5% and 50.6%, respectively. The effective tax rate for the three months ended September 30, 2023 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance. The effective tax rate for the three months ended September 30, 2022 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.

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Equity in losses
Equity in losses of Vasconia, net of taxes, was $0.7 million for the three months ended September 30, 2023, as compared to equity in losses of Vasconia, net of taxes, of $2.0 million for the three months ended September 30, 2022. For the three months ended September 30, 2023 and 2022, equity in losses included a non-cash impairment charge of $0.3 million and $6.2 million, respectively, to reduce the carrying value of the Company’s investment in Vasconia to its fair value. The decline in the fair value was determined to be other than temporary due to the decline in the quoted stock price, the continued decline in the operating results of Vasconia and the recent downgrade in Vasconia’s debt rating.
Vasconia reported loss from operations of $1.1 million for the three months ended September 30, 2023, as compared to loss from operations of $5.5 million for the three months ended September 30, 2022. The decrease in loss from operations was primarily attributable to improved operating results in the current period.
MANAGEMENT’S DISCUSSION AND ANALYSIS
NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2022
Net Sales
Consolidated net sales for the nine months ended September 30, 2023 were $483.5 million, a decrease of $37.1 million, or 7.1%, as compared to net sales of $520.6 million for the corresponding period in 2022. In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2023 average rates to 2022 local currency amounts, consolidated net sales decreased by $36.2 million, or 7.0%, as compared to consolidated net sales in the corresponding period in 2022.
Net sales for the U.S. segment for the nine months ended September 30, 2023 were $447.9 million, a decrease of $28.3 million, or 5.9%, as compared to net sales of $476.2 million for the corresponding period in 2022.
Net sales for the U.S. segment’s Kitchenware product category were $267.4 million for the nine months ended September 30, 2023, a decrease of $23.7 million, or 8.1%, as compared to $291.1 million for the corresponding period in 2022. The decrease was mainly driven by lower sales across most distribution channels for kitchen tools and gadgets, cutlery and board, and bakeware products in the first half of 2023 due to retail inventory rightsizing, which began in the second quarter of 2022. The decrease was partially offset by higher sales in the third quarter of 2023 as retailer's ordering patterns normalized.
Net sales for the U.S. segment’s Tableware product category were $99.0 million for the nine months ended September 30, 2023, a decrease of $2.0 million, or 2.0%, as compared to $101.0 million for the corresponding period in 2022. The decrease was primarily driven by dinnerware sales primarily due to lower sales to e-commerce and brick-and-mortar customers, partially offset by off-price retailers and a new warehouse club program.
Net sales for the U.S. segment’s Home Solutions product category were $81.5 million for the nine months ended September 30, 2023, a decrease of $2.6 million, or 3.1%, as compared to $84.1 million for the corresponding period in 2022. The decrease was in hydration products, partially offset by Taylor branded bath measurement products.
Net sales for the International segment were $35.6 million for the nine months ended September 30, 2023, a decrease of $8.8 million, or 19.8%, as compared to net sales of $44.4 million for the corresponding period in 2022. In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations, net sales decreased $7.9 million, or 18.1%, as compared to consolidated net sales in the corresponding period in 2022. The decrease was driven by a slowing of replenishment orders in the U.K. due to weaker end market demand caused by macroeconomic factors and lower e-commerce sales.
Gross margin
Gross margin for the nine months ended September 30, 2023 was $180.8 million, or 37.4%, as compared to $186.1 million, or 35.7%, for the corresponding period in 2022.
Gross margin for the U.S. segment was $167.6 million, or 37.4%, for the nine months ended September 30, 2023, as compared to $172.1 million, or 36.1%, for the corresponding period in 2022. The decrease in gross margin for the U.S. was driven by lower sales. The improvement in gross margin percentage was due to lower inbound freight costs and product mix.
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Gross margin for the International segment was $13.2 million, or 37.1%, for the nine months ended September 30, 2023, as compared to $14.0 million, or 31.5%, for the corresponding period in 2022. The decrease in gross margin was driven by lower sales. The increase in gross margin percentage was due to lower product costs and inbound freight costs. In addition, the current year reflects the benefit of lower duty costs on goods sold to European Union (“EU”) customers now distributed from the EU through the Company’s Netherlands distribution facility rather than the U.K.
Distribution expenses
Distribution expenses for the nine months ended September 30, 2023 were $49.7 million, as compared to $55.2 million for the corresponding period in 2022. Distribution expenses as a percentage of net sales were 10.3% for the nine months ended September 30, 2023, as compared to 10.6% for the nine months ended September 30, 2022.
Distribution expenses as a percentage of net sales for the U.S. segment were approximately 8.9% and 9.4% for the nine months ended September 30, 2023 and 2022, respectively. Distribution expenses during the nine months ended September 30, 2023 and 2022 include $0.5 million and $0.1 million, respectively, for redesign costs related to the Company's U.S. warehouses. As a percentage of sales shipped from the Company’s U.S. warehouses, excluding non-recurring expenses, distribution expenses were 9.7% and 10.5% for the nine months ended September 30, 2023 and 2022, respectively. The decrease in the expenses as a percentage of sales was a result of improved labor management efficiencies resulting in a decrease of employee expenses, lower pallet expenses, and storage expenses, partially offset by higher real estate taxes and labor rates.
Distribution expenses as a percentage of net sales for the International segment were 27.2% for the nine months ended September 30, 2023, compared to 23.5% for the corresponding period in 2022. Distribution expenses during the nine months ended September 30, 2022 include $0.5 million for the Company’s relocation costs for its new warehouse distribution facility in the Netherlands. As a percentage of sales shipped from the Company’s international warehouse, excluding non-recurring expenses, distribution expenses were 23.8% and 22.2% for the nine months ended September 30, 2023 and 2022, respectively. The increase was primarily attributed to lower shipment volume.
Selling, general and administrative expenses
Selling, general and administrative expenses for the nine months ended September 30, 2023 were $114.0 million, a decrease of $0.2 million, or 0.2%, as compared to $114.2 million for the corresponding period in 2022.
Selling, general and administrative expenses for the U.S. segment were $88.3 million for the nine months ended September 30, 2023, as compared to $85.9 million for the corresponding period in 2022. As a percentage of net sales, selling, general and administrative expenses were 19.7% and 18.0% for the nine months ended September 30, 2023 and 2022, respectively. The increase in selling, general and administrative expenses as a percentage of net sales is due to the impact of fixed costs on lower sales volume. The increase in expenses was attributable to the provision for doubtful accounts in the current period primarily related to significant declines in the financial condition of the Company's customer, Bed, Bath and Beyond Inc. and an increase in incentive compensation expense. The increase was partially offset by cost incurred in the prior year for integration costs related to the S’well acquisition and financing fees on receivables sold to HSBC.
Selling, general and administrative expenses for the International segment were $11.3 million for the nine months ended September 30, 2023, as compared to $13.2 million for the corresponding period in 2022. The decrease was primarily attributable to lower foreign currency exchange losses and lower employee costs. The reduction in employee costs was a result of the restructuring action taken by the Company in the fourth quarter of 2022.
Unallocated corporate expenses for the nine months ended September 30, 2023 were $14.4 million, as compared to $15.1 million for the corresponding period in 2022. The decrease was driven by lower salary costs, as a result of the elimination of the Executive Chairman role as of March 31, 2023 and lower stock compensation expense. The decrease was partially offset by higher incentive compensation expense.
Wallace facility remediation expense
In connection with the Wallace EPA matter, the Company recorded an expense of $5.1 million for the nine months ended September 30, 2022, to increase its estimated liability for remediation cost related to the Wallace facility. Refer to NOTE 13 — CONTINGENCIES for further discussion on this matter.
Restructuring expenses
For the nine months ended September 30, 2023, the Company incurred $0.8 million of unallocated corporate expense related to the termination payment with its Executive Chairman. On November 1, 2022, the Company entered into a transition agreement
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with its Executive Chairman, which provided for termination of his employment with the Company, effective March 31, 2023. The transition agreement amended his employment agreement which was set to expire on December 31, 2022. The employment agreement provided for a one-time termination payment which was paid in April, 2023.
Interest expense
Interest expense was $16.1 million and $12.1 million for the nine months ended September 30, 2023 and 2022, respectively. The increase in expense was a result of higher interest rates on outstanding borrowings, partially offset by lower average outstanding borrowings.
Mark to market (loss) gain on interest rate derivatives
Mark to market loss on interest rate derivatives was $0.1 million for the nine months ended September 30, 2023, as compared to a mark to market gain on interest rate derivatives of $2.0 million for the nine months ended September 30, 2022. The decrease was attributable to the change in the fair value based on the increase in interest rates. The mark to market amount represents the change in fair value on the Company’s interest rate derivatives that have not been designated as hedging instruments. These derivatives were entered into for purposes of locking-in a fixed interest rate on a portion of the Company’s variable interest rate debt. As of September 30, 2023, the intent of the Company is to hold these derivative contracts until their maturity.
Gain on early retirement of debt
Gain on early retirement of debt was $1.5 million for the nine months ended September 30, 2023. The gain recognized for the nine months ended September 30, 2023 was attributable to the repurchase of $47.2 million in principal amount of the Term Loan. Refer to NOTE 7 — DEBT for additional information.
Income taxes
Income tax provision of $2.9 million and $3.4 million for the nine months ended September 30, 2023 and 2022, respectively, represent taxes on both US and foreign earnings at a combined effective income tax provision rate of 197.0% and 245.9%, respectively. The effective tax rate for the nine months ended September 30, 2023 differs from the federal statutory income tax rate of 21.0% primarily due to the impact of non-deductible expenses, and foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance. The effective tax rate for the nine months ended September 30, 2022 differs from the federal statutory income tax rate of 21.0% primarily due to foreign losses for which no tax benefit is recognized as such amounts are fully offset with a valuation allowance.
Equity in losses
Equity in losses of Vasconia, net of taxes, was $2.9 million for the nine months ended September 30, 2023, as compared to equity in losses of Vasconia, net of taxes, of $1.2 million for the nine months ended September 30, 2022. For the nine months ended September 30, 2023 and 2022, equity in losses included non-cash impairment charges of $6.8 million and $6.2 million, respectively, to reduce the carrying value of the Company’s investment in Vasconia to its fair value. The decline in the fair value was determined to be other than temporary due to the decline in the quoted stock price, the continued decline in the operating results of Vasconia and the recent downgrade in Vasconia’s debt rating.
Vasconia reported loss from operations of $1.9 million for the nine months ended September 30, 2023, as compared to loss from operations of $0.3 million for the nine months ended September 30, 2022. The decrease in loss from operations was primarily attributable to decreased operating results in the current period.
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LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company’s principal sources of cash to fund liquidity needs were: (i) cash provided by operating activities and (ii) borrowings available under its revolving credit facility under the ABL Agreement, as defined below. The Company’s primary uses of funds consist of working capital requirements, capital expenditures, acquisitions and investments, and payments of principal and interest on its debt.
At September 30, 2023, the Company had cash and cash equivalents of $6.3 million, compared to $23.6 million at December 31, 2022. Working capital was $236.9 million at September 30, 2023, compared to $270.4 million at December 31, 2022. Liquidity, which includes cash and cash equivalents, availability under the ABL Agreement, and available funding under the Receivables Purchase Agreement, was approximately $198.8 million at September 30, 2023.
Inventory, a large component of the Company’s working capital, is expected to fluctuate from period to period, with inventory levels higher primarily in the June through October time period. The Company also expects inventory turnover to fluctuate from period to period based on product and customer mix. Certain product categories have lower inventory turnover rates as a result of minimum order quantities from the Company’s vendors or customer replenishment needs. Certain other product categories experience higher inventory turns due to lower minimum order quantities or trending sale demands. For the three months ended September 30, 2023, inventory turnover was 2.2 times, or 164 days, as compared to 1.7 times, or 219 days, for the three months ended September 30, 2022. The improvement was attributable to lower inventory levels as compared to the prior year, which were elevated due to inventory buildup at retailers as a result of supply chain disruptions and weaker end market demand.
In connection with the Wallace EPA Matter, the Company expects in the next twelve months it will be required to provide financial assurance of $5.6 million, which it expects to provide in the form of a letter of credit. This would reduce availability under the revolving credit facility.
The Company believes that availability under the revolving credit facility under its ABL Agreement, cash on hand and cash flows from operations are sufficient to fund the Company’s operations for the next twelve months. However, if circumstances were to adversely change, the Company may seek alternative sources of liquidity including debt and/or equity financing. However, there can be no assurance that any such alternative sources would be available or sufficient or available on terms favorable to the Company. On October 25, 2023, the Company launched the syndication of an Amendment & Extension of the Company’s existing Term Loan B facility due 2025 through an extended maturity of August 2027.The Company has received the required commitments from the lenders and expects the closing of such Term Loan B facility in the fourth quarter of 2023.
The Company closely monitors the creditworthiness of its customers. Based upon its evaluation of changes in customers’ creditworthiness, the Company may modify credit limits and/or terms of sale. However, notwithstanding the Company’s efforts to monitor its customers’ financial condition, the Company could be materially adversely affected by changes in customers’ creditworthiness in the future.
Credit Facilities
On August 26, 2022, the Company entered into Amendment No. 2 (the “Amendment”) to the Company’s credit agreement, dated as of March 2, 2018 (as amended, the “ABL Agreement”) among the Company, as a Borrower, certain subsidiaries of the Company, as Borrowers and/or Loan Parties, JPMorgan Chase Bank, N.A., as Administrative Agent and a Lender, HSBC Bank USA, National Association and Wells Fargo Bank, National Association, as Co-Documentation Agents and Lenders, and Manufacturers and Traders Trust Company. The ABL Agreement provides for a senior secured asset-based revolving credit facility in the maximum aggregate principal amount of $200.0 million, which facility will mature on August 26, 2027 (subject to an earlier springing maturity date that is 90 days prior to the Term Loan maturity date of February 28, 2025 if the Company’s Term Loan has not been repaid or refinanced by such date).
The Company’s loan agreement, dated as of March 2, 2018, (the “Term Loan” and together with the ABL Agreement, the “Debt Agreements”) provides for a senior secured term loan credit in the original principal amount of $275.0 million, which matures on February 28, 2025. On December 29, 2022, the Company entered into Amendment No. 1 to the Term Loan, which replaces the LIBOR-based interest rates with SOFR-based interest rates and modifies the provisions for determining the alternative rate of interest upon the occurrence of certain events relating to the availability of interest rate benchmarks. The Term Loan requires the Company to make an annual prepayment of principal based upon a percentage of the Company's excess cash flow, (“Excess Cash Flow”), if any. The percentage applied to the Company’s excess cash flow is based on the Company’s Total Net Leverage Ratio (as defined in the Debt Agreements). When an Excess Cash Flow payment is required, each lender has the option to decline a portion or all of the prepayment amount payable to it. An estimate of the amount of the Excess Cash Flow payment is recorded in current maturity of term loan on the unaudited condensed consolidated balance sheets.
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Additionally, the Term Loan requires quarterly payments, which commenced on June 30, 2018, of principal equal to 0.25% of the original aggregate principal amount of the Term Loan, which payments are to be adjusted from time to time to account for prepayments made. Per the Term Loan, when the Company makes an Excess Cash Flow payment, the payment is first applied to satisfy the next eight (8) scheduled future quarterly required payments of the Term Loan in order of maturity and then to the remaining scheduled installments on a pro rata basis. The quarterly principal payments have been satisfied through maturity of the Term Loan by the annual Excess Cash Flow payments made to date.
The maximum borrowing amount under the ABL Agreement may be increased to up to $250.0 million if certain conditions are met but limited to $220.0 million pursuant to the Term Loan. One or more tranches of additional term loans (the “Incremental Term 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 on a pro forma basis pursuant to the Term Loan, after giving effect to such increase, is no greater than 3.75 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan but not to mature earlier than the maturity date of the then existing term loans.
As of September 30, 2023 and December 31, 2022, the total availability under the ABL Agreement was as follows (in thousands):
September 30, 2023
December 31, 2022
Maximum aggregate principal allowed$200,000 $189,411 
Outstanding borrowings under the ABL Agreement(29,305)(10,424)
Standby letters of credit(2,974)(2,765)
Total availability under the ABL Agreement$167,721 $176,222 
Availability under the ABL Agreement is limited to the lesser of the $200.0 million commitment thereunder and the borrowing base and therefore depends on the valuation of certain current assets comprising the borrowing base. The borrowing capacity under the ABL Agreement will depend, in part, on eligible levels of accounts receivable and inventory that fluctuate regularly. Due to the seasonality of the Company’s business, this means that the Company may have greater borrowing availability during the third and fourth quarters of each year. Consequently, the $200.0 million commitment thereunder may not represent actual borrowing capacity.
On June 8, 2023, the Company completed the repurchase of $47.2 million in principal amount of the Term Loan, for $95.0 per $100.0 of principal. The repurchase was executed by way of a reverse Dutch auction, pursuant to and in accordance with the terms and conditions provided for in the Term Loan. In connection therewith, debt issuance costs of $0.5 million were written off and fees of $0.4 million were incurred. The gain on the early retirement of the Term Loan was $1.5 million, net of fees and expenses.
The current and non-current portions of the Company’s Term Loan included in the condensed consolidated balance sheets were as follows (in thousands):
September 30, 2023December 31, 2022
Current portion of Term Loan:
Estimated Excess Cash Flow principal payment$15,000 $— 
Estimated unamortized debt issuance costs(1,134)— 
Total Current portion of Term Loan$13,866 $— 
Non-current portion of Term Loan:
Term Loan, net of current portion$183,684 $245,911 
Estimated unamortized debt issuance costs(450)(3,054)
Total Non-current portion of Term Loan$183,234 $242,857 
The estimated Excess Cash Flow principal payment recorded at September 30, 2023 represents the Company’s estimate for the 2024 Excess Cash Flow Payment. There was no Excess Cash Flow payment due in 2023.
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
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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 foreign subsidiary borrowers under the ABL Agreement are secured by security interests in substantially all of the assets of, and stock in, such foreign subsidiary borrowers, subject to certain limitations. 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 security interests in 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 interests consist of (1) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and certain of its 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 (2) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and certain of its 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 Adjusted Term Secured Overnight Financing Rate (“SOFR”) plus 1.0% as of a specified date in advance of the determination, but in each case not less than 1.0%, plus a margin of 0.25% to 0.50%, or (ii) Adjusted Term SOFR, which is the Term SOFR Rate for the selected 1, 3 or 6 month interest period plus 0.10% (or Euro Interbank Offered Rate “EURIBOR” for borrowings denominated in Euro; or Sterling Overnight Index Average “SONIA” for borrowings denominated in Pounds Sterling), but in each case not less than zero, plus a margin of 1.25% to 1.50%. The respective margins are based upon average quarterly availability, as defined in and computed pursuant to the ABL Agreement. In addition, the Company pays a commitment fee of 0.20% to 0.25% per annum based on the average daily unused portion of the aggregate commitment under the ABL Agreement. The interest rate on outstanding borrowings under the ABL Agreement at September 30, 2023 was between 6.44% and 8.75%. The Company paid a commitment fee of 0.25% during the nine months ended September 30, 2023.
The Term Loan bears interest, at the Company’s option, at one of the following rates: (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 Adjusted Term SOFR, but not less than 1.0%, plus 1.0%, plus a margin of 2.5% or (ii) SOFR for the applicable interest period, multiplied by any statutory reserve rate, 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, 2023 was 8.93%.
The Debt Agreements provide for customary restrictions and events of default. Restrictions include limitations on additional indebtedness, liens, acquisitions, investments and payment of dividends, among other things. 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 $20.0 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 $20.0 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, 2023.
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.
Covenant Calculations
Adjusted EBITDA (a non-GAAP financial measure), which is defined in the Company’s Debt Agreements, is used in the calculation of the Fixed Charge Coverage Ratio, Secured Net Leverage Ratio, Total Leverage Ratio and Total Net Leverage Ratio, which are required to be provided to the Company’s lenders pursuant to its Debt Agreements.
The Company’s adjusted EBITDA (including pro forma adjustments), for the trailing twelve months ended September 30, 2023 was $55.8 million.
Capital expenditures for the nine months ended September 30, 2023 were $1.8 million.
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Non-GAAP financial measure
Adjusted EBITDA is a non-GAAP financial measure within the meaning of Regulation G and Item 10(e) of Regulation S-K, each promulgated by the SEC. This measure is provided because management of the Company uses this financial measure in evaluating the Company’s on-going financial results and trends, and management believes that exclusion of certain items allows for more accurate period-to-period comparison of the Company’s operating performance by investors and analysts. Management also uses this non-GAAP information as an indicator of business performance. Adjusted EBITDA, as discussed above, is also one of the measures used to calculate financial covenants required to be provided to the Company’s lenders pursuant to its Debt Agreements.
Investors should consider this non-GAAP financial measure in addition to, and not as a substitute for, the Company’s financial performance measures prepared in accordance with U.S. GAAP. Further, the Company’s non-GAAP information may be different from the non-GAAP information provided by other companies including other companies within the home retail industry.
The following is a reconciliation of the net income (loss), as reported, to adjusted EBITDA, for each of the last four quarters and the 12 months ended September 30, 2023:
 Quarter EndedTwelve Months Ended September 30, 2023
 December 31, 2022March 31,
2023		June 30,
2023		September 30,
2023
(in thousands)
Net income (loss) as reported
$3,272 $(8,805)$(6,520)$4,206 $(7,847)
Undistributed equity losses, net
2,058 2,777 5,863 1,047 11,745 
Income tax provision (benefit)
2,308 (1,348)1,242 3,015 5,217 
Interest expense5,125 5,336 5,528 5,246 21,235 
Depreciation and amortization5,001 4,870 4,925 4,821 19,617 
Mark to market loss (gain) on interest rate derivatives
19 234 (197)98 154 
Stock compensation expense281 861 1,011 898 3,051 
Contingent consideration fair value adjustments— — (50)— (50)
Gain on early retirement of debt
— — (1,520)— (1,520)
Acquisition related expenses
170 490 242 186 1,088 
Restructuring expenses1,420 856 — — 2,276 
Warehouse redesign expenses(1)
— 194 157 176 527 
Adjusted EBITDA19,654 5,465 10,681 19,693 55,493 
Pro forma projected synergies adjustment(2)
$323 
Pro forma Adjusted EBITDA(3)
$19,654 $5,465 $10,681 $19,693 $55,816 
(1) For the twelve months ended September 30, 2023, the warehouse redesign expenses were related to the U.S. segment.
(2) Pro forma projected synergies represents the projected cost savings of $0.2 million associated with the Executive Chairman's cessation of service in such role, and $0.1 million associated with reorganization of the U.S. segment's sales management structure.
(3) Adjusted EBITDA is a non-GAAP financial measure that is defined in the Company’s debt agreements. Adjusted EBITDA is defined as net income (loss), adjusted to exclude undistributed equity in losses, income tax provision (benefit), interest expense, depreciation and amortization, mark to market loss (gain) on interest rate derivatives, stock compensation expense, gain on early retirement of debt, and other items detailed in the table above that are consistent with exclusions permitted by our debt agreements.
Accounts Receivable Purchase Agreement
To improve its liquidity during seasonally high working capital periods, the Company has an uncommitted Receivables Purchase Agreement with HSBC Bank USA, National Association (“HSBC”) as Purchaser (the “Receivables Purchase Agreement”). Under the Receivables Purchase Agreement, the Company may offer to sell certain eligible accounts receivable (the “Receivables”) to HSBC, 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 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. The term of the agreement is for 364 days and shall automatically be
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extended for annual successive terms unless terminated. Either party may terminate the agreement at any time upon sixty days’ prior written notice to the other party.
The Company did not sell receivables to HSBC during the three and nine months ended September 30, 2023. Pursuant to the Receivable Purchase Agreement, the Company sold to HSBC $30.0 million and $109.8 million of receivables during the three and nine months ended September 30, 2022, respectively. Charges of $0.2 million and $0.5 million, respectively, related to the sale of the receivables were included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022. At September 30, 2023 and 2022, zero and $20.2 million, respectively, of receivables sold were outstanding and due to HSBC from customers.
At September 30, 2023, $24.8 million of accounts receivables were available for sale to HSBC, net of applicable charges.
Derivatives
Interest Rate Swaps
The Company’s total outstanding notional value of interest rate swaps was $25.0 million at September 30, 2023. These non-designated interest rate swaps were entered into in June 2019 and serve as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings and expire in February 2025.
The Company’s interest rate swaps that were designated as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings expired in March 2023. The Company has no designated interest rate swaps at September 30, 2023.
Foreign Exchange Contracts
The Company is 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 than 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 value of foreign exchange contracts at September 30, 2023 was $8.8 million. These foreign exchange contracts have been designated as hedges in order to apply hedge accounting.
The Company is exposed to market risks as well as changes in foreign currency exchange rates as measured against the USD and each other, and to changes to the credit risk of derivative counterparties. The Company attempts to minimize these risks primarily by 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 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, 2023, these foreign exchange contracts have been designated as hedges in to order to apply hedge accounting.
Operating activities
Net cash provided by operating activities was $17.0 million for the nine months ended September 30, 2023, as compared to net cash used in operating activities of $20.1 million for the nine months ended September 30, 2022. The increase from 2023 compared to 2022 was attributable to the timing of payments for accounts payable and accrued expenses and a reduction in inventory levels, partially offset by timing of collections related to the Company's accounts receivables.



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Investing activities
Net cash used in investing activities was $1.8 million and $19.9 million for the nine months ended September 30, 2023 and 2022, respectively. The decrease from 2023 compared to 2022 was attributable to the cash consideration of $18.0 million paid for the acquisition of S'well in 2022.
Financing activities
Net cash used in financing activities was $32.4 million for the nine months ended September 30, 2023, as compared to net cash provided by financing activities of $18.4 million for the nine months ended September 30, 2022. The change was attributable to the repurchase of a portion of the term loan in the 2023 period, compared to the Excess Cash Flow principal payment on the term loan in the 2022 period and lower proceeds from the revolving credit facility in the 2023 period. The cash used in financing activities was partially offset by decreased payments for stock repurchases in the 2023 period.
Stock repurchase program
On March 14, 2022, the Company announced that its Board authorized the repurchase of up to $20.0 million of the Company’s common stock, replacing the Company’s previously-authorized $10.0 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 nine months ended September 30, 2023, the Company repurchased 320,204 shares for a total cost of $2.5 million and thereafter retired the shares. No repurchases were effected during the three months ended September 30, 2023. As of September 30, 2023, the remaining dollar amount available for repurchases under the Board authorized plan was $11.1 million.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in market risk for changes in foreign currency exchange rates and interest rates from the information provided in Item 7A – Quantitative and Qualitative Disclosures About Market Risk in the 2022 Annual Report on Form 10-K.
Item 4. Controls and Procedures
(a)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 September 30, 2023, that the Company’s disclosure 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 and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’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.
(b)Changes in Internal Controls
There were no changes in the Company’s internal controls 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 controls over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a description of the Company’s legal proceedings, please see NOTE 13 — CONTINGENCIES, to the Company's condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, readers should carefully consider the factors discussed in Part I, Item 1A—Risk Factors in the 2022 Annual Report on Form 10-K, and in the Company’s other filings with the SEC, which could materially affect the Company’s business, financial condition, cash flows or future results. There have been no material changes from the risk factors previously disclosed in Part I, Item 1A—Risk Factors in the 2022 Annual Report on Form 10-K.
Item 5. Other Information
Employment Agreements
On November 8, 2023, the Company entered into amendments (each, an “Employment Agreement Amendment”) to the existing effective employment agreements between the Company and each of Daniel Siegel and Laurence Winoker.
The Employment Agreement Amendment for Daniel Siegel increases his base salary from $663,000 to $725,000, effective November 1, 2023.
The Employment Agreement Amendment for Laurence Winoker increases his target annual bonus attributable to the Company’s Adjusted EBITDA (as defined by Mr. Winoker’s employment agreement) for 2024 and subsequent years from 37.5% of his base salary to 50% of his base salary (the “EBITDA Target Bonus”). In addition, the Employment Agreement Amendment for Mr. Winoker amends Mr. Winoker’s employment agreement to address the Company’s adoption of a compensation recoupment policy.
Rule 10b5-1 Trading Plans
None of the Company’s directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company’s fiscal quarter ended September 30, 2023.
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Item 6. Exhibits
See the Exhibit Index below, which is incorporated by reference herein.
Exhibit Index
Exhibit No.
10.1*
10.2*
10.3*
31.1*
31.2*
32.1**
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 Quarterly Report on Form 10-Q, formatted in Inline XBRL and contained in Exhibit 101

*    Filed herewith
**    Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, 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. KayNovember 9, 2023
Robert B. Kay
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Laurence WinokerNovember 9, 2023
Laurence Winoker
Executive Vice President, Treasurer and Chief Financial Officer
(Principal Financial and Accounting Officer)

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Document



Exhibit 10.1
FIFTH AMENDMENT TO THE AMENDED AND RESTATED
EMPLOYMENT AGREEMENT

    This Fifth Amendment (this “Amendment”), dated as of November 8, 2023 (the “Amendment Effective Date”) by and between Lifetime Brands, Inc., a Delaware Corporation (the “Company”) and Laurence Winoker (the “Executive”) shall be effective as of the Amendment Effective Date unless otherwise provided herein and amends the Amended and Restated Employment Agreement, dated as of September 10, 2015 between the Company and the Executive, as amended from time to time (the “Employment Agreement”).

    WHEREAS, pursuant to Section 14(a) of the Employment Agreement, the Company wishes to further amend the Employment Agreement to reflect a change in the Executive’s annual target bonus as well as the Company’s adoption of a compensation recoupment policy.

NOW, THEREFORE, in consideration of the Executive’s continued employment with the Company and other good and sufficient consideration set forth herein, the Company and the Executive hereby agree as follows:

1.Effective for the fiscal year ending on December 31, 2024 and each subsequent fiscal year during the Employment Term, Section 3(b)(i) shall be amended to delete the reference to “37.5%” and replace it with “50%”.

2.Effective for the fiscal year ending on December 31, 2024 and each subsequent fiscal year during the Employment Term, Section 3(b)(iii) of the Employment Agreement shall be deleted in its entirety and replaced with the following:

“For purposes of this Agreement, the term “Target Bonus” shall mean 75% of the Executive’s annual Base Salary in effect at the time of termination; provided that, for purposes of Section 6(d)(iii), Target Bonus shall mean 75% of the greater of (A) the Executive’s annual Base Salary in effect at the time of termination or (B) the Executive’s annual Base Salary in effect at the date of the Change of Control.”

3.Section 14 of the Employment Agreement shall be amended by adding the following subsection (g) to the end thereof:

“(g) Company Policies. This Agreement and the compensation payable hereunder shall be subject to any applicable clawback or recoupment policies, share trading policies, and other policies that may be implemented by the Board from time to time with respect to officers of the Company.”

4.The Employment Agreement, as amended by this Amendment, constitutes the entire and exclusive agreement between the parties with respect to the subject matter hereof. All previous discussions and agreements with respect to the subject matter of this Amendment are superseded by this Amendment.

5.Except as expressly amended hereby, all the terms, conditions, and provisions of the Employment Agreement shall remain in full force and effect. This Amendment shall form a part of the Employment Agreement for all purposes.




Exhibit 10.1
6.This Amendment may be executed in counterparts and by facsimile or other electronic means, including by portable document format (PDF), each of which shall be deemed to have the same legal effect as an original and together shall constitute one and the same instrument.

7.The Company represents and warrants that it has the full power and authority to enter into this Amendment.

[The remainder of this page is intentionally left blank]

2



Exhibit 10.1
IN WITNESS WHEREOF, the parties have executed this Amendment as of the Amendment Effective Date.

                    
LIFETIME BRANDS, INC.
By:/s/ Robert B. Kay
Name:Robert B. Kay
TitleChief Executive Officer
EXECUTIVE
/s/ Laurence Winoker
Laurence Winoker
3
Document

EX-10.2
FOURTH AMENDMENT TO THE
EMPLOYMENT AGREEMENT

    This Fourth Amendment (this “Amendment”), dated as of November 8, 2023 by and between Lifetime Brands, Inc., a Delaware Corporation (the “Company”) and Daniel Siegel (the “Executive”) shall be effective as of November 1, 2023 (the “Amendment Effective Date”) and amends the Employment Agreement, dated as of November 8, 2017 between the Company and the Executive, as amended from time to time (the “Employment Agreement”).

    WHEREAS, pursuant to Section 21 of the Employment Agreement, the Company wishes to amend the Employment Agreement to reflect a revised base salary as of the Amendment Effective Date.

    NOW, THEREFORE, in consideration of Executive’s continued employment with the Company and other good and sufficient consideration set forth herein, the Company and the Executive hereby agree as follows:

1.Section 2(a) of the Employment Agreement shall be amended as of the Amendment Effective Date by replacing the first sentence of Section 2(a) in its entirety with the following:

“During the Term, the Company shall pay the Executive a base salary (“Base Salary”) at the annual rate of $725,000.”

2.The Employment Agreement, as amended by this Amendment, constitutes the entire and exclusive agreement between the parties with respect to the subject matter hereof. All previous discussions and agreements with respect to the subject matter of this Amendment are superseded by this Amendment.

3.Except as expressly amended hereby, all the terms, conditions, and provisions of the Employment Agreement, as amended, shall remain in full force and effect. This Amendment shall form a part of the Employment Agreement for all purposes.
4.This Amendment may be executed in counterparts and by facsimile or other electronic means, including by portable document format (PDF), each of which shall be deemed to have the same legal effect as an original and together shall constitute one and the same instrument.

5.The Company represents and warrants that it has the full power and authority to enter into this Amendment.

[The remainder of this page is intentionally left blank]



    IN WITNESS WHEREOF, the parties have executed this Amendment as of the day and year first written above.

                    

LIFETIME BRANDS, INC.
By:/s/ Robert B. Kay
Name:Robert B. Kay
TitleChief Executive Officer
EXECUTIVE
/s/ Daniel Siegel
DANIEL SIEGEL
2

Document

Exhibit 31.1
CERTIFICATION
I, Robert B. Kay, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Lifetime Brands, Inc. (“the registrant”);
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)4) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and

1.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Robert B. Kay
Robert B. Kay
Chief Executive Officer and Director
Date: November 9, 2023


Document

Exhibit 31.2
CERTIFICATION
I, Laurence Winoker, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Lifetime Brands, Inc. (“the registrant”);
2.Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)4) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c.evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Laurence Winoker
Laurence Winoker
Executive Vice President,
Treasurer and Chief Financial Officer
Date: November 9, 2023


Document

Exhibit 32.1
Certification by Robert B. Kay, Chief Executive Officer and Director, and Laurence Winoker, Executive Vice-President – 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.
I, Robert B. Kay, Chief Executive Officer and Director, and I, Laurence Winoker, Executive Vice President, Treasurer and Chief Financial Officer, of Lifetime Brands, Inc., a Delaware corporation (the “Company”), each hereby certify that:
(1)The Company’s periodic report on Form 10-Q for the period ended September 30, 2023 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert B. Kay/s/ Laurence Winoker
Robert B. Kay
Chief Executive Officer and Director		Laurence Winoker
Executive Vice President, Treasurer and Chief Financial Officer
Date: November 9, 2023
Date: November 9, 2023
A signed original of this certification required by 18 U.S.C. Section 1350 has been provided to Lifetime Brands, Inc. and will be retained by Lifetime Brands, Inc. and furnished to the SEC or its staff upon request.