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: June 30, ~~2019~~

2020

☐
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number: 0-19254

__________________________

LIFETIME BRANDS, INC.

(Exact name of registrant as specified in its charter)

__________________________

Delaware

11-2682486

(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 class

Trading

Symbol(s)

Name of each exchange

on which registered

Common Stock, $.01 par value

LCUT

The ~~NASDAQ~~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”,~~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 July 31, ~~2019~~2020 was ~~21,255,218.~~

21,768,740.

Table of Contents

LIFETIME BRANDS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, ~~2019~~

2020

INDEX


						Page No.

Part I.			Financial Information

Item 1.			Financial Statements

			Condensed Consolidated Balance Sheets – June 30, ~~2019~~2020 (unaudited) and December 31, ~~2018~~2019				2

			Condensed Consolidated Statements of Operations (unaudited) – Three and Six Months EndedJune 30, 2020 and 2019	3

		Condensed Consolidated Statements of Comprehensive Loss (unaudited) –Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019				3	4

			~~Condensed Consolidated Statements of Comprehensive Loss (unaudited) – Three and Six Months Ended June 30, 2019 and 2018~~		4

	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) ~~–Three~~–Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019			5

			Condensed Consolidated Statements of Cash Flows (unaudited) – Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019				6

			Notes to Condensed Consolidated Financial Statements (unaudited)				7

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations				28	29

Item 3.			Quantitative and Qualitative Disclosures About Market Risk				41	44

Item 4.			Controls and Procedures				41	44

Part II.			Other Information

Item 1.			Legal Proceedings				42	44

Item 1A.			Risk Factors				42	46

Item 2. 2			Unregistered Sales of Equity Securities and Use of Proceeds				43	47

Item 6.			Exhibits				44	48

Signatures								45	49

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Inin thousands, except share data)

   June 30, December 31,
   2019 2018
   (unaudited)
ASSETS

CURRENT ASSETS

Cash and cash equivalents
   $ 10,535 $ 7,647
Accounts receivable, less allowances of $7,473 at June 30, 2019 and $7,855 at December 31, 2018
   91,109 125,292
Inventory
   205,607 173,601
Prepaid expenses and other current assets
   12,724 10,822
Income taxes receivable
   10,690 1,442


TOTAL CURRENT ASSETS
   330,665 318,804
PROPERTY AND EQUIPMENT, net
   26,563 25,762
OPERATING LEASE RIGHT-OF-USE ASSETS
   109,757 —
INVESTMENTS
   20,935 22,582
INTANGIBLE ASSETS, net
   331,314 338,847
DEFERRED INCOME TAXES
   122 733
OTHER ASSETS
   3,345 1,844


TOTAL ASSETS
   $ 822,701 $ 708,572


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Current maturity of term loan
   $ 13,261 $ 1,253
Accounts payable
   48,495 38,167
Accrued expenses
   50,966 45,456
Current portion of operating lease liability
   11,163 —


TOTAL CURRENT LIABILITIES
   123,885 84,876
DEFERRED RENT & OTHER LONG-TERM LIABILITIES
   10,055 23,339
DEFERRED INCOME TAXES
   15,103 15,141
OPERATING LEASE LIABILITIES
   114,630 —
INCOME TAXES PAYABLE, LONG-TERM
   949 949
REVOLVING CREDIT FACILITY
   44,913 42,080
TERM LOAN
   250,062 262,694
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, $.01 par value, shares authorized: 50,000,000 at June 30, 2019 and December 31, 2018; shares issued and outstanding: 21,255,218 at June 30, 2019 and 20,764,143 at December 31, 2018
   213 208
Paid-in capital
   260,461 258,637
Retained earnings
   37,090 55,264
Accumulated other comprehensive loss
   (34,660 ) (34,616 )


TOTAL STOCKHOLDERS’ EQUITY
   263,104 279,493


TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 822,701 $ 708,572


	June 30, 2020		December 31, 2019
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	63,537	$	11,370
Accounts receivable, less allowances of $13,040 at June 30, 2020 and $9,681 at December 31, 2019	111,361		128,639
Inventory	168,928		173,427
Prepaid expenses and other current assets	12,249		14,140
Income taxes receivable	2,466		1,577
TOTAL CURRENT ASSETS	358,541		329,153
PROPERTY AND EQUIPMENT, net	25,100		28,168
OPERATING LEASE RIGHT-OF-USE ASSETS	99,883		106,871
INVESTMENTS	17,020		21,289
INTANGIBLE ASSETS, net	250,515		280,471
OTHER ASSETS	2,743		4,071

TOTAL ASSETS	$	753,802	$	770,023
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturity of term loan	$	13,527	$	8,413

Accounts payable	66,678		36,173
Accrued expenses	62,114		52,060

Current portion of operating lease liabilities	10,660		10,661
TOTAL CURRENT LIABILITIES	152,979		107,307
OTHER LONG-TERM LIABILITIES	16,159		12,214
INCOME TAXES PAYABLE, LONG-TERM	1,217		1,217
OPERATING LEASE LIABILITIES	106,195		112,180
DEFERRED INCOME TAXES	12,661		13,685
REVOLVING CREDIT FACILITY	27,383		32,822
TERM LOAN	242,337		254,281
STOCKHOLDERS’ EQUITY
Preferred stock, $1.00 par value, shares authorized: 100 shares of Series A and 2,000,000 shares of Series B; NaN issued and outstanding	—		—
Common stock, $0.01 par value, shares authorized: 50,000,000 at June 30, 2020 and December 31, 2019; shares issued and outstanding: 21,768,740 at June 30, 2020 and 21,255,660 at December 31, 2019	218		213
Paid-in capital	265,630		263,386
(Accumulated deficit) retained earnings	(26,813)		7,173
Accumulated other comprehensive loss	(44,164)		(34,455)
TOTAL STOCKHOLDERS’ EQUITY	194,871		236,317
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	753,802	$	770,023

See accompanying notes to unaudited condensed consolidated financial statements.

- 2 -

Table of Contents

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Inin thousands, except per share data)

(unaudited)

   Three Months Ended Six Months Ended
   June 30, June 30,
   2019 2018 2019 2018
Net sales
   $ 142,536 $ 148,651 $ 292,462 $ 266,820
Cost of sales
   98,517 96,573 194,122 169,655


Gross margin
   44,019 52,078 98,340 97,165
Distribution expenses
   15,541 14,942 31,401 32,764
Selling, general and administrative expenses
   40,850 40,042 80,990 80,217
Restructuring expenses
   173 395 781 801


Loss from operations
   (12,545 ) (3,301 ) (14,832 ) (16,617 )
Interest expense
   (4,694 ) (4,676 ) (9,616 ) (6,779 )
Loss on early retirement of debt
   —   —   —   (66 )


Loss before income taxes and equity in (losses) earnings
   (17,239 ) (7,977 ) (24,448 ) (23,462 )
Income tax benefit
   5,795 1,765 8,253 5,575
Equity in (losses) earnings, net of taxes
   (69 ) 155 (185 ) 232


NET LOSS
   $ (11,513 ) $ (6,057 ) $ (16,380 ) $ (17,655 )


BASIC LOSS PER COMMON SHARE
   (0.56 ) $ (0.30 ) (0.80 ) $ (0.96 )


DILUTED LOSS PER COMMON SHARE
   (0.56 ) $ (0.30 ) (0.80 ) $ (0.96 )


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net sales	$	150,140	$	142,536	$	295,210	$	292,462
Cost of sales	95,972		98,517		188,108		194,122
Gross margin	54,168		44,019		107,102		98,340
Distribution expenses	15,192		15,541		31,749		31,401
Selling, general and administrative expenses	34,427		40,850		75,949		80,990
Restructuring expenses	253		173		253		781
Goodwill and other impairments	—		—		20,100		—
Income (loss) from operations	4,296		(12,545)		(20,949)		(14,832)
Interest expense	(4,230)		(5,044)		(8,966)		(9,966)
Mark to market (loss) gain on interest rate derivatives	(164)		350		(2,415)		350


Loss before income taxes and equity in losses	(98)		(17,239)		(32,330)		(24,448)
Income tax (provision) benefit	(3,031)		5,795		698		8,253
Equity in losses, net of taxes	(848)		(69)		(509)		(185)
NET LOSS	$	(3,977)	$	(11,513)	$	(32,141)	$	(16,380)
BASIC LOSS PER COMMON SHARE	$	(0.19)	$	(0.56)	$	(1.55)	$	(0.80)
DILUTED LOSS PER COMMON SHARE	$	(0.19)	$	(0.56)	$	(1.55)	$	(0.80)

See accompanying notes to unaudited condensed consolidated financial statements.

- 3 -

Table of Contents

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Inin thousands)

(unaudited)

   Three Months Ended Six Months Ended
   June 30, June 30,
   2019 2018 2019 2018
Net loss
   $ (11,513 ) $ (6,057 ) $ (16,380 ) $ (17,655 )
Other comprehensive loss, net of taxes:

Translation adjustment
   (2,953 ) (5,489 ) (1,647 ) (2,109 )
Net change in cash flow hedges
   982 (263 ) 1,578 (277 )
Effect of retirement benefit obligations
   12 17 25 35


Other comprehensive loss, net of taxes
   (1,959 ) (5,735 ) (44 ) (2,351 )


Comprehensive loss
   $ (13,472 ) $ (11,792 ) $ (16,424 ) $ (20,006 )


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net loss	$	(3,977)	$	(11,513)	$	(32,141)	$	(16,380)
Other comprehensive loss, net of taxes:
Translation adjustment	(2,514)		(2,953)		(6,972)		(1,647)
Net change in cash flow hedges	101		982		(2,776)		1,578
Effect of retirement benefit obligations	19		12		39		25
Other comprehensive loss, net of taxes	(2,394)		(1,959)		(9,709)		(44)
Comprehensive loss	$	(6,371)	$	(13,472)	$	(41,850)	$	(16,424)

See accompanying notes to unaudited condensed consolidated financial statements.

- 4 -

Table of Contents

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(~~In thousands, except~~in thousands)

(unaudited)


	Common stock					Paid-in capital		Retained Earnings		Accumulated other comprehensive loss		Total
	Shares	Amount
BALANCE AT DECEMBER 31, 2018	20,764	$	208	$	258,637	$	55,264	$	(34,616)	$	279,493
Comprehensive (loss) income:
Net loss	—	—		—		(4,867)		—		(4,867)
Translation adjustment	—	—		—		—		1,306		1,306
Net change in cash flow hedges	—	—		—		—		596		596
Effect of retirement benefit obligations	—	—		—		—		13		13
Total comprehensive loss										(2,952)


Net issuance of restricted shares to employees	169	1		(1)		—		—		—
Stock compensation expense	—	—		900		—		—		900
Net exercise of stock options	19	—		—		—		—		—
Shares effectively repurchased for required employee withholding taxes	(25)	—		(232)		—		—		(232)
Dividends ⁽¹⁾	—	—		—		(898)		—		(898)
BALANCE AT MARCH 31, 2019	20,927	$	209	$	259,304	$	49,499	$	(32,701)	$	276,311

Comprehensive (loss) income:
Net loss	—	—		—		(11,513)		—		(11,513)
Translation adjustment	—	—		—		—		(2,953)		(2,953)
Net change in cash flow hedges	—	—		—		—		982		982
Effect of retirement benefit obligations	—	—		—		—		12		12
Total comprehensive loss										(13,472)

Restricted shares issued to directors	61	1		(1)		—		—		—
Net issuance of restricted shares to employees	250	3		(3)		—		—		—
Stock compensation expense	—	—		1,186		—		—		1,186
Net exercise of stock options	34	—		133		—		—		133
Shares effectively repurchased for required employee withholding taxes	(17)	—		(158)		—		—		(158)
Dividends (1)	—	—		—		(896)		—		(896)
BALANCE AT JUNE 30, 2019	21,255	$	213	$	260,461	$	37,090	$	(34,660)	$	263,104


	Common stock					Paid-in capital		Retained Earnings (Accumulated deficit)		Accumulated other comprehensive loss		Total
	Shares	Amount
BALANCE AT DECEMBER 31, 2019	21,256	$	213	$	263,386	$	7,173	$	(34,455)	$	236,317
Comprehensive (loss) income:
Net loss	—	—		—		(28,164)		—		(28,164)
Translation adjustment	—	—		—		—		(4,458)		(4,458)
Net change in cash flow hedges	—	—		—		—		(2,877)		(2,877)
Effect of retirement benefit obligations	—	—		—		—		20		20
Total comprehensive loss										(35,479)
Performance shares issued to employees	62	1		(1)		—		—		—
Net issuance of restricted shares to employees	220	2		(2)		—		—		—
Stock compensation expense	—	—		1,320		—		—		1,320

Shares effectively repurchased for required employee withholding taxes	(52)	(1)		(298)		—		—		(299)
Dividends ⁽¹⁾	—	—		—		(932)		—		(932)
BALANCE AT MARCH 31, 2020	21,486	$	215	$	264,405	$	(21,923)	$	(41,770)	$	200,927

Comprehensive (loss) income:
Net loss	—	—		—		(3,977)		—		(3,977)
Translation adjustment	—	—		—		—		(2,514)		(2,514)
Net change in cash flow hedges	—	—		—		—		101		101
Effect of retirement benefit obligations	—	—		—		—		19		19
Total comprehensive income										(6,371)

Net issuance of restricted shares to employees	309	3		(3)		—		—		—
Stock compensation expense	—	—		1,415		—		—		1,415


Shares effectively repurchased for required employee withholding taxes	(26)	—		(187)		—		—		(187)
Dividends (1)	—	—		—		(913)		—		(913)
BALANCE AT JUNE 30, 2020	21,769	$	218	$	265,630	$	(26,813)	$	(44,164)	$	194,871

⁽¹⁾Cash dividends declared per share ~~data)~~

~~(unaudited)~~

   Common stock    Paid-in Retained Accumulated other
Six Months Ended June 30, 2018
   Shares
Amount    capital earnings comprehensive loss Total
BALANCE AT DECEMBER 31, 2017
   14,903 $ 149    $ 178,909 $ 60,546 $ (29,325 ) $ 210,279
Comprehensive loss:

Net loss
   —   —      —   (11,598 ) —   (11,598 )
Translation adjustment
   —   —      —   —   3,380 3,380
Derivative fair value adjustment
   —   —      —   —   (14 ) (14 )
Effect of retirement benefit obligations
   —   —      —   —   18 18


Total comprehensive loss
      (8,214 )


Issuance of 5,593,116 shares of common stock for acquisition of Filament, net of equity issuance costs
   5,593 56    75,920 —   —   75,976
Restricted shares issued to directors
   3 —      —   —   —   —
Net issuance of restricted shares to employees
   126 1    (1 ) —   —   —
Stock compensation expense
   —   —      838 —   —   838
Shares effectively repurchased for required employee withholding taxes
   (19 ) —      (258 ) —   —   (258 )
Dividends⁽¹⁾
   —   —      —   (880 ) —   (880 )




BALANCE AT MARCH 31, 2018
   20,606 206    255,408 48,068 (25,941 ) 277,741
Comprehensive loss:

Net loss
   —   —      —   (6,057 ) —   (6,057 )
Translation adjustment
   —   —      —   —   (5,489 ) (5,489 )
Derivative fair value adjustment
   —   —      —   —   (263 ) (263 )
Effect of retirement benefit obligations
   —   —      —   —   17 17


Total comprehensive loss
      (11,792 )


Filament net equity issuance costs adjustment
   —   —      (6 ) (6 )
Restricted shares issued to directors
   54 —      —   —   —   —
Net issuance of restricted shares to employees
   93 1    (1 ) —   —   —
Stock compensation expense
   —   —      921 —   —   921
Shares effectively repurchased for required employee withholding taxes
   (12 ) —      (140 ) —   —   (140 )
Dividends⁽¹⁾
   —   —      —   (885 ) —   (885 )




BALANCE AT JUNE 30, 2018
   20,741 207    256,182 41,126 (31,676 ) 265,839




   Common stock    Paid-in Retained Accumulated other
Six Months Ended June 30, 2019
   Shares
Amount    capital earnings comprehensive loss Total
BALANCE AT DECEMBER 31, 2018
   20,764 $ 208    $ 258,637 $ 55,264 $ (34,616 ) $ 279,493
Comprehensive loss:

Net loss
   —   —      —   (4,867 ) —   (4,867 )
Translation adjustment
   —   —      —   —   1,306 1,306
Net change in cash flow hedges
   —   —      —   —   596 596
Effect of retirement benefit obligations
   —   —      —   —   13 13


Total comprehensive loss
      (2,952 )


Net issuance of restricted shares to employees
   169 1    (1 ) —   —   —
Stock compensation expense
   —   —      900 —   —   900
Net exercise of stock options
   19 —      —   —   —   —
Shares effectively repurchased for required employee withholding taxes
   (25 ) —      (232 ) —   —   (232 )
Dividends⁽¹⁾
   —   —      —   (898 ) —   (898 )




BALANCE AT MARCH 31, 2019
   20,927 $ 209    $ 259,304 $ 49,499 $ (32,701 ) $ 276,311
Comprehensive loss:

Net loss
   —   —      —   (11,513 ) —   (11,513 )
Translation adjustment
   —   —      —   —   (2,953 ) (2,953 )
Net change in cash flow hedges
   —   —      —   —   982 982
Effect of retirement benefit obligations
   —   —      —   —   12 12


Total comprehensive loss
      (13,472 )


Restricted shares issued to directors
   61 1    (1 ) —   —   —
Net issuance of restricted shares to employees
   250 3    (3 ) —   —   —
Stock compensation expense
   —   —      1,186 —   —   1,186
Net exercise of stock options
   34 —      133 —   —   133
Shares effectively repurchased for required employee withholding taxes
   (17 ) —      (158 ) —   —   (158 )
Dividends⁽¹⁾
   —   —      —   (896 ) —   (896 )




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

⁽¹⁾	~~Cash dividends declared per share of common stock were $0.085 and $0.085 in the six months ended June 30, 2018 and 2019, respectively.~~

of common stock were $0.085 and $0.085 in the six months ended June 30, 2019 and 2020, respectively.

See accompanying notes to unaudited condensed consolidated financial statements.

- 5 -

Table of Contents

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Inin thousands)

(unaudited)

   Six Months Ended
   June 30,
   2019 2018
OPERATING ACTIVITIES

Net loss
   $ (16,380 ) $ (17,655 )
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization
   12,649 10,731
Amortization of financing costs
   876 663
Deferred rent
   —   368
Non-cash lease expense
   1,156 —
Stock compensation expense
   2,100 1,759
Undistributed equity in losses (earnings), net of taxes
   185 (232 )
Loss on early retirement of debt
   —   66
SKU Rationalization
   8,500 —
Changes in operating assets and liabilities (excluding the effects of business acquisitions):

Accounts receivable
   34,184 41,441
Inventory
   (40,900 ) (39,555 )
Prepaid expenses, other current assets and other assets
   (1,568 ) (185 )
Accounts payable, accrued expenses and other liabilities
   15,587 5,170
Income taxes receivable
   (9,247 ) (4,095 )
Income taxes payable
   —   (4,242 )


NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
   7,142 (5,766 )


INVESTING ACTIVITIES

Purchases of property and equipment
   (3,867 ) (3,168 )
Filament acquisition, net of cash acquired
   —   (217,932 )


NET CASH USED IN INVESTING ACTIVITIES
   (3,867 ) (221,100 )


FINANCING ACTIVITIES

Proceeds from revolving credit facility
   136,455 126,283
Repayments of revolving credit facility
   (133,497 ) (161,173 )
Proceeds from term loan
   —   275,000
Repayments of term loan
   (1,375 ) (688 )
Proceeds from short term loan
   —   79
Payments on short term loan
   —   (71 )
Payment of financing costs
   —   (11,154 )
Payment of equity issuance costs
   —   (936 )
Payments for capital leases
   (12 ) (24 )
Payments of tax withholding for stock based compensation
   (390 ) (398 )
Proceeds from exercise of stock options
   133 —
Cash dividends paid
   (1,786 ) (1,535 )


NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
   (472 ) 225,383


Effect of foreign exchange on cash
   85 (118 )


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
   2,888 (1,601 )
Cash and cash equivalents at beginning of period
   7,647 7,600


CASH AND CASH EQUIVALENTS AT END OF PERIOD
   $ 10,535 $ 5,999


	Six Months Ended June 30,
	2020		2019
OPERATING ACTIVITIES
Net loss	$	(32,141)	$	(16,380)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	12,295		12,649
Goodwill and other impairments	20,100		—
Amortization of financing costs	878		876
Mark to market loss (gain) on interest rate derivatives	2,415		(350)
Non-cash lease expense	2,020		1,156
Provision for doubtful accounts	2,987		386

Stock compensation expense	2,746		2,100
Undistributed equity in losses, net of taxes	509		185
SKU Rationalization	—		8,500
Changes in operating assets and liabilities:
Accounts receivable	12,661		33,798
Inventory	2,398		(40,900)
Prepaid expenses, other current assets and other assets	782		(1,218)
Accounts payable, accrued expenses and other liabilities	39,430		15,587
Income taxes receivable	(871)		(9,247)

NET CASH PROVIDED BY OPERATING ACTIVITIES	66,209		7,142
INVESTING ACTIVITIES
Purchases of property and equipment	(1,380)		(3,867)

NET CASH USED IN INVESTING ACTIVITIES	(1,380)		(3,867)
FINANCING ACTIVITIES
Proceeds from revolving credit facility	95,851		136,455
Repayments of revolving credit facility	(99,134)		(133,497)

Repayments of term loan	(7,583)		(1,375)




Payments for finance lease obligations	(50)		(12)
Payments of tax withholding for stock based compensation	(486)		(390)
Proceeds from the exercise of stock options	—		133
Cash dividends paid	(937)		(1,786)
NET CASH USED IN FINANCING ACTIVITIES	(12,339)		(472)
Effect of foreign exchange on cash	(323)		85
INCREASE IN CASH AND CASH EQUIVALENTS	52,167		2,888
Cash and cash equivalents at beginning of period	11,370		7,647
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	63,537	$	10,535

See accompanying notes to unaudited condensed consolidated financial statements.

- 6 -

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

NOTE A1 — BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

Organization and business

~~Lifetime Brands, Inc. (the “Company”)~~

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.~~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 ~~and~~several lines within each of its product categories under more than one brand. The Company sells its products ~~principally on~~directly to retailers (who may resell the Company’s products through their Internet websites) and, to a ~~wholesale basis~~lesser extent, to ~~retailers.~~distributors. The Company also ~~markets and~~ sells a limited selection of its products directly to consumers through ~~third parties and~~ its own ~~internet~~Internet 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 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 ~~only~~ of normal recurring accruals and non-recurring adjustments, some specifically associated with recent events surrounding the COVID-19 pandemic, considered necessary for a fair presentation have been included.

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, ~~2018 (the “2018 Annual Report on Form 10-K”).~~

2019.

Operating results for the three and six months ended June 30, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~

2020.

Although the Company’s current estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from expectations, which could materially affect the Company’s results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing COVID-19 pandemic. The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict.

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 ~~returns~~an estimate for products expected to be returned are reflected as reductions of revenue at the time of sale. See Note B2 – Revenue to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

Cost of sales

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

~~Prior to January 1, 2019, depreciation associated with certain tooling used to produce products was classified as selling, general and administrative expenses. The amount recorded in cost~~

- 7 -

Table of ~~sales for the three and six months ended~~ Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

In 2019 ~~was $0.4 million and $0.7 million, respectively. The impact on~~ the ~~comparative periods presented is de minimis and therefore, the comparative periods have not been adjusted to reflect this change in accounting policy.~~

~~The~~ Company implemented programs to improve the productivity of its inventory and simplify its U.S. business. In connection therewith, it initiated a stock keeping unit rationalization (“SKU Rationalization”) initiative to identify inventory to discontinue from active status, consistent with the objectives of these programs.

~~- 7 -~~

~~LIFETIME BRANDS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2019~~

~~(unaudited)~~

During the three months ended June 30, 2019, the Company recorded an $8.5 million charge to cost of sales associated with the SKU Rationalization initiative. The inventory ~~affected represents~~charge, which was recognized in cost of sales during the three months ended June 30, 2019, represented approximately 8% of ~~its~~the Company's consolidated ~~inventory.~~

inventory at June 30, 2019.

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 losses that could result from the inability of its customers to make required ~~payments.~~payments, taking into consideration customer credit history and financial condition, industry and market segment information, credit reports, and economic trends and conditions such as the impacts of the COVID-19 pandemic in 2020. A considerable amount of judgment is required to assess the ultimate ~~potential~~ 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 ~~Company’s Receivable~~Receivables Purchase Agreement with HSBC, is ~~reflected as a reduction of accounts receivable in~~excluded from the Company’s unaudited condensed consolidated balance sheets at the time of sale and ~~any~~the related sale expense is included in selling, general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations. Pursuant to this agreement, the Company sold to HSBC$36.0 million and $73.9 million of receivables during the three and six months ended June 30, 2020, respectively, and $24.1 million and $49.2 million of receivables during the three and six months ended June 30, 2019, ~~respectively, and $19.1 million and $38.7 million of receivables during the three and six months ended June 30, 2018,~~ respectively. Charges of ~~$138,500 and $286,000~~$0.1 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three ~~and six~~ months ended June 30, ~~2019, respectively.~~2020 and June 30, 2019. Charges of ~~$99,000 and $189,000~~$0.3 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the ~~three and~~ six months ended June 30, ~~2018, respectively.~~

2020 and June 30, 2019. At June 30, 2020 and 2019, $20.8 million and $14.8 million , respectively, of receivables sold were outstanding and due to HSBC from customers.

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 ~~costs~~cost of completion, disposal and transportation.

- 8 -

Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

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

   June 30,    December 31,
   2019    2018
Finished goods
   $ 197,310    $ 165,969
Work in process
   97    375
Raw materials
   8,200    7,257




Total
   $ 205,607    $ 173,601


	June 30, 2020		December 31, 2019
Finished goods	$	160,704	$	165,950
Work in process	442		61
Raw materials	7,782		7,416
Total	$	168,928	$	173,427

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 ~~revolving credit facility, term loan~~ABL Agreement and ~~short term loan~~Term Loan (each as defined in Note 6 – Debt to the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q) approximate fair value since such borrowings bear interest at variable market rates.

Derivatives

The Company accounts for derivative instruments in accordance with Accounting Standard Codification (“ASC”) Topic ~~No.~~ 815,Derivatives and Hedging ("ASC 815"). ASC ~~Topic No.~~ 815 requires that all derivative instruments be recognized on the balance sheet at fair value as either an asset or liability. Changes in the fair value of derivatives that qualify as hedges and have been designated as part of a hedging relationship for accounting purposes have no net impact on earnings until the hedged item is recognized in earnings. The change in the fair value of hedges is included in accumulated other comprehensive loss and is subsequently recognized in the Company’s unaudited condensed consolidated statements of operations to mirror the location of the hedged items impacting earnings. Changes into the fair value of derivatives that do not qualify as hedging instruments for accounting purposes are recorded in the Company’s unaudited condensed consolidated statements of operations.

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 Accounting Standards Update (“ASU”) Topic ~~No.~~ 350,Intangibles – Goodwill and ~~Other~~.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 ~~impairment~~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 ~~quantitative~~Company reviews goodwill and other intangibles that have indefinite lives for impairment ~~test compares~~annually as of October 1 or when events or changes in circumstances indicate the carrying value of ~~each reporting unit that has goodwill with~~these assets might exceed their current fair values. Impairment testing is based upon the ~~estimated~~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.

Although the ~~respective~~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

- 9 -

Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

related market capitalization could impact key assumptions in the overall estimated fair values of its reporting ~~unit.~~units and could result in non-cash impairment charges that could be material to the Company's consolidated balance sheet or results of operations. Should the carrying value of a reporting unit be in excess of the estimated fair value of that reporting unit, an impairment charge will be recorded to reduce the reporting unit to fair value. The Company also evaluates qualitative factors to determine whether or not its indefinite lived intangibles have been impaired and then performs quantitative tests if required. These tests can include the relief from royalty model or other valuation models.

~~- 9 -~~

~~LIFETIME BRANDS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2019~~

~~(unaudited)~~

Long-lived assets, including intangible assets deemed to have finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Impairment indicators include, among other conditions, cash flow deficits, ~~historic~~historical or anticipated declines in revenue or operating profit or material adverse changes in the business climate that indicate that the carrying amount of an asset group may be impaired. When impairment indicators are present, the recoverability of the asset group is measured by comparing the carrying value of the asset group to the estimated undiscounted future cash flows expected to be generated by the ~~asset.~~asset group. If the carrying amount of the asset group is ~~considered to be impaired,~~not recoverable, the impairment to be recognized is measured by the amount by which the carrying amount of the long-lived asset group exceeds the fair value of the ~~asset.~~

asset group.

See Note 5 – Intangible Assets to the unaudited condensed consolidated financial statements included in this Quarterly Report 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 ~~were~~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~~accounts for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized.

Employee healthcare

The Company self-insures certain portions of its health insurance ~~plans.~~plan. The Company maintains an accrual for estimated unpaid claims and ~~estimated~~ claims incurred but not yet reported (“IBNR”). Although management believes that it uses the best information available to estimate IBNR claims, ~~IBNR,~~ actual claims may vary significantly from estimated claims.

Restructuring expenses

Costs associated with restructuring activities are recorded at fair value when a liability has been incurred. A liability has been incurred at the point of closure for any remaining operating lease obligations and at the communication date for severance.

~~In connection~~

During the three and six months ended June 30, 2020, the Company's international segment incurred $0.3 million of restructuring expenses related to severance associated with the Company’s March 2018 acquisition of Filament, the Company commenced a restructuring plan to integrate the operations of Filament with the Company’s operations and realize the savings expected from the synergiesstrategic reorganization of the ~~acquisition.~~ international segment’s product development and sales workforce. The strategic reorganization is the result of the Company's efforts for product development efficiencies and a country tailored international sales approach. As of June 30, 2020, $0.2 million of severance was accrued. The Company does not expect to incur any additional restructuring charges for these strategic reorganization efforts for the remainder of 2020.

- 10 -

Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

During the three and six months ended June 30, 2019, the Company incurred $0.1 million and $0.4 million, respectively, of Filament restructuring charges, primarily related to severance, of which $0.1 million was accrued at June 30, 2019. During the three and six months ended June 30, 2018, the Company incurred $0.4 million and $0.8 million, respectively, of Filament restructuring charges, primarily related to severance, of which $0.4 million was accrued at June 30, 2018.

~~- 10 -~~

severance.

~~LIFETIME BRANDS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2019~~

~~(unaudited)~~

During the three and six months ended June 30, 2019, the Company incurred $0.1 million and $0.4 million of restructuring ~~expense,~~expenses, primarily related to severance, for the integration of its legal entities operating in Europe. In 2018, the Company finalized its integration plans for its European operations and took further steps to consolidate its operations.

New accounting pronouncements

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

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles and simplifies the application of U.S. GAAP for other areas of Topic 740 by clarifying and amending the existing guidance. The ~~Company will combine its physical locations~~guidance is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. Early adoption is permitted. Additionally, an entity that elects early adoption must adopt all the amendments in the ~~U.K. in 2019~~same period. Management is currently evaluating the impact of this standard on its consolidated financial statements and ~~expects~~related disclosures.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The ASU also provides updated guidance regarding the impairment of available-for-sale debt securities and includes additional disclosure requirements. The new guidance is effective for public business entities that meet the definition of a Smaller Reporting Company as defined by the Securities and Exchange Commission for interim and annual periods beginning after December 15, 2022. Early adoption is permitted. Management is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions to ~~incur approximately $1.1 million~~account for contract modifications, hedging relationships and other transactions that reference LIBOR or another reference rate that is expected to be discontinued as a result of ~~additional restructuring~~reference rate reform. The ASU is effective for all entities as of March 12, 2020 through December 31, 2022 and ~~integration charges in 2019. At June 30, 2019, $0.6 million~~should be applied on a prospective basis. Management is currently evaluating the impact of ~~restructuring charges~~this standard on its consolidated financial statements and related disclosures.

On April 10, 2020, the FASB staff issued a question-and-answer document to address stakeholder questions on the application of the lease accounting guidance for lease concessions related to the ~~European restructuring plan were accrued.~~

~~Adoption~~effects of ~~new accounting pronouncements~~

~~Effective January 1, 2019,~~ the ~~Company adopted ASU 2016-02,~~~~Leases (Topic 842)~~ ~~(“ASC 842”~~COVID-19 pandemic (the “Question-and-Answer Document”),~~which requires a lessee, in most leases,~~. The guidance allows concessions related to ~~initially recognize a~~the timing of payments, where the total consideration has not changed, to not be accounted for as lease ~~liability~~modifications. Instead, any such concessions can be accounted for as if no change was made to the ~~obligation to make~~contract or as variable lease ~~payments and an ROU asset for the right to use the underlying asset for the lease term.~~payments. The Company adopted ~~this standard using~~ the ~~cumulative-effect adjustment method~~guidance on April 1, 2020 and elected ~~certain practical expedients allowed under~~to account for COVID-19 related rent concessions that did not result in a substantial increase in the ~~standard. Upon adoption,~~rights of the ~~Company recognized ROU assets and a~~lessor or the obligations of the lessee not as lease ~~liability of $90.9 million and $104.4 million, respectively.~~modifications. See Note D3 – Leases for additional information on the Company’s adoption of this ~~standard.~~

~~Effective January 1, 2019, the Company adopted ASU 2018-02,~~~~Income Statement- Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~, which addresses the effect on items within accumulated other comprehensive income (loss) of the change in the U.S. federal corporate tax rate due to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017. Upon adoption, the Company did not elect to reclassify the stranded income tax effects of the Tax Act from accumulated other comprehensive income (loss) to retained earnings.

guidance.

NOTE B2 —REVENUE

The Company sells products wholesale, to retailers and distributors, and sells products retail, directly to ~~the consumer.~~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 $1.0 million and $1.7 million for the three

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Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

and six months ended June 30, 2020, respectively, and $0.6 million and $1.3 million for the three and six months ended June 30, 2019, ~~respectively, and $0.8 million and $1.3 million for the three and six months ended June 30, 2018,~~ respectively. Net sales exclude taxes that are collected from customers and remitted to the taxing authorities.

The Company offers various sales incentives and promotional programs to its wholesale customers from time to time in the normal course of business. These incentives and promotions typically include arrangements such as cooperative advertising, buydowns, volume rebates and discounts. These arrangements represent forms of variable consideration and an estimate of sales returns are reflected as reductions in net sales in the Company’s 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 ~~with customers~~ vary by customer, but generally range from 30 to 90 days or at the point of sale for the Company’s retail direct ~~sales.~~ sales. As a result of the COVID-19 pandemic, many of the Company's customers which operate retail locations have temporarily closed their stores voluntarily or as mandated by government stay at home orders. In response to these closings, the affected customers have requested extended payment terms. The Company has been working with these customers to address their temporary extended payment requests.

The Company incurs certain direct incremental costs to obtain contracts with customers, such as sales-related ~~commissions,~~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.

~~- 11 -~~

~~LIFETIME BRANDS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2019~~

~~(unaudited)~~

The following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the three and six months ended June 30, 2020 and 2019 (in thousands):

   Three Months Ended    Six Months Ended
   June 30, 2019    June 30, 2019
U.S. Segment

Kitchenware
   $ 65,625    $ 134,892
Tableware
   28,759    55,211
Home Solutions
   28,708    60,027




Total U.S.Segment
   123,092    250,130




International Segment

Kitchenware
   12,376    26,512
Tableware
   7,068    15,820




Total International Segment
   19,444    42,332




Total net sales
   $ 142,536    $ 292,462




United States
   $ 116,683    $ 238,092
United Kingdom
   14,775    30,712
Rest of World
   11,078    23,658




Total net sales
   $ 142,536    $ 292,462

~~NOTE C —ACQUISITION~~

On December 22, 2017, the Company entered into an agreement providing for the acquisition of Filament by the Company. The acquisition was completed on March 2, 2018. The aggregate consideration for Filament, after taking into account certain adjustments, was $294.4 million, consisting of $217.5 million of cash consideration and 5,593,116 newly issued shares of the Company’s common stock, with a value equal to $76.9 million based on the market value of the Company’s common stock as of March 2, 2018.

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

Accounts receivable
   $ 26,224
Inventory
   29,044
Other assets
   5,620
Other liabilities
   (23,018 )
Deferred income tax
   (13,881 )
Goodwill and other intangibles
   270,427


Total allocated value
   $ 294,416


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
U.S. segment
Kitchenware	$	84,418	$	65,625	$	163,692	$	134,892
Tableware	23,605		28,759		47,249		55,211
Home Solutions	24,568		28,708		50,858		60,027
Total U.S. segment	132,591		123,092		261,799		250,130
International segment
Kitchenware	15,360		12,376		26,314		26,512
Tableware	2,189		7,068		7,097		15,820
Total International segment	17,549		19,444		33,411		42,332
Total net sales	$	150,140	$	142,536	$	295,210	$	292,462

United States	$	128,928	$	116,683	$	253,655	$	238,092
United Kingdom	11,673		14,775		20,772		30,712
Rest of World	9,539		11,078		20,783		23,658
Total net sales	$	150,140	$	142,536	$	295,210	$	292,462

- 12 -

Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

Goodwill results from such factors as an assembled workforce. The total amount of goodwill is not expected to be deductible for tax purposes. The goodwill and other intangible assets are primarily included in the U.S. segment. Customer relationships are amortized on a straight-line basis over their estimated useful lives (see Note F – Intangible Assets).

The three and six months ended June 30, 2018 included the operations of Filament for the period from March 2, 2018, the date of acquisition, to June 30, 2018. The condensed consolidated statements of operations for the three months ended June 30, 2018 include $29.3 million of net sales and $0.4 million of net loss from operations contributed by Filament. The condensed consolidated statements of operations for the six months ended June 30, 2018, include $38.6 million of net sales and $1.5 million of net loss from operations contributed by Filament.

~~Unaudited Pro forma Results~~

The following table presents the Company’s pro forma consolidated net sales, loss before income taxes and equity in earnings and net loss for the three and six months ended June 30, 2018. The unaudited pro forma results include the historical statements of operations information of the Company and of Filament, giving effect to the Filament acquisition and related financing as if they had occurred at the beginning of the periods presented.

   Three Months Ended    Six Months Ended
   June 30, 2018    June 30, 2018
   (in thousands, except per share data)
Net sales
   $ 148,651    $ 292,631
Loss before income taxes and equity in earnings
   (6,694 )    (22,904 )
Net loss
   (5,092 )    (17,235 )
Basic and diluted loss per common share
   (0.25 )    (0.85 )

The unaudited pro forma results do not include any revenue or cost reductions that may be achieved through the business combination or the impact of non-recurring items directly related to the business combination.

The unaudited pro forma results are not necessarily indicative of the operating results that would have occurred if the Filament acquisition had been completed as of the date for which the pro forma financial information is presented. In addition, the unaudited pro forma results do not purport to project the future condensed consolidated operating results of the combined company.

NOTE D3 — LEASES

The Company adopted ASC 842 as of January 1, 2019, using the cumulative effective adjustment method wherein the Company applied the new leases standard at the adoption date. Accordingly, all periods prior to January 1, 2019 were presented in accordance with the previous ASC Topic 840 –~~Leases~~, and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC 842 resulted in an increase to total assets and liabilities due to the recording of operating lease ROU assets and operating lease liabilities of approximately $90.9 million and $104.4 million, respectively, as of January 1, 2019. Finance leases are not material to the Company and were not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the balance sheet under the previous guidance, ASC 840. The adoption did not materially impact the Company’s condensed consolidated statements of operations or cash flows.

~~- 13 -~~

~~LIFETIME BRANDS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2019~~

~~(unaudited)~~

The Company has operating leases for corporate offices, distribution facilities, manufacturing plants, and certain vehicles. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet.

In response to the COVID-19 pandemic, the Company negotiated COVID-19 related rent concessions for several of its leased properties. The majority of these rent concessions were in the form of deferred rent payments for one or more months. For these rent concessions the Company ~~has~~ elected ~~the practical expedient~~ to account for ~~each separate~~these as if no changes to the lease ~~component~~were made and continued to recognize the straight-line lease expense for these leases in accordance with the FASB Question-and-Answer Document. COVID-19 related deferred rent payments as of June 30, 2020, totaled $1.0 million and were recorded in accrued expenses in the unaudited condensed consolidated balance sheet as of June 30, 2020. In addition, there were a ~~contract~~limited number of rent concessions obtained by the Company in the form of rent abatement and ~~its associated non-lease components~~changes in lease terms. These lease modifications were accounted for as a ~~single~~resolution to a contingency that fixes previously variable lease ~~component, thus causing all fixed~~ payments ~~to be capitalized.~~which resulted in the remeasurement of the right-of-use asset and lease liability. The remeasurement of the right-of-use and lease liability did not have a material effect on our consolidated financial statements or results of operations. The Company ~~also elected~~continues to assess and hold ongoing conversations with landlords for various properties in seeking commercially reasonable lease concessions given the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense.

ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. ROU assets also include any advance lease payments. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

current environment.

The components of lease ~~costs~~expense for the three and six months ended June 30, 2020 and 2019 were as follows (in thousands):

   Three Months Ended    Six Months Ended
   June 30, 2019    June 30, 2019
Operating lease costs:

Fixed
   $ 4,907    $ 9,131




Total
   $ 4,907    $ 9,131


	Three Months Ended June 30,						Six Months EndedJune 30,
	2020		2019		2020		2019
Operating lease expenses:
Fixed	$	4,491	$	4,907	$	9,305	$	9,131

Supplemental cash flow information for lease related liabilities and assets for the ~~three and~~ six months ended June 30, 2020 and 2019 ~~was~~were as follows (in thousands):

   Three Months Ended    Six Months Ended
   June 30, 2019    June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases
   $ 4,295    $ 7,975




Total
   $ 4,295    $ 7,975

   Three Months Ended    Six Months Ended
   June 30, 2019    June 30, 2019
Right-of-use assets obtained in exchange for new lease obligations:

Operating leases
   $ 20,991    $ 115,488




Total
   $ 20,991    $ 115,488


	Six Months Ended June 30,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	7,285	$	7,975


	Six Months Ended June 30,
	2020		2019
Right-of-use assets obtained in exchange for new lease obligations:
Operating leases	$	12	$	115,488

- 1413 -

Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

The aggregate future lease payments for operating leases as of June 30, ~~2019~~2020 were as follows (in thousands):

   Operating
2019 (excluding the six months ending June 30, 2019)
   $ 9,952
2020
   17,461
2021
   17,102
2022
   17,178
2023
   17,343
Thereafter
   88,825


Total lease payments
   167,861
Less: Interest
   (42,068 )


Present value of lease liabilities
   $ 125,793


	Operating
2020 (excluding the six months ending June 30, 2020)	$	8,819
2021	17,795
2022	17,920
2023	17,914
2024	17,585
2025	17,564
Thereafter	54,209
Total lease payments	151,806
Less: Interest	(34,951)
Present value of lease payments	$	116,855

The Company expects to make payments related to the deferrals obtained as a result of COVID-19-related rent concessions of $0.4 million in 2020 and $0.6 million in 2021, per the updated terms of the applicable lease agreements.

Average lease terms and discount rates were as follows:


					June 30, ~~2019~~	2020
Operating leases:
Weighted-average remaining lease term (years)						8.6
~~Operating leases~~				~~9.6~~
Weighted-average discount rate	6.2
~~Operating leases~~		~~6.2~~	%

NOTE E4 —INVESTMENTS

The Company owns approximately a 30% ~~interest in~~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 six months ended June 30, ~~2019~~2020 and ~~2018~~2019 in the accompanying unaudited condensed consolidated statements of operations.

The value of the ~~Company’s~~Company's investment balance has been translated from Mexican Pesos ~~(“MXN”~~("MXN") to U.S. Dollars ~~(“USD”~~("USD") using the spot rates of MXN ~~19.19~~23.07 and MXN ~~19.64~~18.91 at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

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


	Three Months Ended June 30,			Six Months Ended June 30,
	2020	2019	2020	2019
Average exchange rate (USD to MXN)	23.31	19.11	19.91 - 23.31	19.11 - 19.24

- 14 -

Table of ~~MXN 19.11 and MXN 19.38 during the three months ended~~ Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019 and 2018, respectively, and MXN 19.11 to MXN 19.24 and MXN 18.71 to MXN 19.38 during the six months ended June 30, 2019 and 2018, respectively.~~ 2020

(unaudited)

The effect of the translation of the Company’s investment, as well as the translation of Vasconia's balance sheet, resulted in a decrease to the investment of $4.0 million and $1.5 million during the six months ended June 30, 2020 and 2019, ~~and a decrease to the investment of $1.1 million during the six months ended 2018.~~respectively. These translation effects are recorded in accumulated other comprehensive loss. ~~Included within prepaid expenses~~

Summarized income statement information for the three and ~~other current assets at~~six months ended June 30, ~~2019~~2020 and ~~December 31, 2018 are amounts due from Vasconia of $159,000 and $95,000, respectively. Included within accrued expenses and accounts payable at June 30,~~ 2019 ~~and December 31, 2018 are amounts due to Vasconia of $68,000 and $0, respectively.~~

~~- 15 -~~

~~LIFETIME BRANDS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2019~~

~~(unaudited)~~

~~Summarized statement of income information~~ for Vasconia in USD and MXN is as follows (in thousands):

Three Months Ended

   June 30,
   2019    2018
   USD    MXN    USD    MXN
Net sales
   $ 37,040    $ 707,837    $ 48,061    $ 931,329
Gross profit
   9,291    177,552    9,986    193,517
Income from operations
   2,805    53,601    3,655    70,827
Net (Loss) Income
   (178 )    (3,407 )    2,457    47,621

Six Months Ended

   June 30,
   2019    2018
   USD    MXN    USD    MXN
Net Sales
   $ 78,534    $ 1,506,175    $ 87,630    $ 1,671,735
Gross Profit
   17,229    330,273    17,105    326,724
Income from operations
   4,698    90,027    4,804    92,330
Net (Loss) Income
   (511 )    (9,813 )    2,095    40,845


	Three Months Ended June 30,
	2020						2019
	USD		MXN		USD		MXN
Net sales	$	28,572	$	666,012	$	37,040	$	707,837
Gross profit	6,062		141,304		9,291		177,552
Income from operations	1,414		32,948		2,805		53,601
Net loss	(1,994)		(46,459)		(178)		(3,407)



	Six Months Ended June 30,
	2020						2019
	USD		MXN		USD		MXN
Net Sales	$	60,367	$	1,299,048	$	78,534	$	1,506,175
Gross profit	11,469		248,961		17,229		330,273
Income from operations	864		22,000		4,698		90,027
Net loss	(572)		(18,156)		(511)		(9,813)

The Company recorded equity in ~~(losses) earnings~~losses of Vasconia, net of taxes, of ~~$(69,000)~~$0.6 million and ~~$(185,000)~~$0.3 million for the three and six months ended June 30, 2020, respectively. The Company recorded equity in losses of Vasconia, net of taxes, of $0.1 million and $0.2 million for the three and six months ended June 30, 2019, respectively. ~~The Company recorded equity in (losses) earnings of Vasconia, net of taxes, of $155,000 and $232,000 for~~

Included within the ~~three and six months ended June 30, 2018, respectively. Equity in (losses) earnings for~~Company's unaudited condensed consolidated balance sheets were the ~~three and six months ended June 30, 2018 includes deferred tax expense of $(501,000) and $(306,000), respectively,~~following amounts due to ~~the requirement to record tax benefits for foreign currency translation gains~~ and ~~losses through other comprehensive loss, with a corresponding adjustment to deferred tax liabilities.~~

due from Vasconia (in thousands):


Vasconia due to and due from balances	Balance Sheet Location	June 30, 2020		December 31, 2019
Amounts due from Vasconia	Prepaid expenses and other current assets	$	91	$	63
Amounts due to Vasconia	Accrued expenses and Accounts payable	(23)		(77)

As of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the fair value (based upon ~~Vasconia’s~~the quoted stock price) of the Company’s investment in Vasconia was ~~$34.2~~$28.3 million and ~~$31.9~~$34.7 million, respectively. The carrying value of the Company’s investment in Vasconia was ~~$20.9~~$17.0 million and ~~$22.6~~$21.3 million as of June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

Lifetime Brands Do Brasil Participacoes Ltda., a 100% owned subsidiary of Lifetime Brands, Inc., was dissolved on May 5, 2020. The subsidiary held a note receivable relating to the 2016 sale of its 40% equity interest in GS International S/A (“GSI”), a wholesale distributor of branded housewares products in Brazil, which was accounted for as an equity method investment. The final installment due on the note receivable was received prior to dissolution of the subsidiary. Foreign currency translation losses of $0.2 million, which were previously recorded as a component of stockholder’s equity within accumulated other comprehensive loss, were recognized in earnings upon dissolution of this subsidiary for the period ended June 30, 2020. The Company included this loss within equity in losses, net of taxes.

- 1615 -

Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

NOTE F5 — INTANGIBLE ASSETS

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

   June 30, 2019    December 31, 2018
      Accumulated       Accumulated
   Gross    Amortization Net    Gross    Impairment Amortization Net
Goodwill
   $ 92,637    $ —   $ 92,637    $ 93,895    $ (2,205 ) $ —   $ 91,690
Indefinite-lived intangible assets:

Trade names
   58,216    —   58,216    58,216    —   —   58,216
Finite-lived intangible assets:

Licenses
   15,847    (10,059 ) 5,788    15,847    —   (9,825 ) 6,022
Trade names
   43,559    (15,545 ) 28,014    43,689    —   (13,965 ) 29,724
Customer relationships
   175,396    (33,691 ) 141,705    175,482    —   (27,538 ) 147,944
Other
   6,508    (1,554 ) 4,954    6,510    —   (1,259 ) 5,251








Total
   $ 392,163    $ (60,849 ) $ 331,314    $ 393,639    $ (2,205 ) $ (52,587 ) $ 338,847


	June 30, 2020														December 31, 2019
	Gross		Impairment		Accumulated Amortization		Net		Gross		Impairment		Accumulated Amortization		Net
Goodwill	$	49,371	$	(19,100)	—		$	30,271	$	92,361	$	(42,990)	$	—	$	49,371
Indefinite-lived intangible assets:
Trade names	58,216		(1,000)		—		57,216		58,216		—		—		58,216
Finite-lived intangible assets:
Licenses	15,847				(10,514)		5,333		15,847				(10,287)		5,560
Trade names	43,222				(18,556)		24,666		43,986				(17,337)		26,649
Customer relationships	174,447				(45,764)		128,683		176,602				(40,605)		135,997
Other	6,478				(2,132)		4,346		6,546				(1,868)		4,678
Total	$	347,581	$	(20,100)	$	(76,966)	$	250,515	$	393,558	$	(42,990)	$	(70,097)	$	280,471

In the first quarter of 2020, as a result of the economic downturn caused by the COVID-19 pandemic, the Company concluded that a triggering event had occurred and performed an interim impairment test of goodwill and certain intangible assets as of March 31, 2020. The Company performed the first quarter 2020 interim impairment test of goodwill by comparing its fair value with its carrying value. The analysis was performed by using a discounted cash flow method and market multiple method. For goodwill, the outcome of the valuation is largely dependent upon estimates made by the Company with respect to significant assumptions, including projected net sales, projected earnings before interest, tax, depreciation and amortization (“EBITDA”), terminal growth rates, and the cost of capital under the discounted cash flow method

For its indefinite-lived trade names the Company performed a quantitative impairment analysis by comparing the fair value of the indefinite-lived trade names to their respective carrying values in the first quarter of 2020. The Company values its indefinite-lived trade names using a relief-from-royalty approach, which assumes the value of the trade name is the discounted cash flows of the amount that would be paid by a hypothetical market participant had they not owned the trade name and instead licensed the trade name from another company. Significant assumptions used in the Company’s fair value analysis included future net sales for the related brands, royalty rates, and the cost of capital.

Based upon these analyses performed, the Company recognized a non-cash goodwill impairment charge of $19.1 million, and a $1.0 million non-cash impairment charge for certain of its indefinite-lived intangible assets in the U.S. segment in the first quarter of 2020. The Company has determined that as of June 30, 2020 a triggering event has not occurred which would require an interim impairment test to be performed.

The Company believes the circumstances and global disruption caused by COVID-19 may have an adverse effect on its sales, operating results, cash flows and financial condition. In addition, there are some inherent estimates and assumptions used in determining fair value of indefinite-lived intangible assets and reporting units that are outside the control of management, such as interest rates, cost of capital, tax rates, industry growth, credit ratings, foreign exchange rates, labor inflation and tariffs including the current trade negotiations with China. Accordingly, the Company may be required to perform additional impairment testing based on further deterioration of the global economic environment, disruptions to the Company’s business, declines in operating results of the Company’s reporting units and/or trade names, further sustained deterioration of the Company’s market capitalization, and other factors, which could result in impairment charges in the future. Although management cannot predict when improvements in macroeconomic conditions will occur, if consumer confidence and consumer spending decline significantly in the future or if commercial and industrial economic activity or the market capitalization experiences a sustained deterioration significantly from current levels, it is reasonably likely the Company will be required to record impairment charges in the future.

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LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

NOTE G6 — DEBT

The Company’s credit agreement (the “ABL Agreement”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), includes a senior secured asset-based revolving credit facility in the maximum aggregate principal amount of $150.0 million, which facility will mature on March 2, 2023, and a loan agreement (the “Term Loan” and together with the ABL Agreement, the “Debt Agreements”) which provides for a senior secured term loan credit facility in the original principal amount of $275.0 million, which ~~will mature~~matures on February 28, 2025. The Term Loan requires the Company to make an annual prepayment of principal based upon excess cash flow (“Excess Cash Flow”), if any. This estimated amount is recorded in current maturity of term loan on the unaudited condensed consolidated balance sheets. Additionally, the Term Loan facility ~~will be repaid in~~requires quarterly payments, which commenced June 30, 2018, of principal equal to 0.25% of the original aggregate principal amount of the Term Loan facility. ~~The Term Loan requires~~Per the ~~Company to make~~Debt Agreements, when an ~~annual prepayment of principal based upon excess cash flow (the “Excess Cash Flow”), if any. Based upon its current estimate of~~ Excess Cash Flow ~~as defined, to be generated in calendar year 2019,~~payment is made by the Company, ~~expects~~the payment is first applied to ~~prepay approximately $12.0 million~~satisfy the future quarterly required payments in order of ~~principal in the first quarter of 2020. Accordingly, this estimated amount is recorded in the current maturity of term loan on the condensed consolidated balance sheets.~~ maturity.

The maximum borrowing amount under the ABL Agreement may be increased to up to $200.0 million if certain conditions are met. One or more tranches of additional term loans (the “Incremental Facilities”) may be added under the Term Loan if certain conditions are met. The Incremental Facilities may not exceed the sum of (i) $50.0 million plus (ii) an unlimited amount so long as, in the case of (ii) only, the Company’s secured net leverage ratio, as defined in and computed pursuant to the Term Loan, is no greater than 3.75 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan.

As of June 30, ~~2019~~2020 and December 31, ~~2018, borrowings outstanding under~~2019, the ~~ABL Agreement were $44.9 million and $42.1 million, respectively, and open letters of credit were $3.2 million and $3.4 million, respectively. At June 30, 2019,~~total availability under the ABL Agreement was ~~approximately $101.9 million.~~ as follows (in thousands):


	June 30, 2020		December 31, 2019
Maximum aggregate principal allowed	$	150,000	$	150,000
Outstanding borrowings under the ABL Agreement	(27,383)		(32,822)
Standby letters of credit	(2,677)		(2,288)
Total availability under the ABL Agreement	$	119,940	$	114,890

Availability under the ABL Agreement depends on the valuation of certain current assets comprising the borrowing base. Due to the seasonality of the Company’s business, this may mean that the Company will have greater borrowing availability during the third and fourth quarters of each year. The borrowing capacity under the ABL Agreement will depend, in part, on eligible levels of accounts receivable and inventory that fluctuate regularly. Consequently, the $150.0 million commitment thereunder may not represent actual borrowing capacity.

~~At June 30, 2019~~

The current and December 31, 2018, $271.6 million and $272.9 million, respectively, was outstanding under the Term Loan. At June 30, 2019, unamortized debt issuance costs of $1.5 million and $6.8 million offset the short-term and long-term outstanding balances, respectively,non-current portions of the Company’s Term ~~Loan.~~

Loan facility included in the condensed consolidated balance sheets were as follows (in thousands):


	June 30, 2020		December 31, 2019
Current portion of Term Loan facility:
Term Loan facility payment	$	—	$	2,750
Excess Cash Flow principal payment	15,000		7,145
Estimated unamortized debt issuance costs	(1,473)		(1,482)
Total Current portion of Term Loan facility	$	13,527	$	8,413

Non-current portion of Term Loan facility:
Term Loan facility payment, net of current portion	$	247,605	$	260,293
Estimated unamortized debt issuance costs	(5,268)		(6,012)
Total Non-current portion of Term Loan facility	$	242,337	$	254,281

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Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

The Company’s payment obligations under its Debt Agreements are unconditionally guaranteed by its existing and future U.S. subsidiaries with certain minor exceptions. Certain payment obligations under the ABL Agreement are also direct obligations of its foreign subsidiary borrowers designated as such under the ABL Agreement and, subject to limitations on such guaranty, are guaranteed by the foreign subsidiary borrowers, as well as by the Company. The obligations of the Company under the Debt Agreements and any hedging arrangements and cash management services and the guarantees by its domestic subsidiaries in respect of those obligations are secured by substantially all of the assets and stock (but in the case of foreign subsidiaries, limited to 65% of the capital stock in first-tier foreign subsidiaries and not including the stock of subsidiaries of such first-tier foreign subsidiaries) owned by the Company and the U.S. subsidiary guarantors, subject to certain exceptions. Such security interest consists of (1) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and its domestic subsidiaries (the “ABL Collateral”) pledged as collateral in favor of lenders under the ABL Agreement and a second-priority lien in the ABL Collateral in favor of the lenders under the Term Loan and (2) a first-priority lien, subject to certain permitted liens, with respect to certain assets of the Company and its domestic subsidiaries (the “Term Loan Collateral”) pledged as collateral in favor of lenders under the Term Loan and a second-priority lien in the Term Loan Collateral in favor of the lenders under the ABL Agreement.

Borrowings under the ~~revolving credit facility~~ABL agreement bear interest, at the Company’s option, at one of the following rates: (i) alternate base rate, defined, for any day, as the greater of the prime rate, a federal funds and overnight bank funding based rate plus 0.5% or one-month LIBOR plus 1.0%, plus a margin of 0.25% to 0.75%, or (ii) LIBOR plus a margin of 1.25% to 1.75%. The respective margins are based upon the Company’s total leverage ratio, as defined in and computed pursuant to the ABL Agreement. ~~Interest rates~~The interest rate on outstanding borrowings under the ABL Agreement at June 30, ~~2019 ranged from 2.4% to 6.25%~~2020 was 1.8%. In addition, the Company ~~paid~~pays a commitment fee ~~that ranged from 0.250% to~~of 0.375% on the unused portion of the ABL ~~Agreement during the six months ended June 30, 2019.~~

Agreement.

The ~~term loan~~Term Loan facility 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 LIBOR, but not less than 1.0%, plus 1.0%, which alternate base rate shall not be less than 2%, plus a margin of 2.5% or (ii) LIBOR, but not less than 1.0%, plus a margin of ~~2.50% or (ii) LIBOR plus a margin of 3.50%~~3.5%. The interest rate on outstanding borrowings under the Term Loan at June 30, ~~2019~~2020 was ~~5.9%~~4.5%.

The Debt Agreements provide for customary restrictions and events of default. Restrictions include limitations on additional indebtedness, acquisitions, investments and payment of dividends, among other things. Further, the ABL Agreement provides that during any period (a) commencing on the last day of the most recently ended four consecutive fiscal quarters on or prior to the date availability under the ABL Agreement is less than the greater of $15.0 million and 10% of the aggregate commitment under the ABL Agreement at any time and (b) ending on the day after such availability has exceeded the greater of $15.0 million and 10% of the aggregate commitment under the ABL Agreement for forty-five (45) consecutive days, the Company is required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00 as of the last day of any period of four consecutive fiscal quarters.

The Company was in compliance with the covenants of the Debt Agreements at June 30, ~~2019.~~

2020. 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 H7—DERIVATIVES

Interest Rate Swap Agreements

The Company is a party to interest rate swap agreements, with an aggregate notional value of ~~$100.0~~$75.0 million at June 30, ~~2019.~~2020. The ~~Company designated the~~ interest rate swaps are designated as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings. The hedge periods of these agreements commenced in April 2018 and expire in March 2023. The notional amounts are reduced over these periods. ~~In June 2019, the~~

The Company entered into ~~new~~additional interest rate swap agreements, with an aggregate notional value of $25.0 million at June 30, ~~2019. These~~2020, that do not meet the criteria for hedge accounting treatment. As a result, these interest rate swap agreements are considered non-designated interest rate swaps that serve as ~~cash flow~~economic hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings and expire in February 2025.

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

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Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

Foreign Exchange Contracts

The Company is ~~exposed~~a party from time to ~~market risks as well as changes~~time to certain foreign exchange contracts, primarily to offset the earnings impact related to fluctuations in foreign currency exchange rates ~~as measured against the USD and each other, and changes to credit risk of derivative counterparties. The Company attempts to minimize these risks by primarily using~~associated with inventory purchases denominated in foreign currency forward contracts and by maintaining counterparty credit limits. These hedging activities provide only limited protection against currency exchange and credit risk. Factors that could influence the effectiveness of the Company’s hedging programs include currency markets and availability of hedging instruments and liquidity of the credit markets. All foreign currency forward contracts that the Company enters into are components of hedging programs and are entered into for the sole purpose of hedging an existing or anticipated currency exposure. The Company does not enter into such contracts for speculative purposes and currently does not have any foreign currency forward contract derivatives that are not designated as hedges.

currencies. Fluctuations in the value of certain foreign currencies as compared to the ~~USD~~U.S. dollar 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 short-term (i.e. 12 months or less) foreign currency forward contracts to protect against currency exchange risks associated with the payment of merchandise purchases to foreign suppliers. The Company does not hedge the translation of foreign currency profits into USD, as the Company regards this as an accounting exposure rather than an economic exposure. The ~~aggregate gross notional values of~~Company's foreign exchange contracts, ~~at June 30, 2019 was $9.0 million. These foreign exchange contracts have~~that had been ~~designated~~designed as hedges in to order to apply hedge ~~accounting.~~

accounting, matured in April 2020. As of June 30, 2020 the Company did not have any outstanding foreign exchange contracts.

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 June 30, 2020, the Company does not have any foreign currency forward contract derivatives that are not designated as hedges.

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

Derivatives designated as hedging instruments
Balance Sheet
Location
   June 30, 2019    December 31, 2018
Interest rate swaps
   Prepaid Expenses    $ 460    $ 42
   Other Assets    1,372    157
Foreign exchange contracts
   Prepaid Expenses    370    —
Derivatives not designated as hedging instruments
Balance Sheet
Location
   June 30, 2019    December 31, 2018
Interest rate swaps
   Other Assets    $ 350    $ —


Derivatives designated as hedging instruments	Balance Sheet Location	June 30, 2020		December 31, 2019
Interest rate swaps	Prepaid expenses	$	—	$	427
	Other assets	—		1,267
	Accrued expenses	711		—
	Other Long-Term Liabilities	1,425		—
Foreign exchange contracts	Prepaid expenses	—		180


Derivatives not designated as hedging instruments	Balance Sheet Location	June 30, 2020		December 31, 2019
Interest rate swaps	Other assets	$	—	$	402
	Other Long-Term Liabilities	2,013		—

The fair values of the ~~derivatives~~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. The Company does not anticipate non-performance by any of its counterparties.

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Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

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

   Three Months Ended    Six Months Ended
   June 30,    June 30,
Derivatives designated as hedging instruments    2019    2018    2019    2018
Interest rate swaps, net of taxes
   $ 748    $ (263 )    $ 1,224    $ (277 )
Foreign exchange contracts, net of taxes
   234    —      354    —








   $ 982    $ (263 )    $ 1,578    $ (277 )

~~Gains or~~


	Three Months Ended June 30,						Six Months Ended June 30,
Derivatives designated as hedging instruments	2020		2019		2020		2019
Interest rate swaps	$	209	$	748	$	(2,885)	$	1,224
Foreign exchange contracts	(108)		234		109		354
	$	101	$	982	$	(2,776)	$	1,578

Realized gains and losses on the interest rate swaps ~~designated as hedges, will be~~are reclassified into earnings as the interest expense ~~as the interest~~ on the debt is recognized. ~~During~~The Company had no terminated or matured interest rate swaps during the three and six months ended June 30, ~~2019~~2020.

Realized gains and ~~June 30, 2018, the Company recognized $0.1 million and $0.2 million of interest expense related to the interest rate swaps, respectively.~~

~~Gains or~~ losses on ~~the~~ foreign exchange contracts ~~will be~~that are reported in other comprehensive income (loss) are reclassified into cost of sales as the ~~hedged merchandise purchases are~~underlying inventory purchased is sold. ~~The amount recorded as~~

During the three months ended June 30, 2020, the Company reclassified $0.2 million of cash flow hedges in other comprehensive losses to earnings. This was comprised of $0.3 million related to realized interest rate swap losses and a gain of $0.1 million related to foreign exchange contracts recognized in cost of ~~sales for~~sales. During the six months ended June 30, 2020, the Company reclassified $0.4 million of cash flow hedges in other comprehensive losses to earnings. This was comprised of $0.6 million related to realized interest rate swap losses and a gain of $0.2 million related to foreign exchange contracts recognized in cost of sales.

During the three months ended June 30, 2019, the Company reclassified $0.1 million related to realized interest rate swap losses and a gain of $0.1 million related to foreign exchange contracts recognized in cost of sales. During the six months ended June 30, 2019, ~~was~~the Company reclassified $0.1 ~~million.~~

~~The amounts~~million related to realized interest rate swap losses and a gain of ~~the gains~~$0.1 million related to foreign exchange contracts recognized in cost of sales.

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

      Three Months Ended    Six Months Ended
      June 30,    June 30,
Derivatives not designated as hedging instruments
Location of gain (loss)
   2019    2018    2019    2018
Interest rate swaps
   Interest expense    $ 350    —      $ 350    —
Foreign exchange contracts
   Selling, general and administrative expense    —      $ 1,468    —      $ (47 )

Three Months Ended
June 30, Six Months Ended
June 30,
Derivatives not designated as hedging instruments Location of gain (loss) 2020 2019 2020 2019
Interest rate swaps Mark to market (loss) gain on interest rate derivatives $ (164) 350 $ (2,415) 350
Interest expense (87) — (102) —
$ (251) $ 350 $ (2,517) $ 350

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Table of Contents
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
(unaudited)

NOTE I8—STOCK COMPENSATION

On June 25, 2020, the shareholders of the Company approved an amendment and restatement of the Company’s Amended and Restated 2000 Long Term Incentive Plan (the “Plan”). The amendment and restatement of the Plan revised the terms and conditions of the Plan to, among other things, increase the shares available for grant under the Plan by 850,000 shares. As of June 30, 2020, there were 746,809 shares available for the grant of awards under the Plan.

Option Awards

A summary of the Company’s stock option activity and related information for the six months ended June 30, ~~2019~~2020 is as follows:

   Options    Weighted-
average
exercise price    Weighted-
average
remaining
contractual
life (years)    Aggregate
intrinsic
value
Options outstanding, January 1, 2019
   1,548,825    $ 13.87
Grants
   296,500    9.21
Exercises
   (75,000 )    4.28
Cancellations
   (6,750 )    13.34
Expirations
   (68,125 )    15.57



Options outstanding, June 30, 2019
   1,695,450    13.41    4.9    $ 87,425




Options exercisable, June 30, 2019
   1,212,172    $ 14.27    3.1    $ 87,425

~~- 20 -~~

~~LIFETIME BRANDS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2019~~

~~(unaudited)~~

Options Weighted-
average
exercise price Weighted-
average
remaining
contractual
life (years) Aggregate
intrinsic
value
(in thousands)
Options outstanding, January 1, 2020 1,508,325 $ 13.43
Grants 37,500 6.36
Cancellations (3,750) 12.86
Expirations (229,175) 13.14
Options outstanding, June 30, 2020 1,312,900 13.28 5.3 $ 14
Options exercisable, June 30, 2020 999,919 $ 14.28 4.2 $ —
Total unrecognized stock option expense remaining (in thousands) $ 903
Weighted-average years expected to be recognized over 1.5

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 June 30, ~~2019.~~2020. The intrinsic value is calculated for each in-the-money stock option as the difference between the closing price of the Company’s common stock on June 30, ~~2019~~2020 and the exercise price.

Total unrecognized stock option compensation expense at June 30, 2019, before the effect of income taxes, was $1.7 million and is expected to be recognized over a weighted-average period of 1.8 years.

Restricted Stock

A summary of the Company’s restricted stock activity and related information for the six months ended June 30, ~~2019~~2020 is as follows:

   Restricted
Shares    Weighted-
average grant
date fair
value
Non-vested restricted shares, January 1, 2019
   326,545    $ 14.63
Grants
   437,997    9.26
Vested
   (145,049 )    14.49
Cancellations
   (24,362 )    13.99



Non-vested restricted shares, June 30, 2019
   595,131    $ 10.74



Total unrecognized compensation expense remaining
   $ 5,904,000
Weighted-average years expected to be recognized over
   1.8


	Restricted Shares		Weighted- average grant date fair value
Non-vested restricted shares, January 1, 2020	593,341		$	10.70
Grants	534,940		5.94
Vested	(288,597)		10.82
Cancellations	(5,613)		9.54
Non-vested restricted shares, June 30, 2020	834,071		$	7.61
Total unrecognized compensation expense remaining (in thousands)	$	5,511
Weighted-average years expected to be recognized over	1.4

The total fair value of restricted stock that vested during the six months ended June 30, ~~2019~~2020 was ~~$1.4~~$1.8 million.

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Table of Contents
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
(unaudited)

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 ~~by the end~~ of the ~~performance period.~~Board of Directors. The shares are subject to the terms and conditions of the Company’s ~~Amended and Restated 2000 Long Term Incentive Plan (the “Plan”).~~

~~- 21 -~~

Plan.

~~LIFETIME BRANDS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2019~~

~~(unaudited)~~

A summary of the Company’s performance-based award activity and related information for the six months ended June 30, ~~2019~~2020 is as follows:

   Performance-
based stock
awards⁽¹⁾    Weighted-
average grant
date fair
value
Non-vested performance-based awards, January 1, 2019
   339,287    $ 14.82
Grants
   156,775    9.21
Vested
   (66,761 )    15.69
Cancellations
   (25,767 )    15.46



Non-vested performance-based awards, June 30, 2019
   403,534    $ 12.45



Total unrecognized compensation expense remaining
   $ 3,037,000
Weighted-average years expected to be recognized over
   1.9

~~(1)~~

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


	Performance- based stock awards ⁽¹⁾		Weighted- average grant date fair value
Non-vested performance-based awards, January 1, 2020	405,059		$	12.43
Grants	106,275		6.36
Vested	(62,215)		18.45
Cancellations	(14,524)		17.39
Non-vested performance-based awards, June 30, 2020	434,595		$	9.92
Total unrecognized compensation expense remaining (in thousands)	$	1,864
Weighted-average years expected to be recognized over	1.7

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

The total fair value of performance-based awards that vested during the six months ended June 30, ~~2019~~2020 was ~~$0.6~~$0.4 million.

The Company ~~recognized total~~recorded stock compensation expense of $1.2 million for the three months ended June 30, 2019, of which $0.1 million represents stock option compensation expense and $1.1 million represents restricted stock and performance-based stock compensation expense. For the six months ended June 30, 2019, the Company recognized total stock compensation expense of $2.1 million, of which $0.3 million represents stock option compensation expense and $1.8 million represents restricted stock and performance-based stock compensation expense. The Company recognized total stock compensation expense of $0.9 million for the three months ended June 30, 2018, of which $0.2 million represents stock option compensation expense and $0.7 million represents restricted stock and performance-based stock compensation expense. For the six months ended June 30, 2018, the Company recognized total stock compensation expense of $1.8 million, of which $0.4 million represents stock option compensation expense and $1.4 million represents restricted stock and performance-based stock compensation expense.

~~At June 30, 2019, there were 152,342 shares available for awards that could be granted under the Plan, assuming maximum performance of performance-based awards.~~

as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
Stock Compensation Expense Components	2020		2019		2020		2019
Equity based stock option expense	$	139	$	100	$	285	$	300
Restricted and performance-based stock awards expense	1,276		1,086		2,450		1,786
Stock compensation expense for equity based awards	$	1,415	$	1,186	$	2,735	$	2,086
Liability based stock option expense	5		7		11		14
Total Stock Compensation Expense	$	1,420	$	1,193	$	2,746	$	2,100

- 22 -

Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

NOTE J9 —LOSS PER COMMON SHARE

Basic loss per common share has been computed by dividing net loss by the weighted-average number of shares of the Company’s common stock outstanding during the relevant period. Diluted loss per common share adjusts net loss and basic 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 loss per common share for the three and six months ended June 30, ~~2019~~2020 and ~~2018~~2019 are as follows:

   Three Months Ended
June 30,    Six Months Ended
June 30,
   2019    2018    2019    2018
   (in thousands, except per share amounts)
Net loss– basic and diluted
   $ (11,513 )    $ (6,057 )    $ (16,380 )    $ (17,655 )
Weighted-average shares outstanding – basic and diluted
   20,545    20,327    20,527    18,474
Basic and diluted loss per common share
   $ (0.56 )    $ (0.30 )    $ (0.80 )    $ (0.96 )


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands, except per share amounts)
Net loss – Basic and Diluted	$	(3,977)	$	(11,513)	$	(32,141)	$	(16,380)



Weighted-average shares outstanding – Basic and Diluted	20,824		20,545		20,784		20,527
Basic and Diluted loss per common share	$	(0.19)	$	(0.56)	$	(1.55)	$	(0.80)

Antidilutive Securities	2,088		2,148		2,100		1,882

NOTE 10— INCOME TAXES

The ~~computation~~Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of ~~diluted~~the annual effective tax rate for the full fiscal year to pre-tax income or loss ~~per common share~~for the reporting period. For the three and six months ended June 30, 2020, the Company has used a discrete effective tax rate method to calculate taxes. Management determined that since minimal changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the three and six months ended June 30, ~~2019 excludes 2,147,690 shares~~2020.

Income tax expense of $3.0 million and ~~1,882,113 shares, respectively, related to options to purchase shares and other stock awards. The computation~~benefit of ~~diluted loss per common share~~$0.7 million for the three and six months ended June 30, ~~2018 excludes 1,990,536 shares~~2020, respectively, represent taxes on both U.S. and ~~1,938,124 shares, respectively, related~~foreign earnings at a combined effective income tax provision rate of 3,092.9% and benefit rate of 2.2%, respectively. The effective tax rate for the three and six months ended June 30, 2020 differs from the federal statutory income tax rate of 21.0% primarily due to ~~options to purchase shares~~non-deductible goodwill impairment and other ~~stock awards. These shares were excluded due to their antidilutive effects.~~

~~NOTE K— INCOME TAXES~~

significant permanent items recorded year-to-date, partially offset by the benefit of losses in foreign jurisdictions.

Income tax benefit of $5.8 million and $8.3 million for the three and six months ended June 30, 2019, respectively, represent taxes on both U.S. and foreign earnings at combined effective income tax benefit rates of 33.6% and 33.8%, respectively. The effective ~~rates~~tax rate for the three and six months ended June 30, 2019 differs from the federal statutory rate of ~~21%~~21.0% primarily due to state and local taxes and the impact of non-deductible expenses.

Income tax benefit of $1.8 million and $5.6 million for the three and six months ended June 30, 2018, respectively, represent taxes on both U.S. and foreign earnings at a combined effective income tax benefit rate of 22.1% and 23.8%, respectively. The effective rates for the three and six months ended June 30, 2018 reflects the reduced U.S. corporate income tax rate, partially offset by non-deductible expenses.

The Company has identified the following jurisdictions as “major” tax jurisdictions: U.S. Federal, California, Massachusetts, ~~New York, New Jersey, Illinois, Georgia~~Texas and the United Kingdom. The Company’s 2015 U.S. Federal income tax return ~~and~~audit was completed with no assessments. The Company's New York State tax returns for years 2014-2016 remain under audit with no ~~proposed adjustments~~material assessments as of June 30, ~~2019.~~

2020.

The Company evaluates its tax positions on a quarterly basis and revises its estimates accordingly. There were no material changes to the Company’s uncertain tax positions, interest, or penalties during the three-month periods ended June 30, ~~2019~~2020 and June 30, ~~2018.~~

2019.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law and the new legislation contains several key tax provisions, including the five-year net operating loss carryback, an adjusted business interest limitation, and payroll tax deferral. The Company is required to recognize the effect of tax law changes in the period of enactment. The Company has assessed the applicability of the CARES Act and determined there is no material impact to the Company.

- 23 -

Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

NOTE L11 – BUSINESS SEGMENTS

The Company has ~~two~~2 reportable segments, U.S. and International. Prior to October 1, 2018, the U.S. segment was reported as two separate reportable segments, U.S. Wholesale and Retail Direct. The Company changed its reporting structure as of October 1, 2018 to reflect how the Company is managing its operations as well as what the chief operating decision maker reviews to make organizational decisions about resource allocations. Prior period segment information has been recast to reflect the current reportable segment structure of the Company.

~~- 23 -~~

~~LIFETIME BRANDS, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~June 30, 2019~~

~~(unaudited)~~

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 its internet 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 ~~loss~~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 and consulting fees, are not allocated to the specific segments and are reflected as unallocated corporate expenses.

The Company implemented its SKU Rationalization initiative to improve the productivity of its inventory and simplify its U.S. business. During the three months ended June 30, 2019, the Company recorded an $8.5 million charge to cost of sales associated with the SKU Rationalization initiative, which negatively impacted loss from operations for the U.S. segment.

   Three Months Ended
June 30,    Six Months Ended
June 30,
   2019    2018    2019    2018
   (in thousands)
Net sales

U.S.
   $ 123,092    $ 128,985    $ 250,130    $ 224,892
International
   19,444    19,666    42,332    41,928








Total net sales
   $ 142,536    $ 148,651    $ 292,462    $ 266,820








Loss from operations

U.S.
   $ (4,678 )    $ 1,968    $ (292 )    $ (3,572 )
International
   (2,868 )    (204 )    (3,915 )    (3,424 )
Unallocated corporate expenses
   (4,999 )    (5,065 )    (10,625 )    (9,621 )








Loss from operations
   $ (12,545 )    $ (3,301 )    $ (14,832 )    $ (16,617 )








Depreciation and amortization

U.S.
   $ 5,210    $ 5,292    $ 10,481    $ 8,439
International
   1,080    1,130    2,168    2,292








Total depreciation and amortization
   $ 6,290    $ 6,422    $ 12,649    $ 10,731

   June 30,    December 31,
   2019    2018
   (in thousands)
Assets

U.S.
   $ 684,229    $ 604,532
International
   117,295    94,210
Unallocated corporate
   21,177    9,830




Total Assets
   $ 822,701    $ 708,572


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
Net sales
U.S.	$	132,591	$	123,092	$	261,799	$	250,130
International	17,549		19,444		33,411		42,332
Total net sales	$	150,140	$	142,536	$	295,210	$	292,462
Income (loss) from operations
U.S.	$	13,152	$	(4,678)	$	(728)	$	(292)
International	(3,817)		(2,868)		(10,551)		(3,915)
Unallocated corporate expenses	(5,039)		(4,999)		(9,670)		(10,625)
Income (loss) from operations	$	4,296	$	(12,545)	$	(20,949)	$	(14,832)
Depreciation and amortization
U.S.	$	4,934	$	5,210	$	9,996	$	10,481
International	1,127		1,080		2,299		2,168
Total depreciation and amortization	$	6,061	$	6,290	$	12,295	$	12,649


	June 30, 2020		December 31, 2019
	(in thousands)
Assets
U.S.	$	592,806	$	639,047
International	95,036		117,935
Unallocated corporate	65,960		13,041
Total Assets	$	753,802	$	770,023

- 24 -

Table of Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

NOTE M12—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 United States Environmental Protection Agency (the “EPA”) announced that the San Germán Ground Water Contamination site in Puerto Rico (the “Site”) had been added to the Superfund National Priorities ~~List.~~

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, 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, andin-situ treatment as needed to address residual sources. The EPA’s total net present worth estimated ~~capital~~ cost for its selected remedy is $7.3 million. The EPA also designated a second operable unit under which the EPA has and will continue to conduct further investigations to determine the nature and extent of groundwater contamination, as well as a determination by the EPA on the necessity of any further response actions to address groundwater contamination. In February 2017, the EPA indicated that it planned to expand its field investigation for the RI/FS to a second operable unit to further determine the nature and extent of the groundwater ~~damage~~contamination at and from the Site and to determine the nature of the remedial action ~~needed.~~needed to address the contamination. The EPA has requested access to the property occupied by WSPR to install monitoring wells and to undertake groundwater sampling as part of this expanded investigation. WSPR has consented to the EPA’s access request, ~~subject to~~provided that the EPA receives PRIDCO’s consent, as the property owner.

WSPR never used the primary contaminant of concern and did not take up its tenancy at the Site until after the EPA had discovered the contamination in the local water supply. The EPA has also issued notices of potential liability to a number of other entities affiliated with the Site, which used the contaminants of concern.

In December 2018, the Company, WSPR, and other identified Potentially Responsible Parties affiliated with the Site entered into tolling agreements to extend the statute of limitations for potential claims for the recovery of response costs for the initial operable unit under Section 107 of CERCLA. In February 2020, the tolling agreements were extended to November 2020. 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.

~~On July 19, 2019, WSPR’s counsel received an email from the US Department of Justice attorney representing the~~

The EPA ~~with respect to the Site providing, as a courtesy, information relating to a public meeting to be held on July 30, 2019, in San German concerning the EPA’s~~released its proposed plan for a second operable ~~unit. The EPA is accepting public comments on the proposed remedy, which is estimated to cost $17.3 million and includes~~unit in ~~situ treatment and monitored nature attenuation of groundwater.~~July 2019. The public comment period ~~lasts~~ for the proposed plan ended on September 10, 2019. On September 30, ~~days~~2019, the EPA issued the ROD for operable unit 2 (“OU-2”), electing to implement its preferred remedy which consists of in-situ treatment of groundwater and ~~ends on August 11, 2019. However, any member~~a monitored natural attenuation (MNA) program including monitoring of the ~~public can request a mandatory 30 day extension.~~

~~WSPR never used the primary constituents of concern and did not take up its tenancy~~plume fringe at the Site until after EPA had discovered the damage to the local water supply. EPA has also issued notices of potential liability to numerous other entities affiliated with the Site, which used the constituents of concern. Site. The EPA’s estimated total net present worth cost for its selected remedy is $17.3 million.

- 25 -

Table of ~~property damage asserted against~~Contents

LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

(unaudited)

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 7 tableware collections imported in this shipment.

The Company is now in the process of compiling a complete set of supporting documents for the remaining three protests (for the remaining 29 tableware collections that were imported by the Company under the protested shipments) for submission to the CBP. If the CBP approves these additional claims and accepts the evidence presented as it did with the Lead Protest, then no additional duties will be owed for the remaining protested shipments.

Because the period of investigation covers a five year period, the company is compiling supporting documentation packages for all tableware collections imported during this period.

In the event CBP accepts the evidence presented, then no additional duties or penalties will be owed. If CBP rejects the Company’s position, then the estimated amount of duties that could be owed is $3.1 million. In such event, it is reasonably possible that additional penalties could be assessed, depending upon the level of culpability found, of up to $6.2 million for negligence and up to $12.4 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

June 30, ~~2019~~

2020

(unaudited)

NOTE N 13 — OTHER

Cash dividends

Dividends declared in the six months ended June 30, ~~2019~~2020 were as follows:

Dividend per share

Date declared

Date of record

Payment date

$0.0425

~~March 12, 2019~~3/10/2020

~~May 1, 2019~~11/16/2020

~~May 15, 2019~~12/16/2020

$0.0425

~~June 27, 2019~~6/25/2020

~~August 1, 2019~~8/3/2020

~~August 15, 2019~~8/17/2020

On February ~~15, 2019 and May 15, 2019,~~14, 2020, the Company paid dividends of $0.9 million ~~and $0.9 million~~ to shareholders of record on ~~February 1, 2019 and~~January 31, 2020.

In 2020, the Company declared dividends as follows:

•On March 10, 2020, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on May 15, 2020 to shareholders of record on May 1, ~~2019, respectively.~~ 2020. Subsequently, the Company issued a press release on April 23, 2020, announcing that the Board of Directors unanimously approved the rescheduling of the May quarterly dividend. Accordingly, shareholders of record as of November 16, 2020 will be eligible to receive a dividend of $0.0425 per share on December 16, 2020.

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

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

In the ~~six~~three months ended June 30, ~~2019,~~2020, the Company reduced retained earnings for the accrual of $0.9 million relating to the dividend payable on August ~~15, 2019.~~

~~On August 6, 2019,~~17, 2020. For the ~~Board~~six months ended June 30, 2020, the Company reduced retained earnings for the accrual of ~~Directors declared a quarterly~~$1.8 million relating to the dividend ~~of $0.0425 per share~~ payable on ~~November 15, 2019 to shareholders of record on November 1, 2019.~~

August 17, 2020 and December 16, 2020.

Supplemental cash flow information

   Six Months Ended
June 30,
   2019    2018
   (in thousands)
Supplemental disclosure of cash flow information:

Cash paid for interest
   $ 9,066    $ 5,614
Cash paid for taxes
   993    2,763
Non-cash investing activities:

Translation loss adjustment
   $ (1,647 )    $ (2,109 )


	Six Months Ended June 30,
	2020		2019
	(in thousands)
Supplemental disclosure of cash flow information:
Cash paid for interest	$	8,070	$	9,066
Cash paid for taxes, net of refunds	173		993
Non-cash investing activities:
Translation loss adjustment	$	(7,207)	$	(1,647)

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LIFETIME BRANDS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2019~~

2020

(unaudited)

Components of accumulated other comprehensive loss, net

   Three Months Ended    Six Months Ended
   June 30,    June 30,
   2019    2018    2019    2018
   (in thousands)
Accumulated translation adjustment:

Balance at beginning of period
   $ (32,421 )    $ (24,441 )    $ (33,727 )    $ (27,821 )
Translation loss during period
   (2,953 )    (5,489 )    (1,647 )    (2,109 )








Balance at end of period
   $ (35,374 )    $ (29,930 )    $ (35,374 )    $ (29,930 )








Accumulated deferred gains (losses) on cash flow hedges:

Balance at beginning of period
   $ 757    $ —      $ 161    $ 14
Amounts reclassified from accumulated other comprehensive loss:

Settlement of cash flow hedge
   (52 )    —      (23 )    (14 )
Change in unrealized gains (losses)
   1,034    (263 )    1,601    (263 )








Net change in cash flow hedges, net of taxes of $306, $88, $495, and $88
   982    (263 )    1,578    (277 )








Balance at end of period
   $ 1,739    $ (263 )    $ 1,739    $ (263 )








Accumulated effect of retirement benefit obligations:

Balance at beginning of period
   $ (1,037 )    $ (1,500 )    $ (1,050 )    $ (1,518 )
Amounts reclassified from accumulated other comprehensive loss:⁽¹⁾

Amortization of actuarial losses, net of taxes
   12    17    25    35








Balance at end of period
   $ (1,025 )    $ (1,483 )    $ (1,025 )    $ (1,483 )








Total accumulated other comprehensive loss at end of period
   $ (34,660 )    $ (31,676 )    $ (34,660 )    $ (31,676 )

~~(1)~~

~~Amounts are recorded in selling, general and administrative expense on the condensed consolidated statements of operations.~~


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)
Accumulated translation adjustment:
Balance at beginning of period	$	(38,477)	$	(32,421)	$	(34,019)	$	(33,727)
Translation loss during period	(2,749)		(2,953)		(7,207)		(1,647)
Amounts reclassified from accumulated other comprehensive loss ⁽¹⁾	235		—		235		—
Translation Adjustment	(2,514)		(2,953)		(6,972)		(1,647)
Balance at end of period	$	(40,991)	$	(35,374)	$	(40,991)	$	(35,374)
Accumulated deferred gains on cash flow hedges:
Balance at beginning of period	$	(1,713)	$	757	$	1,164	$	161
Amounts reclassified from accumulated other comprehensive loss:
Settlement of cash flow hedge ⁽²⁾	240		(52)		359		(23)
Change in unrealized (losses) gains	(139)		1,034		(3,135)		1,601
Net change in cash flow hedges, net of taxes of $69, $306, $(929) and $495	101		982		(2,776)		1,578
Balance at end of period	$	(1,612)	$	1,739	$	(1,612)	$	1,739
Accumulated effect of retirement benefit obligations:
Balance at beginning of period	$	(1,580)	$	(1,037)	$	(1,600)	$	(1,050)
Amounts reclassified from accumulated other comprehensive loss:⁽³⁾
Amortization of actuarial gains, net of taxes	19		12		39		25
Balance at end of period	$	(1,561)	$	(1,025)	$	(1,561)	$	(1,025)
Total accumulated other comprehensive losses at end of period	$	(44,164)	$	(34,660)	$	(44,164)	$	(34,660)

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

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

⁽³⁾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~~ “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Theseforward-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, inManagement’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,” ~~“anticipates,” “projects,~~“predicts,” “plans,~~” “intends,~~” “believes,” “may,” “should,” ~~“assumes,” “seeks,~~“would,” and variations of such words or similar expressions are intended to identifyforward-looking statements. Allforward-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 theforward-looking statements contained in this Quarterly Report. Important factors that could cause the Company’s actual results to differ materially from those expressed asforward-looking statements are set forth in this Quarterly Report in Part II, Item 1A. Risk Factors, and in the Company’s ~~2018~~ Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Annual Report on Form 10-K”) in Part I, Item 1A under the headingRisk Factors. Such risks, uncertainties and other important factors include, among others, risks related to:

•General economic factors and political conditions;

•Exit of the United Kingdom from the European Union;

•Tariffs;

•Indebtedness and compliance with credit agreements;

•Access to the capital markets and credit markets;

•The credit-worthiness of our customers and the counterparties to our derivatives;

•Restructuring and integration of our European operations;

•Seasonality;

•Liquidity;

•Interest;

•Acquisition integration;

•Competition;

•Customer practices;

•Intellectual property, brands and licenses;

•Goodwill;

•International operations;

•Supply chain;

•Foreign exchange rates;

•International trade, ~~and transportation;~~

including trade negotiations;

•Transportation;

•Product liability;

•Regulatory matters;

•Product development;

•Stock keeping unit rationalization (“SKU Rationalization”) initiative;

•Reputation;

•Technology;

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~~Reputation;~~

Table of Contents

~~Technology;~~

•Personnel;

~~Personnel;~~

•Price fluctuations;

•Business interruptions;

•Projections;

•Fixed costs;

•Governance; ~~and~~

•Acquisitions and ~~investments.~~

investments;

•Public health pandemics, such as COVID-19; and

•Social unrest, including related protests or disturbances.

There may be other factors that may cause the Company’s actual results to differ materially from theforward-looking statements. Except as may be required by law, the Company undertakes no obligation to publicly update or reviseforward-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 United States Securities and Exchange Commission (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 Annual Report. 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 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 Company’s website. The SEC also maintains an Internet site 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, ~~cutting boards, shears,~~ kitchen scales, thermometers, ~~timers,~~cutting boards, shears, cookware, pantryware, spice racks, ~~wine accessories,~~ and bakeware) and Tableware (dinnerware, stemware, flatware, ~~wire organization,~~ 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 ~~bath scales, weather instruments,~~ and home décor). In ~~2018,~~2019, Kitchenware products and Tableware products accounted for approximately ~~82%~~79% of the Company’s U.S. segment’s net sales and ~~84%~~82% of the Company’s consolidated net sales.

On March 2, 2018, the Company completed the acquisition of Taylor Holdco LLC and its subsidiaries (doing business as Filament Brands) (“Filament”). Filament primarily designs, markets and distributes consumer and food service precision measurement products, including kitchen scales, thermometers and timers, bath scales, wine accessories, kitchen tools, hydration products, and select outdoor products. The six months ended June 30, 2018 include the operations of Filament for the period from March 2, 2018 to June 30, 2018.

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^®, Taylor^®, KitchenAid^®, KitchenCraft^®, Pfaltzgraff^®~~, KitchenCraft~~^®~~, Fitz and Floyd~~^®~~, Sabatier~~^®~~, Kamenstein~~^®, Built NY^®, ~~MasterClass~~Rabbit^®, ~~Fred~~Kamenstein^®, ~~Rabbit~~^®and ~~LaCafetière~~^®MasterClass®. Historically, the Company’s sales growth has come from expanding product offerings within its product categories, by developing existing brands, acquiring new brands ~~including~~(including complementary brands in markets outside the ~~United States,~~U.S.), 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.

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BUSINESS SEGMENTS

~~Effective October 1, 2018, the~~

The Company ~~operates in~~has two reportable ~~segments:~~segments, U.S. and International. The U.S. segment is the Company’s primary domestic business that designs, markets and distributes its products to retailers and distributors, as well as directly to consumers through third party and its own internet websites. The International segment consists of certain business operations conducted outside the U.S. The Company has segmented its operations to reflect the manner in which management reviews and evaluates ~~its~~the results of its operations.

~~- 29 -~~

The U.S. segment includes the Company’s primary domestic business that designs, markets and distributes its products to retailers, distributors and its internet 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 and consulting fees, are not allocated to the specific segments and are reflected as unallocated corporate expenses.

EQUITY INVESTMENTS

The Company owns approximately 30% 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 ~~results of operations as equity in earnings or losses~~net income (reduced for amortization expense related to the customer relationships acquired) for the three and six months ended June 30, 2020 and 2019 in the ~~Company’s~~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. As of June 30, ~~2019,~~2020, Vasconia’s Board of Directors is comprised of ~~twelve~~fourteen members of whom the Company has designated three members.

SEASONALITY

The Company’s business and working capital needs are highly seasonal, with a majority of sales occurring in the third and fourth quarters. In ~~2018~~2019 and ~~2017,~~2018, net sales for the third and fourth quarters accounted for ~~62%~~60% and ~~60%~~62% of total annual net sales, respectively. In anticipation of the pre-holiday shipping season, inventory levels increase primarily in the June through October time period. 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.

The COVID-19 pandemic has led, and may continue to lead, to shifts in some of the Company's selling and purchasing cycles as customers deviate from their historical ordering patterns.

RESTRUCTURING

~~In connection~~

severance.

RECENT DEVELOPMENTS

In March 2020, the World Health Organization declared COVID-19 a global pandemic. The virus has continued to plague the United States and the rest of the world. The pandemic has resulted in an increase in sales of certain of the Company’s products as well as a decrease in sales in other of its products. The Company ~~will combine~~has experienced a significant reduction in sales at certain retailers which have been closed or have had a limited number of stores that are open during the pandemic. This reduction in sales has been offset by higher sales at retailers that have remained open. Many of the retailers that remain open provide products that are deemed essential. In addition, the Company's e-commerce sales have increased during the pandemic.

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The Company’s distribution centers remain operational and continue to support e-commerce and brick-and-mortar retail customers. The Company has not experienced disruptions in its physical locations in the U.K. in 2019 and expects to incur approximately $1.1 million of additional restructuring and integration charges in 2019. At June 30, 2019, $0.6 million of restructuring chargessupply chain related to the ~~European restructuring plan were accrued.~~

COVID-19 pandemic. However, in limited instances and categories, increased demand has strained the manufacturing capacity of certain of the Company’s suppliers.

In response to the COVID-19 pandemic, the Company announced and implemented cost reductions in April 2020. Also in April 2020, the Company's Board of Directors authorized the postponement of the Company's quarterly cash dividend, which was to be paid on May 15, 2020, to shareholders of record on May 1, 2020. The Company set November 16, 2020 as the new record date for such dividend payable on December 16, 2020.

The Company cannot estimate the length or severity of this pandemic. However the Company believes that it could have a material adverse impact on its future sales, results of operations, and cash flows, including the potential impairment of certain intangible and other long-lived assets.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

~~The following is an update to the corresponding critical accounting policies and estimates set forth in the Company’s 2018 Annual Report on Form 10-K. Except as modified below, there~~

There have been no material changes to the Company’s critical accounting policies and estimates discussed in the ~~2018~~2019 Annual Report on Form 10-K in Item 7 under the headingManagement’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.

~~Cost of Sales~~

The Company implemented programs to improve the productivity of its inventory and simplify its U.S. business. In connection therewith, it initiated a SKU Rationalization initiative to identify inventory to discontinue from active status, consistent with the objectives of these programs. During the three months ended June 30, 2019, the Company recorded an $8.5 million charge to cost of sales associated with the SKU Rationalization initiative. The inventory affected represents approximately 8% of its consolidated inventory.

~~- 30 -~~

~~Leases~~

The Company determines if an arrangement contains a lease at inception. 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 the operating lease liability and operating lease liabilities, respectively, on the condensed consolidated balance sheets. Finance leases were not material to the Company’s condensed consolidated balance sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized upon commencement of the lease based on the present value of the lease payments over the lease term. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Leases with a lease term of 12 months or less are not capitalized.

~~The Company has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.~~

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
June 30, Six Months Ended
June 30,
   2019 2018 2019 2018
Net sales
   100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales
   69.1 65.0 66.4 63.6


Gross margin
   30.9 35.0 33.6 36.4
Distribution expenses
   10.9 10.1 10.7 12.3
Selling, general and administrative expenses
   28.7 26.9 27.7 30.1
Restructuring expenses
   0.1 0.3 0.3 0.3


Loss from operations
   (8.8 ) (2.2 ) (5.1 ) (6.2 )
Interest expense
   (3.3 ) (3.1 ) (3.3 ) (2.5 )


Loss before income taxes and equity in (losses) earnings
   (12.1 ) (5.3 ) (8.4 ) (8.7 )
Income tax benefit
   4.1 1.2 2.8 2.1
Equity in (losses) earnings, net of taxes
   —   0.1 (0.1 ) 0.1


Net loss
   (8.0 )% (4.0 )% (5.7 )% (6.5 )%


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	63.9		69.1		63.7		66.4
Gross margin	36.1		30.9		36.3		33.6
Distribution expenses	10.1		10.9		10.8		10.7
Selling, general and administrative expenses	22.9		28.7		25.7		27.7
Restructuring expenses	0.2		0.1		0.1		0.3
Goodwill and other impairments	—		—		6.8		—
Income (loss) from operations	2.9		(8.8)		(7.1)		(5.1)
Interest expense	(2.8)		(3.5)		(3.0)		(3.4)
Mark to market (loss) gain on interest rate derivatives	(0.1)		0.2		(0.8)		0.1

Loss before income taxes and equity in losses	—		(12.1)		(11.0)		(8.4)
Income tax (provision) benefit	(2.0)		4.1		0.2		2.8
Equity in losses, net of taxes	(0.6)		—		(0.1)		(0.1)
Net loss	(2.6)	%	(8.0)	%	(10.9)	%	(5.7)	%

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MANAGEMENT’S DISCUSSION AND ANALYSIS

THREE MONTHS ENDED JUNE 30, ~~2019~~2020 COMPARED TO THE THREE MONTHS ENDED

JUNE 30, ~~2018~~

2019

Net Sales

Consolidated net sales for the three months ended June 30, ~~2019~~2020 were ~~$142.5~~$150.1 million, ~~a decrease~~representing an increase of ~~$6.2~~$7.6 million, or ~~4.2%~~5.3%, as compared to net sales of ~~$148.7~~$142.5 million for the corresponding period in ~~2018.~~2019. In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying ~~2019~~2020 average rates to ~~2018~~2019 local currency amounts, consolidated net sales ~~decreased $5.0~~increased by $8.2 million, or ~~3.4%~~5.8%, as compared to consolidated net sales in the corresponding period in ~~2018.~~

2019.

Net sales for the U.S. segment for the three months ended June 30, ~~2019~~2020 were ~~$123.1~~$132.6 million, ~~a decrease~~an increase of ~~$5.9~~$9.5 million, or ~~4.6%~~7.7%, as compared to net sales of ~~$129.0~~$123.1 million for the corresponding period in ~~2018.~~

2019.

Net sales for the U.S. segment’s Kitchenware product category were ~~$65.6~~$84.4 million for the three months ended June 30, ~~2019, a decrease~~2020, an increase of ~~$2.8~~$18.8 million, or ~~4.1%~~28.7%, as compared to ~~$68.4~~$65.6 million for the corresponding period in ~~2018.~~2019. The ~~decrease~~increase was ~~attributable to decreases~~mainly driven by higher consumer demand in the e-commerce and wholesale channels for ~~cutlery, bakeware, pantryware, partially offset by increases for~~essential kitchen tools and gadgets, cutlery and ~~Taylor branded kitchenware. The decrease was attributable to lower volume, including higher sales allowances, for certain brick~~boards and ~~mortar retailers, partially offset by higher e-commerce sales.~~

bakeware products.

Net sales for the U.S. segment’s Tableware product category were ~~$28.8~~$23.6 million for the three months ended June 30, ~~2019,~~2020, a decrease of ~~$6.5~~$5.2 million, or ~~18.4%~~18.1%, as compared to ~~$35.3~~$28.8 million for the corresponding period in ~~2018.~~2019. The decrease was primarily ~~attributable~~driven by lower sales of dinnerware products to ~~certain retailer programs not repeating in 2019 and~~brick-and-mortar retailers which were closed for most of the ~~expected timing~~period as a result of ~~other programs. In addition, volume declines for certain brick and mortar retailers were~~the COVID-19 pandemic. This decrease was partially offset by ~~higher~~increased e-commerce sales.

Net sales for the U.S. segment’s Home Solutions product category were ~~$28.7~~$24.6 million for the three months ended June 30, ~~2019, an increase~~2020, a decrease of ~~$3.4~~$4.1 million, or ~~13.4%~~14.3%, as compared to ~~$25.3~~$28.7 million for the corresponding period in ~~2018.~~2019. The ~~increase reflects increased volumes~~decrease was driven by lower sales in the private label hydration ~~products~~ category.

Net sales for the International segment were ~~$19.4~~$17.5 million for the three months ended June 30, ~~2019, which was consistent with~~2020, a decrease of $1.9 million, or 9.8%, as compared to net sales of ~~$19.7~~$19.4 million for the corresponding period in ~~2018.~~2019. In constant currency, which excludes the impact of foreign exchange fluctuations, net sales ~~increased $0.9~~decreased $1.3 million, or ~~4.6%~~6.7%, as compared to consolidated net sales in the corresponding period in ~~2018.~~2019. The ~~increase,~~decrease in sales, and sales in constant currency, iswas primarily due to ~~an increase in~~lower sales to brick-and-mortar retailers as a result of lower demand and closures due to COVID-19, offset by increased e-commerce ~~retailers.~~

sales due to higher customer demand in online channels.

Gross margin

Gross margin for the three months ended June 30, ~~2019~~2020 was $54.2 million, or 36.1%, as compared to $44.0 million, or 30.9%~~, as compared to $52.1 million, or 35.0%~~, for the corresponding period in ~~2018.~~

2019.

Gross margin for the U.S. segment was $36.7 million, or 29.8%, for the three months ended June 30, 2019, as compared to $45.5 million, or 35.3%, for the corresponding period in 2018. The gross margin decrease reflects an $8.5 million charge for the SKU Rationalization initiative, offset by a $0.9 million non-recurring inventory step-up charge related to the acquisition of Filament in the 2018 period. Excluding the SKU Rationalization and step-up charges, gross margin would have been 36.7% and 36.0% in the 2019 and 2018 periods, respectively. The increase in margin is attributable to changes in customer and product mix.

~~Gross margin for the International segment was $7.3~~$49.8 million, or 37.6%, for the three months ended June 30, ~~2019,~~2020, as compared to ~~$6.6~~$36.7 million, or ~~33.4%~~29.8%, for the corresponding period in ~~2018.~~2019. Gross margin in the 2019 period reflects an $8.5 million charge for the SKU rationalization initiative. Excluding the SKU rationalization the gross margin would have been 36.7%. The increase in gross margin, excluding the SKU rationalization change, was primarily ~~attributable~~due to changes in product mix.

Gross margin for the International segment was $4.4 million, or 24.8%, for the three months ended June 30, 2020, as compared to $7.3 million, or 37.6%, for the corresponding period in 2019. The decrease in gross margin percentage was driven by higher inventory reserves and lower sales ~~allowances, and the de-emphasis~~to independent retailers a result of lower ~~margin private label tableware product lines.~~

demand and store closures due to COVID-19.

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Distribution expenses

Distribution expenses for the three months ended June 30, ~~2019~~2020 were ~~$15.5~~$15.2 million, as compared to ~~$14.9~~$15.5 million for the corresponding period in ~~2018.~~2019. Distribution expenses as a percentage of net sales were 10.1% for the three months ended June 30, 2020, as compared to 10.9% for the three months ended June 30, ~~2019, as compared to 10.1% for the three months ended June 30, 2018.~~

2019.

Distribution expenses as a percentage of net sales for the U.S. segment were approximately ~~10.4%~~8.8% and ~~9.5%~~10.4% for the three months ended June 30, 2020 and 2019, ~~and 2018, respectively~~.respectively. As a percentage of sales shipped from the Company’s U.S. warehouses distribution expenses ~~(excluding the moving~~were 9.0% and ~~relocation costs for the U.S. segment) were~~ 11.8% ~~and 10.5%~~ for the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~increase is primarily attributable to lower shipment volume, higher real estate taxes~~improvement reflects the continued realization of labor management efficiency, realized synergy savings and ~~an increase in freight expense~~the leverage benefit of fixed costs on higher sales ~~to prepaid freight customers.~~

volume.

Distribution expenses as a percentage of net sales for the International segment were ~~13.9%~~19.9% for the three months ended June 30, ~~2019, which was consistent with distribution expenses as a percentage of net sales of 13.8%,~~2020, compared to 13.9% for the corresponding period in ~~2018.~~2019. Distribution expenses asduring the three months ended June 30, 2020 include $0.3 million for the Company’s facility relocation costs. As a percentage of sales shipped from the Company’s U.K. warehouses, ~~approximated 14%~~excluding the moving and relocation costs for ~~both~~U.K. operations, distribution expenses were 15.0% and 14.5% for the three months ended June 30, 2020 and 2019, ~~and 2018.~~

respectively. The increase was primarily attributed to higher labor costs associated with increased e-commerce channel sales.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended June 30, ~~2019~~2020 were ~~$40.9~~$34.4 million, ~~an increase~~a decrease of ~~$0.9~~$6.5 million, or ~~2.2%~~15.9%, as compared to ~~$40.0~~$40.9 million for the corresponding period in ~~2018.~~

2019.

Selling, general and administrative expenses for the U.S. segment were ~~$28.9~~$25.0 million for the three months ended June 30, ~~2019,~~2020, as compared to ~~$30.9~~$28.9 million for the ~~three months ended June 30, 2018.~~corresponding period in 2019. As a percentage of net sales, selling, general and administrative expenses were 18.9% and 23.5% for the three months ended June 30, 2020 and ~~24.0%~~2019, respectively. The decrease was primarily attributable to lower expenses resulting from the Company's cost reduction strategy in response to the COVID-19 pandemic, as well as lower selling and marketing expenses.

Selling, general and administrative expenses for the International segment were $4.4 million for the three months ended June 30, 2020, as compared to $7.0 million for the corresponding period in 2019. The decrease was primarily attributable to the realization of cost savings resulting from the Company's integration efforts, and lower employee and selling expenses resulting from the Company's cost reduction strategy in response to the COVID-19 pandemic.

Unallocated corporate expenses were $5.0 million for the three months ended June 30, 2020 and 2019.

Restructuring expenses

During the three months ended June 30, 2020, the Company's international segment incurred $0.3 million, of restructuring expenses related to severance associated with the strategic reorganization of the international segment’s product development and sales workforce. The strategic reorganization is the result of the Company's efforts for product development efficiencies and a country tailored international sales approach.

During the three months ended June 30, 2019, the Company incurred $0.1 million of Filament restructuring charges and $0.1 million of restructuring expenses, primarily related to severance, for the integration of its legal entities operating in Europe.

Interest expense

Interest expense was $4.2 million for the three months ended June 30, 2020 and $5.0 million for the three months ended June 30, 2019 as a result of lower debt outstanding and ~~2018, respectively. The 2019 period reflects the synergy savings from the Filament acquisition, primarily from efficiencies in labor reduction initiatives.~~

~~Selling, general and administrative expenses~~a lower interest rate environment.

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Mark to market (loss) gain on interest rate derivatives

Mark to market loss on interest rate derivatives was $0.2 million for the three months ended June 30, ~~2019 for the International segment were $7.0 million, an increase of $3.0 million, from $4.0 million for the corresponding period in 2018. Of the increase, $2.1 million represented the absence of~~2020 as compared to a mark to market gain ~~from foreign currency contracts in 2018. Additionally, the Company commenced an operating lease for its new U.K. headquarters and warehouse as part~~on interest rate derivatives of ~~its reorganization plan to consolidate its European operations and incurred $0.5~~$0.4 million ~~in duplicative operating lease expense.~~

~~Unallocated corporate expenses~~ for the three months ended June 30, ~~2019~~2019. The decrease was primarily driven by mark to market fair value fluctuations on the Company's interest rate derivatives. These derivatives were ~~$5.0 million,~~entered into for purposes of locking-in a fixed interest rate on the Company's variable interest rate debt. The current period loss was caused by lower interest rates as compared to ~~$5.1 million for the corresponding period in 2018. Lower employee related and acquisition expenses were partially offset by higher professional fees.~~

~~Interest expense~~

~~Interest expense was $4.7 million for both~~ the three months ended June 30, ~~2019 and~~2019. The intent of the ~~corresponding period in 2018. This reflects~~Company is to hold these derivative contracts until their maturity. Therefore, the ~~benefit of lower debt balances offset by higher interest rates, and a benefit from mark to market changes from interest rate swaps not designated as hedges.~~

Company expects that this loss will reverse over time.

Income tax (provision) benefit

~~Income~~

The provision for income taxes includes federal, foreign, state and local income taxes. The Company used a discrete effective tax ~~benefit~~rate method to calculate taxes for the three months ended June 30, ~~2019~~2020. Management determined that since minimal changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the three months ended June 30, 2020.

Income tax provision for the three months ended June 30, 2020 was ~~$5.8~~$3.0 million as compared to ~~$1.8~~an income tax benefit of$5.8 million for the corresponding period in ~~2018.~~2019. The Company’s effective income tax provision rate for the three months ended June 30, 2020 was 3,092.9% as compared to a tax benefit rate of 33.6% for the corresponding 2019 period. The effective tax rate for the three months ended June 30, ~~2019 was 33.6% as compared~~2020 differs from the federal statutory income tax rate of 21.0% primarily due to ~~22.1%~~the impact of the non-deductible portion of the goodwill impairment charge (recorded in the three months ended March 31, 2020), the reversal of a discrete benefit recorded in the three months ended March 31, 2020 for a favorable rate arbitrage related to a net operating loss carryback claim available under the ~~corresponding 2018 period.~~CARES Act, which is no longer expected based on a revised estimate, and other permanent items, partially offset by the benefit of losses in foreign jurisdictions. The effective ~~tax~~ rate for the three months ended June 30, 2019 differs from the federal statutory income tax rate of ~~21%~~21.0% primarily due to state and local taxes and the impact of non-deductible expenses. ~~The effective tax rate for the three months ended June 30, 2018 reflects the reduced statutory U.S. corporate income tax rate, partially offset by non-deductible expenses.~~

Equity in ~~(losses) earnings~~

losses

Equity in ~~(losses) earnings~~losses of Vasconia, net of taxes, was ~~$(0.1)~~$0.6 million for the three months ended June 30, ~~2019,~~2020, as compared to equity in ~~(losses) earnings~~losses of Vasconia, net of taxes, of ~~$0.2~~$0.1 million for the three months ended June 30, ~~2018. Equity in (losses) earnings~~2019. Vasconia reported income from operations of $1.4 million for the three months ended June 30, ~~2018 includes a deferred tax expense of $(0.5) million due~~2020, as compared to the requirement to record tax benefits for foreign currency translation gains and losses through other comprehensive loss, with a corresponding adjustment to deferred tax liabilities. Vasconia reported income from operations of $2.8 million for the three months ended June 30, 2019 ~~as compared to income from operations of $3.7 million for the three months ended June 30, 2018.~~. The decrease ~~in income from operations~~ is primarily due to a decrease in operating income from Vasconia's aluminum and kitchenware division.

During the ~~aluminum division.~~

three months ended June 30, 2020, the Company recognized a loss of $0.2 million, relating to cumulative translation foreign currency losses that were recognized to earnings upon the dissolution of Lifetime Brands Do Brasil Participacoes Ltda., a 100% owned foreign subsidiary. The foreign currency translation losses related to the notes receivable due to the company from the 2016 sale of its equity interest in GS International S/A.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

SIX MONTHS ENDED JUNE 30, ~~2019~~2020 COMPARED TO THE SIX MONTHS ENDED

JUNE 30, ~~2018~~

2019

Net Sales

Consolidated net sales for the six months ended June 30, ~~2019~~2020 were ~~$292.5~~$295.2 million, representing an increase of ~~$25.7~~$2.7 million, or ~~9.6%~~0.9%, as compared to net sales of ~~$266.8~~$292.5 million for the corresponding period in ~~2018. The~~2019. In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2020 average rates to 2019 local currency amounts, net sales increased by $3.8 million, or 1.3%, as compared to consolidated net sales in the corresponding period in 2019.

Net sales for the U.S. segment for the six months ended June 30, ~~2018 includes~~2020 were $261.8 million, an increase of $11.7 million, or 4.7%, as compared to net sales of ~~$38.6~~$250.1 million ~~from Filament~~ for the corresponding period ~~from March 2, 2018,~~in 2019.

Net sales for the ~~date~~U.S. segment’s Kitchenware product category were $163.7 million for the six months ended June 30, 2020, an increase of $28.8 million, or 21.3%, as compared to $134.9 million for the corresponding period in 2019. The increase was mainly attributable to higher consumer demand in the e-commerce and wholesale channels for essential kitchen tools and gadgets, cutlery and boards, and cookware and bakeware products. In addition, in the early part of 2020, sales increased as a result of the ~~acquisition.~~continuance of promotional programs that commenced in the latter part of 2019 for tools and gadgets, cutlery and bakeware.

Net sales for the U.S. segment’s Tableware product category were $47.2 million for the six months ended June 30, 2020, a decrease of $8.0 million, or 14.4%, as compared to $55.2 million for the corresponding period in 2019. The decrease was primarily driven by lower sales of dinnerware products to brick-and-mortar retailers; this decrease was partially offset by increased e-commerce sales.

Net sales for the U.S. segment’s Home Solutions product category were $50.9 million for the six months ended June 30, 2020, a decrease of $9.1 million, or 15.2%, as compared to $60.0 million for the corresponding period in 2019. The decrease was driven by lower sales in the private label hydration category, offset by new program hydration category sales.

Net sales for the International segment were $33.4 million for the six months ended June 30, 2020, a decrease of $8.9 million, or 21.0%, as compared to net sales of $42.3 million for the corresponding period in 2019. In constant currency, which excludes the impact of foreign exchange fluctuations, net sales ~~increased $28.2~~decreased $7.9 million, or ~~10.7%~~19.1%, as compared to consolidated net sales in the corresponding period in ~~2018.~~

~~Net~~2019. The decrease in sales, ~~for the U.S. segment for the six months ended June 30, 2019 were $250.1 million, an increase of $25.2 million, or 11.2%, as compared~~and sales in constant currency, was driven by several factors including lower sales to ~~net sales of $224.9 million for the corresponding period in 2018.~~

~~Net sales for the U.S. segment’s Kitchenware product category were $134.9 million for the six months ended June 30, 2019, an increase of $9.4 million, or 7.5%, as compared~~independent retailers resulting from lower demand and store closures due to $125.5 million for the corresponding period in 2018. The increase was primarily attributable to the inclusion of Filament for a full six months in 2019, which added $11.3 million of net sales. This wasCOVID-19, offset by ~~lower~~increased e-commerce sales ~~for cutlery, bakeware, and pantryware. The reduction~~due to higher customer demand in sales of these products were partially offset by increases in tools and gadgets product sales. In addition, volume declines for certain brick and mortar retailers were partially offset by higher e-commerce sales.

Net sales for the U.S. segment’s Tableware product category were $55.2 million for the six months ended June 30, 2019, a decrease of $5.7 million, or 9.4%, as compared to $60.9 million for the corresponding period in 2018. The decrease was primarily attributable to certain retailer programs, including close-outs, not repeating in 2019. In addition, volume declines for certain brick and mortar retailers were partially offset by higher e-commerce sales.

Net sales for the U.S. segment’s Home Solutions product category were $60.0 million for the six months ended June 30, 2019, an increase of $21.5 million, or 55.8%, as compared to $38.5 million for the corresponding period in 2018. The increase was primarily attributable to the inclusion of Filament for a full six months in 2019, which added $16.9 million of net sales. In addition, hydration products volume increased in the 2019 period.

Net sales for the International segment were $42.3 million for the six months ended June 30, 2019, an increase of $0.4 million, or 1.0%, as compared to net sales of $41.9 million for the corresponding period in 2018. In constant currency, which excludes the impact of foreign exchange fluctuations, net sales increased $2.9 million, or 7.4%, as compared to consolidated net sales in the corresponding period in 2018. The International segment increase reflects an increase in sales from the e-commerce retailer channel.

online channels.

Gross margin

Gross margin for the six months ended June 30, ~~2019~~2020 was $107.1 million, or 36.3%, as compared to $98.3 million, or 33.6%~~, as compared to $97.2 million, or 36.4%~~, for the corresponding period in ~~2018.~~

2019.

Gross margin for the U.S. segment was ~~$83.0~~$99.1 million, or ~~33.2%~~37.9%, for the six months ended June 30, ~~2019,~~2020, as compared to ~~$82.9~~$83.0 million, or ~~36.8%~~33.2%, for the corresponding period in ~~2018. The gross~~2019. Gross margin ~~decrease~~in the 2019 period reflects an $8.5 million charge for the SKU ~~Rationalization initiative, offset by the $1.2 million non-recurring inventory step-up charge incurred in the six month period in 2018.~~rationalization initiative. Excluding the SKU ~~Rationalization and step-up charges,~~rationalization the gross margin would have been 36.6% ~~and 37.4%~~. The increase in gross margin, excluding the ~~2019 and 2018 periods, respectively. The decrease~~SKU rationalization change, was ~~attributable~~primarily due to changes in ~~customer and~~ product mix.

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Gross margin for the International segment was ~~$15.3~~$8.0 million, or ~~36.2%~~23.9%, for the six months ended June 30, ~~2019,~~2020, as compared to ~~$14.3~~$15.3 million, or ~~34.2%~~36.2%, for the corresponding period in ~~2018.~~2019. The ~~increase~~decrease in gross margin ispercentage was primarily ~~attributable~~due to ~~the de-emphasis~~additional allowances to brick-and-mortar customers, higher inventory reserves and a decrease in sales against a period over period comparable amount of ~~lower margin private label tableware product lines.~~

fixed inventoriable costs.

Distribution expenses

Distribution expenses for the six months ended June 30, ~~2019~~2020 were ~~$31.4~~$31.7 million, as compared to ~~$32.8~~$31.4 million for the corresponding period in ~~2018.~~2019. Distribution expenses as a percentage of net sales were 10.8% for the six months ended June 30, 2020, as compared to 10.7% for the six months ended June 30, ~~2019, as compared to 12.3% for the six months ended June 30, 2018.~~

2019.

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Distribution expenses as a percentage of net sales for the U.S. segment were approximately ~~10.4%~~9.3% and ~~12.1%~~10.4% for the six months ended June 30, 2020 and 2019, ~~and 2018, respectively~~.respectively. Distribution expenses induring the six months ended June 30, 2019 ~~and 2018 periods~~ include $0.2 million ~~and $2.6 million, respectively, of costs related to~~for the Company’s facility ~~relocations.~~relocation efforts of its west coast distribution facility. As a percentage of sales shipped from the Company’s U.S. warehouses, excluding relocation expenses, distribution expenses ~~excluding the moving~~were 9.4% and ~~relocation costs for the U.S. segment, were~~ 11.3% ~~and 11.6%~~ for the six months ended June 30, 2020 and 2019, respectively. The improvement reflects the continued realization of labor management efficiency and ~~2018, respectively.~~

synergy savings as well as the leverage benefit of fixed costs on higher sales volume.

Distribution expenses as a percentage of net sales for the International segment were ~~approximately 12.8% and 13.3%~~22.2% for the six months ended June 30, ~~2019 and 2018, respectively.~~2020, compared to 12.8% for the corresponding period in 2019. Distribution expenses asduring the six months ended June 30, 2020 include $1.1 million for the Company’s facility relocation costs. As a percentage of sales shipped from the Company’s U.K. warehouses, excluding the moving and relocation costs for U.K. operations, distribution expenses were ~~12.7%~~15.5% and ~~13.9%~~12.7% for the six months ended June 30, 2020 and 2019, respectively. The increase is primarily attributed to higher labor costs associated with increased e-commerce channel sales and ~~2018, respectively.~~

temporary labor inefficiencies associated with setting up the new U.K. warehouse but not directly attributable to relocation costs.

Selling, general and administrative expenses

Selling, general and administrative expenses for the six months ended June 30, ~~2019~~2020 were ~~$81.0~~$75.9 million, ~~an increase~~a decrease of ~~$0.8~~$5.1 million, or ~~1.0%~~6.3%, as compared to ~~$80.2~~$81.0 million for the corresponding period in ~~2018.~~

2019.

Selling, general and administrative expenses for the U.S. segment were ~~$57.0~~$55.4 million for the six months ended June 30, ~~2019,~~2020, as compared to ~~$58.3~~$57.0 million for the ~~six months ended June 30, 2018.~~corresponding period in 2019. As a percentage of net sales, selling, general and administrative expenses were ~~22.8%~~21.2% and ~~25.9%~~22.8% for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~2019 period reflects the synergy savings~~decrease was primarily attributable to lower labor costs resulting from the ~~Filament acquisition, primarily from efficiencies~~Company's cost reduction strategy in ~~labor reduction initiatives. The 2018 period includes Filament from~~response to the ~~date of acquisition only.~~

COVID-19 pandemic, as well as lower selling and marketing expenses, offset by higher estimates for bad debt expense related to the economic uncertainties caused by the COVID-19 pandemic.

Selling, general and administrative expenses for the International segment were $10.8 million for the six months ended June 30, ~~2019 for the International segment were~~2020, as compared to $13.4 ~~million, an increase of $1.1 million, from $12.3~~ million for the corresponding period in ~~2018.~~2019. The ~~increase~~decrease was primarily ~~reflects~~attributable to the ~~absence~~realization of ~~a mark~~cost savings resulting from the Company's integration efforts, and lower employee and selling expenses resulting from the Company's cost reduction strategy in response to ~~market gain from foreign currency contracts in 2018. Additionally,~~ the ~~Company commenced an operating lease~~COVID-19 pandemic, offset by higher estimates for ~~its new U.K. headquarters and warehouse as part of its reorganization plan~~bad debt expense related to ~~consolidate its European operations and incurred $0.5 million in duplicative operating lease expense.~~

the economic uncertainties caused by the COVID-19 pandemic.

Unallocated corporate expenses for the six months ended June 30, ~~2019~~2020 were ~~$10.6~~$9.7 million, as compared to ~~$9.6~~$10.6 million for the corresponding period in ~~2018.~~2019. The ~~increase~~decrease was primarily attributable to executive salary costs as well as lower professional fees.

Restructuring expenses

During the six months ended June 30, 2020, the Company's international segment incurred $0.3 million of restructuring expenses related to severance associated with the strategic reorganization of the international segment’s product development and sales workforce. The strategic reorganization is ~~attributed~~the result of the Company's efforts for product development efficiencies and a country tailored international sales approach.

During the six months ended June 30, 2019, the Company incurred $0.4 million of Filament restructuring charges and$0.4 million of restructuring expenses, primarily related to ~~an increase~~severance, for the integration of its legal entities operating in ~~professional fees, partially offset by lower acquisition~~Europe.

Goodwill and infinite-lived intangible asset impairment

During the six months ended June 30, 2020, the Company recorded a $20.1 million non-cash goodwill and intangible asset impairment charge related ~~expenses.~~

to the U.S. reporting unit. The impairment charge resulted from, among other factors, more conservative estimated future cash flows in light of the uncertain market conditions arising from the COVID-19 pandemic.

Interest expense

Interest expense was $9.0 million for the six months ended June 30, 2020 and $10.0 million for the six months ended June 30, 2019 primarily as a result of lower debt outstanding and a lower interest rate environment.

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Mark to market (loss) gain on interest rate derivatives

Mark to market loss on interest rate derivatives was ~~$9.6 million, an increase of $2.8 million, from $6.8~~$2.4 million for the six months ended June 30, ~~2018.~~2020 as compared to a mark to market gain on interest rate derivatives of $0.4 million for the six months ended June 30, 2019. The ~~increase reflects higher~~decrease was primarily driven by mark to market fair value fluctuations on the Company's interest rate derivatives. These derivatives were entered into for purposes of locking-in a fixed interest rate on the Company's variable interest rate debt. The current period loss was caused by lower interest rates ~~on debt during~~as compared to the ~~2019 period, which was partially offset by lower debt balances.~~

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six months ended June 30, 2019. The intent of the Company is to hold these derivative contracts until their maturity. Therefore, the Company expects that this loss will reverse over time.

Income tax (provision) benefit

The provision for income taxes includes federal, foreign, state and local income taxes. The Company used a discrete effective tax rate method to calculate taxes for the six months ended June 30, 2020. Management determined that since minimal changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the six months ended June 30, 2020.

Income tax benefit for the six months ended June 30, ~~2019~~2020 was ~~$8.3~~$0.7 million as compared to ~~$5.6~~an income tax benefit of $8.3 million for the corresponding period in ~~2018.~~2019. The Company’s effective income tax benefit rate for the six months ended June 30, 2020 was 2.2% as compared to 33.8% for the corresponding 2019 period. The effective tax rate for the six months ended June 30, ~~2019 was 33.8%, as compared~~2020 differs from the federal statutory income tax rate of 21.0% primarily due to ~~23.8% for~~ the ~~corresponding 2018 period.~~impact of the non-deductible portion of the goodwill impairment charge (recorded in the three months ended March 31, 2020) and other permanent items, partially offset by the benefit of losses in the foreign jurisdictions. The effective ~~tax~~ rate for the six months ended June 30, 2019 differs from the federal statutory income tax rate of ~~21%~~21.0% primarily due to state and local taxes and the impact of non-deductible expenses. ~~The effective tax rate for the six months ended June 30, 2018 reflects the reduced statutory U.S. corporate income tax rate, partially offset by non-deductible expenses.~~

Equity in ~~(losses) earnings~~

losses

Equity in ~~(losses) earnings~~losses of Vasconia, net of taxes, was ~~$(0.2)~~$0.3 million for the six months ended June 30, ~~2019,~~2020, as compared to equity in ~~(losses) earnings~~losses of Vasconia, net of taxes, of $0.2 million for the six months ended June 30, ~~2018. Equity in (losses) earnings~~2019. Vasconia reported income from operations of $0.9 million for the six months ended June 30, ~~2018 includes a deferred tax expense of $(0.3) million due~~2020, as compared to the requirement to record tax benefits for foreign currency translation gains and losses through other comprehensive loss, with a corresponding adjustment to deferred tax liabilities. Vasconia reported income from operations of $4.7 million for the six months ended June 30, ~~2019, as compared~~2019. The decrease is primarily due to ~~$4.8 million for~~a decrease in operating income from Vasconia's aluminum and kitchenware division.

During the six months ended June 30, ~~2018.~~

2020, the Company recognized a loss of $0.2 million, relating to cumulative translation foreign currency losses that were recognized to earnings upon the dissolution of Lifetime Brands Do Brasil Participacoes Ltda., a 100% owned foreign subsidiary. The foreign currency translation losses related to the notes receivable due to the company from the 2016 sale of its equity interest in GS International S/A.

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LIQUIDITY AND CAPITAL RESOURCES

~~The~~

Historically, the Company’s principal sources of cash to fund liquidity needs ~~are:~~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.

As a result of the COVID-19 pandemic, there is the potential for reduced demand for the Company's products and limited distribution facility capacity. Consequently, the Company may not be able to generate cash from operations at the levels historically provided while operating under pandemic conditions.

At June 30, ~~2019,~~2020, the Company had cash and cash equivalents of ~~$10.5~~$63.5 million, compared to ~~$7.6~~$11.4 million at December 31, 2019. Working capital was $205.6 million at June 30, 2020, compared to $221.8 million at December 31, ~~2018. Working capital was $206.8 million at June 30, 2019, compared to $233.9 million at December 31, 2018.~~2019. Liquidity, which includes cash and cash equivalents and availability under the ABL Agreement, was approximately ~~$112.4~~$183.5 million at June 30, ~~2019.~~

2020.

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. ~~In addition, recent tariff increases resulted in higher inventory carrying costs at June 30, 2019.~~ For the three months ended June 30, ~~2019,~~2020, inventory turnover ~~adjusted for the SKU Rationalization initiative,~~ was 2.3 times, or 157 days, as compared to 1.8 times, or 203 ~~days, as compared to 2.1 times, or 177~~ days, for the three months ended June 30, ~~2018.~~2019, as adjusted for the SKU Rationalization initiative. The improvement was a result of programs implemented by the Company ~~expects~~to improve the productivity of its inventory, including the SKU Rationalization initiative ~~to generate increased liquidity through~~implemented in the ~~sale of inventory during the third and fourth~~second quarter of ~~2019. Liquidation~~2019, along with an increase in consumer demand for certain products in the second quarter of ~~low-margin products should improve inventory turnover rates~~2020.

The Company believes that availability under the revolving credit facility under its ABL Agreement and ~~reduce overall carrying costs.~~

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.

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. Some of the Company’s customers may be adversely and materially affected by the COVID-19 pandemic.

Credit Facilities

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

~~- 36 -~~

One or more tranches of additional term loans (the “Incremental Facilities”) may be added under the Term Loan if certain conditions are met. The Incremental Facilities may not exceed the sum of (i) $50.0 million plus (ii) an unlimited amount so long as, in the case of (ii) only, the Company’s secured net leverage ratio, as defined in and computed pursuant to the Term Loan, is no greater than 3.75 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan.

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As of June 30, 2020 and December 31, 2019, ~~borrowings outstanding under~~ the ~~ABL Agreement were $39.8 million and open letters of credit were $3.2 million. At June 30, 2019,~~total availability under the ABL Agreement was ~~approximately $101.9 million. The borrowing capacity~~as follows (in thousands):


	June 30, 2020		December 31, 2019
Maximum aggregate principal allowed	$	150,000	$	150,000
Outstanding borrowings under the ABL Agreement	(27,383)		(32,822)
Standby letters of credit	(2,677)		(2,288)
Total availability under the ABL Agreement	$	119,940	$	114,890

Availability under the ABL Agreement depends ~~in part,~~ on ~~eligible levels~~the valuation of certain current assets comprising the borrowing ~~base and the Company’s ability to meet and maintain a financial ratio, if and when applicable.~~base. Due to the seasonality of the Company’s business, this may mean that the Company will have greater borrowing availability during the third and fourth quarters of each year. The borrowing capacity under the ABL Agreement will depend, in part, on eligible levels of accounts receivable and inventory that fluctuate regularly. Consequently, the $150.0 million commitment thereunder may not represent actual borrowing capacity.

~~As of June 30, 2019, $271.6 million was outstanding under the Term Loan. At June 30, 2019, unamortized debt issuance costs of $1.5 million~~

The current and ~~$6.8 million offset the short-term and long-term outstanding balances, respectively,~~non-current portions of the Company’s Term ~~Loan.~~

Loan facility included in the condensed consolidated balance sheets were as follows (in thousands):


	June 30, 2020		December 31, 2019
Current portion of Term Loan facility:
Term Loan facility	$	—	$	2,750
Estimated Excess Cash Flow payment	15,000		7,145
Estimated unamortized debt issuance costs	(1,473)		(1,482)
Total Current portion of Term Loan facility	$	13,527	$	8,413

Non-current portion of Term Loan facility:
Term Loan facility payment, net of current portion	$	247,605	$	260,293
Estimated unamortized debt issuance costs	(5,268)		(6,012)
Total Non-current portion of Term Loan facility	$	242,337	$	254,281

Agreement.

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(ii) LIBOR, but not less than 1%, plus a margin of ~~3.50%~~3.5%. The interest rate on outstanding borrowings under the Term Loan at June 30, ~~2019~~2020 was ~~5.9%~~4.5%.

~~- 37 -~~

The Company was in compliance with the covenants of the Debt Agreements at June 30, ~~2019.~~

2020.

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

Consolidated 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 following is the Company’s consolidated adjusted EBITDA, for the last four fiscal quarters:

   Consolidated adjusted
EBITDA for the Four
Quarters Ended June 30,
2019
   (in thousands)
Three months ended June 30, 2019
   $ 4,306
Three months ended March 31, 2019
   6,127
Three months ended December 31, 2018
   30,876
Three months ended September 30, 2018
   22,722
Pro forma projected synergies
   4,763


Consolidated adjusted EBITDA, before limitation
   68,794
Permitted non-recurring charge limitation
   (8,008 )


Consolidated adjusted EBITDA
   $ 60,786


	Consolidated adjusted EBITDA for the Four Quarters Ended June 30, 2020
	(in thousands)
Three months ended June 30, 2020	$	12,388
Three months ended March 31, 2020	3,252
Three months ended December 31, 2019	27,873
Three months ended September 30, 2019	25,758



Consolidated adjusted EBITDA	$	69,271

Capital expenditures for the six months ended June 30, ~~2019~~2020 were ~~$3.9~~$1.4 million.

Non-GAAP financial measure

Consolidated 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 Securities and Exchange Commission. 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 comparison of the Company’s operating performance by investors and analysts. Management also uses this non-GAAP information as an indicator of business performance. Consolidated 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.

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The following is a reconciliation of the net ~~income (loss),~~loss, as reported, to consolidated adjusted EBITDA, for the four quarters ended June 30, ~~2019:~~

   Twelve
   Three Months Ended Months Ended
June 30,
2019
   September 30,
2018 December 31,
2018 March 31,
2019 June 30,
2019
   (in thousands)
Net income (loss) as reported
   $ 5,948 $ 9,987 $ (4,867 ) $ (11,513 ) $ (445 )
Undistributed equity (earnings) losses, net
   (185 ) (128 ) 116 69 (128 )
Income tax provision (benefit)
   906 7,558 (2,458 ) (5,795 ) 211
Interest expense
   5,634 5,591 4,922 4,694 20,841
Depreciation and amortization
   6,076 6,522 6,359 6,290 25,247
Impairment of goodwill
   2,205 —   —   —   2,205
Stock compensation expense
   1,268 1,108 907 1,193 4,476
Contingent consideration fair value adjustment
   —   (1,774 ) —   —   (1,774 )
Unrealized gain on foreign currency contracts
   (190 ) (33 ) —   —   (223 )
Other permitted non-cash charges⁽¹⁾
   307 —   —   —   307
SKU Rationalization
   —   —   —   8,500 8,500
Acquisition related expenses
   43 523 151 —   717
Restructuring expenses⁽²⁾
   552 971 608 173 2,304
Integration charges⁽²⁾
   103 433 174 695 1,405
Warehouse relocation⁽²⁾
   55 118 215 —   388
Projected synergies⁽³⁾
   —   —   —   —   4,763


Consolidated adjusted EBITDA, before limitation
   $ 22,722 $ 30,876 $ 6,127 $ 4,306 $ 68,794


Permitted non-recurring charge limitation⁽²⁾
   (8,008 )


Consolidated adjusted EBITDA
   $ 60,786

~~(1)~~

Other permitted non-cash charges include non-cash purchase accounting adjustments to step-up the fair value of acquired inventory, a permitted exclusion from the Company’s consolidated adjusted EBITDA, pursuant to the Company’s Debt Agreements.

~~(2)~~

Permitted non-recurring charges include severance expense, warehouse relocation costs, transition expenses and restructuring expenses. These are permitted exclusions from the Company’s consolidated adjusted EBITDA, subject to limitations, pursuant to the Company’s Debt Agreements.

~~(3)~~

Projected synergies represents the amount of projected cost savings, operating expense reductions, restructuring charges and expenses and cost saving synergies projected by the Company as a result of actions taken through June 30, 2019 or expected to be taken as of June 30, 2019, net of the benefits realized during the twelve months ended June 30, 2019. Projected synergies is a permitted exclusion from the Company’s consolidated adjusted EBITDA, subject to limitations, pursuant to the Company’s Debt Agreements.

~~- 39 -~~

2020:

Three Months Ended Twelve Months Ended June 30, 2020
September 30, 2019 December 31,
2019 March 31,
2020 June 30,
2020
(in thousands)
Net loss as reported $ (13,519) $ (14,516) $ (28,164) $ (3,977) $ (60,176)
Undistributed equity losses (earnings), net 210 (738) (339) 848 (19)
Income tax provision (benefit) 15,066 (5,704) (3,729) 3,031 8,664
Interest expense 5,172 5,590 4,736 4,230 19,728
Mark to market loss on interest rate derivatives — — 2,251 164 2,415
Depreciation and amortization 6,122 6,344 6,234 6,061 24,761
Goodwill and other impairments 9,748 33,242 20,100 — 63,090
Stock compensation expense 1,505 1,436 1,326 1,420 5,687
Acquisition and divestment related expenses — 55 47 55 157
Restructuring expenses 338 316 — 253 907
Integration charges 235 159 — — 394
Warehouse relocation 881 1,689 790 303 3,663
Consolidated adjusted EBITDA $ 25,758 $ 27,873 $ 3,252 $ 12,388 $ 69,271

Consolidated adjusted EBITDA is a non-GAAP financial measure which is defined in the Company’s debt agreements. Consolidated adjusted EBITDA is defined as net income (loss), adjusted to exclude undistributed equity in (earnings) losses, income tax (benefit) provision, interest expense, mark to market loss on interest rate derivatives, depreciation and amortization, goodwill and other impairments, stock compensation expense, 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 $25.0 million. HSBC will assume the credit risk of the Receivables ~~purchased;~~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 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.

Pursuant to this agreement, the Company sold to HSBC ~~$24.1~~$36.0 million and ~~$49.2~~$73.9 million of ~~Receivables~~receivables during the three and six months ended June 30, ~~2019,~~2020, respectively, and ~~$19.1~~$24.1 million and ~~$38.7~~$49.2 million of ~~Receivables~~receivables during the three and six months ended June 30, 2018, respectively. Charges of $138,500 and $286,000 related to the sale of the Receivables are included in selling, general and administrative expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2019, respectively. Charges of ~~$99,000 and $189,000~~$0.1 million related to the sale of the ~~Receivables~~receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2020 and June 30, 2019. Charges of $0.3 million related to the sale of the receivables are included in selling, general and administrative expenses in the unaudited condensed consolidated statements of operations for the six months ended June 30, ~~2018, respectively.~~

2020 and June 30, 2019. At June 30, 2020 and 2019, $20.8 million and $14.8 million , respectively, of receivables sold were outstanding and due to HSBC from customers.

Derivatives

Interest Rate Swaps

The Company is a party to interest rate swap agreements, with an aggregate notional value of ~~$100~~$75.0 million at June 30, ~~2019. The Company~~2020, designated ~~the interest rate swaps~~ as cash flow hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings. The hedge periods of these agreements commenced in April 2018 and expire in March 2023. The notional amounts are reduced over these periods. ~~In June 2019, the~~

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The Company entered into ~~new~~additional interest rate swap agreements, with an aggregate notional value of $25.0 million at June 30, ~~2019. These~~2020 that do not meet the criteria for hedge accounting treatment. As a result, these interest rate swap agreements are considered non-designated interest rate swaps that serve as ~~cash flow~~economic hedges of the Company’s exposure to the variability of the payment of interest on a portion of its Term Loan borrowings and expire in February 2025.

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

Foreign Exchange Contracts

The Company ~~has also entered into~~is a party from time to time to certain foreign exchange contracts, primarily to ~~primarily~~ offset the earnings impact related to fluctuations in foreign currency exchange rates associated with ~~sales and~~ inventory purchases denominated in foreign currencies. ~~Beginning~~Fluctuations in the value of certain foreign currencies as compared to the U.S. dollar 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 ~~January 29, 2019, these~~earnings. The Company purchases short-term (i.e. 12 months or less) foreign currency forward contracts 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 Company's foreign exchange contracts, ~~have~~that had been ~~designated~~designed as hedges ~~as required~~ in order to apply hedge accounting, ~~and accordingly,~~matured in April 2020. As of June 30, 2020 the Company did not have any outstanding foreign exchange contracts.

The Company is exposed to market risks as well as changes in foreign currency exchange rates as measured against the ~~fair value~~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 ~~recorded in accumulated other comprehensive loss in~~components of hedging programs and are entered into for the ~~condensed consolidated statements~~sole purpose of ~~stockholders equity. Prior to January 29, 2019, these~~hedging an existing or anticipated currency exposure. The Company does not enter into such contracts for speculative purposes and as of June 30, 2020, the Company does not have any foreign ~~exchange contracts were~~currency forward contract derivatives that are not designated as ~~hedges as required in order to apply hedge accounting. The changes in the fair value of these contracts are recorded in the condensed consolidated statements of operations.~~

hedges.

Operating activities

Net cash provided by operating activities was $66.2 million and $7.1 million for the six months ended June 30, 2020 and 2019, respectively. The change in 2020 as compared to ~~net cash used in operating activities of $5.8 million for~~ the corresponding ~~2018 period. The increase in~~ 2019 ~~as compared to 2018~~period was primarily attributable to ~~favorable~~inventory reduction initiatives commencing in the second quarter of 2019, the timing of collections related to the Company's accounts receivable, in addition to cost savings initiatives and payment ~~of accounts payable and accrued expenses as well as additional cash generated from Filament.~~

deferral strategies utilized in response to the COVID-19 pandemic.

Investing activities

Net cash used in investing activities was ~~$3.9~~$1.4 million and ~~$221.1~~$3.9 million for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~2018 investing activity includes~~change in 2020 as compared to the ~~cash consideration paid for~~corresponding 2019 period was primarily attributable to higher capital expenditures in the ~~acquisition of Filament.~~

~~- 40 -~~

2019 period resulting from the Company's U.K. reorganization and warehouse consolidation efforts.

Financing activities

Net cash used in financing activities was $12.3 million and $0.5 million for the six months ended June 30, 2020 and 2019, ~~as compared to net cash provided by financing activities of $225.4 million for the corresponding 2018 period.~~respectively. The change ~~in financing activities~~ was mainly attributable to repayments on the ~~new Debt Agreements entered into~~Company's revolving credit facility under its ABL Agreement and the Company's term loan in ~~order to finance the acquisition~~2020.

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Table of ~~Filament in 2018.~~

Contents

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 ~~2018~~2019 Annual Report on Form 10-K.

Item 4. Controls and Procedures

(a)	~~Evaluation of Disclosure 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 June 30, ~~2019,~~2020, 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~~

The Company implemented the new lease standard under ASC 842 as of January 1, 2019. In connection with these changes, the Company implemented certain modifications to internal controls over financial reporting, including the documentation of the policy regarding the new accounting for leases, implementation of processes to address various judgments and assessments necessary during the life of a lease, as well as implementing new controls to capture the expanded disclosures required under ASC 842.

~~Except as described above, there have been~~

(b)Changes in Internal Controls

There were no ~~other~~ changes in the Company’s internal controls over financial reporting that occurred during the Company’s most recent fiscal quarter ~~ended June 30, 2019~~ that ~~have~~has materially affected, or ~~are~~is reasonably likely to materially affect, the Company’s internal ~~control~~controls over financial reporting.

~~- 41 -~~

We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the effects that the COVID-19 pandemic may have on our internal controls to minimize the impact on their design and operating effectiveness.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Wallace EPA Matter

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.

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second operable unit under which the EPA has and will continue to conduct further investigations to determine the nature and extent of groundwater contamination, as well as a determination by the EPA on the necessity of any further response actions to address groundwater contamination. In February 2017, the EPA indicated that it planned to expand its field investigation for the RI/FS to a second operable unit to further determine the nature and extent of the groundwater ~~damage~~contamination at and from the Site and to determine the nature of the remedial action ~~needed.~~needed to address the contamination. The EPA has requested access to the property occupied by WSPR to install monitoring wells and to undertake groundwater sampling as part of this expanded investigation. WSPR has consented to the EPA’s access request, ~~subject to~~provided that the EPA receives PRIDCO’s consent, as the property owner.

~~On July 19, 2019, WSPR’s counsel received an email from the US Department of Justice attorney representing the~~

Accordingly, based on the above uncertainties and variables, it is not possible at this time for the Company to estimate its share of liability, if any, related to this matter. However, in the event of one or more ~~definitive claims because of property damage asserted against the Company and~~ 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

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.

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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 ~~such~~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.

Item 1A. Risk Factors

~~There have been no material changes~~

In light of recent developments relating to COVID-19, the Company is supplementing Item 1A. Risk Factors in the ~~Company’s risk factors from those disclosed in the Company’s 2018~~2019 Annual Report on Form 10-K.

The following risk factor should be read in conjunction with the risk factors described in the 2019 Annual Report on Form 10-K.

The Company must successfully manage the demand, supply, and operational challenges associated with the actual or perceived effects of the COVID-19 pandemic. Any failure to do so could have a material adverse impact on the Company’s business, financial condition, results of operations, cash flows, and competitive position.

The COVID-19 pandemic has negatively impacted the global economy and disrupted global supply chains. Continuing concerns over economic and business prospects in the U.S. and other countries have contributed to increased volatility and diminished expectations for the global economy. These factors, coupled with the prospect of decreased business and consumer confidence and increased unemployment resulting from the outbreak of COVID-19, may precipitate a prolonged economic slowdown and recession.

The Company’s business may be unfavorably impacted by the fear of exposure to or actual effects of the COVID-19 pandemic, such as reduced travel or recommendations or mandates from governmental authorities to cease particular business activities.

These impacts include, but are not limited to:

•Reductions in demand or volatility in demand for one or more of the Company’s products, which may be caused by, among other things: the temporary inability of consumers to purchase the Company’s products due to illness, brick and mortar retailers closing their store operations, which has resulted in reduced demand from such customers, quarantine or other travel restrictions, or financial hardship for customers and consumers;

•Inability to meet the Company’s customers’ needs and achieve cost targets due to disruptions in the Company's supply chain arrangements as well as distribution centers caused by the loss or disruption of transportation, workforce, or other distribution capability;

•Failure of third parties on which the Company relies, including the Company’s suppliers, third-party manufacturers, distributors, and external business partners, to meet their obligations to the Company, including due to a lack of manufacturing capacity, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties;

•Significant changes in the political and labor conditions in markets in which the Company sells, or distributes products, including quarantines, governmental or regulatory actions, closures or other restrictions that limit or close the Company’s distribution facilities, restrict the Company’s employees’ ability or willingness to travel or perform necessary business functions, or otherwise prevent the Company's facilities or its third-party partners, suppliers, or customers from sufficiently staffing operations, including operations necessary for the production, distribution, sale, and support of the Company's products;

•Increased cybersecurity threats that could result from many of the Company’s key employees working remotely; new and preexisting technologies such as reliance on home networks, virtual workspaces, videoconferencing, and other forms of remote work practices to support this temporary working environment may expose additional cybersecurity threats and vulnerabilities to the Company's network, and increase the exposure of the Company to electrical or internet outages; or

•Negative impact on the Company’s workforce that could result if executive officers or other key employees or a large number of its workers fall ill.The temporary or permanent loss of any of the Company’s executive officers or other key employees could harm the Company’s business and negatively affect the Company’s ability to timely achieve its strategic initiatives.Moreover, the Company may not be successful in finding and integrating suitable successors in

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the event of the loss of executive officers or other key employees or if such persons become unavailable for a prolonged period of time.

There are no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of the outbreak is highly uncertain and subject to change. The Company does not yet know the full extent of the impact of COVID-19 on the global economy. Although disruptions from COVID-19 may continue to occur, the long-term economic impact and near-term financial impact on the Company of the COVID-19 pandemic, including but not limited to, any possible impairment, restructuring, and other charges, cannot be reliably quantified or estimated at this time due to the uncertainty of future developments. Despite efforts to manage and remedy the impact of COVID-19, the ultimate impact of COVID-19 could materially and adversely affect the Company’s business, financial condition, results of operations, cash flows, and competitive position, and depends on factors beyond the Company’s knowledge or control, including the duration and severity of COVID-19 as well as third-party actions taken to contain its spread and mitigate its public health effects.

Item 2. Unregistered Sales of Equity Securities

and Use of Proceeds

Issuer Purchases of Equity Securities

Period
   Total number of
shares
purchased⁽¹⁾    Average price
paid per share    Total number of
shares purchased
as part of publicly
announced plans
or programs⁽²⁾    Maximum
approximate
dollar value of
shares that may
yet be purchased
under the plans
or programs
subsequent to
end of period⁽²⁾
April 1 - April 30, 2019
   2,972    $ 9.33    —      $ 6,771,467
May 1 - May 31, 2019
   255    9.52    —      6,771,467
June 1 - June 30, 2019
   30,021    8.73    —      6,771,467

~~(1)~~

The repurchased shares were acquired other than as part of a publicly announced plan or program. The Company repurchased these securities in connection with its Amended and Restated 2000 Long Term Incentive Plan which allow participants to use shares to satisfy the exercise price of options exercised, certain tax liabilities arising from the exercise of options, and certain tax liabilities arising from the vesting of restricted stock. The number above does not include unvested shares forfeited back to us pursuant to the terms of our stock compensation plans.

~~(2)~~

On April 30, 2013, the Board of Directors of Lifetime Brands, Inc. authorized the repurchase of up to $10.0 million of the Company’s common stock. The repurchase authorization permits the Company to effect the repurchases from time to time through open market purchases and privately negotiated transactions. No repurchases occurred during the six months ended June 30, 2019.


Period	Total number of shares purchased⁽¹⁾	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs⁽²⁾	Maximum approximate dollar value of shares that may yet be purchased under the plans or programs subsequent to end of period ⁽²⁾
May 1 - May 31, 2020	249	$	4.84	—	$	6,771,467
June 1 - June 30, 2020	26,348	7.07		—	6,771,467

(1)The repurchased shares were acquired other than as part of a publicly announced plan or program. The Company repurchased these securities in connection with its Amended and Restated 2000 Long Term Incentive Plan which allow participants to use shares to satisfy the exercise price of options exercised, certain tax liabilities arising from the exercise of options, and certain tax liabilities arising from the vesting of restricted stock. The number above does not include unvested shares forfeited back to us pursuant to the terms of our stock compensation plans.

(2)On April 30, 2013, the Board of Directors of Lifetime Brands, Inc. authorized the repurchase of up to $10.0 million of the Company’s common stock. The repurchase authorization permits the Company to effect the repurchases from time to time through open market purchases and privately negotiated transactions. No repurchases occurred during the three months ended June 30, 2020.

- 4347 -

Table of Contents

Item 6. Exhibits

See the Exhibit Index below, which is incorporated by reference herein.

Exhibit Index


Exhibit No.
10.1			Amended and Restated 2000 Long-Term Incentive Plan (filed as Appendix B to the Registrant's Definitive Proxy Statement on Schedule 14A, filed on April 29, 2020 and incorporated by reference herein).

~~Exhibit No.~~31.1

~~10.1~~	Amended and Restated Employment Agreement dated June 27, 2019 between Lifetime Brands, Inc. and Jeffrey Siegel (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 28, 2019)

~~31.1~~	Certification by Robert B. Kay, Chief Executive Officer and Director, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
~~31.2~~		Certification by Laurence Winoker, Senior Vice President – Finance, Treasurer and Chief Financial Officer, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1			Certification by Robert B. Kay, Chief Executive Officer and Director, and Laurence Winoker, Senior Vice President – Finance, Treasurer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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~~
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

- 4448 -

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Lifetime Brands, Inc.

~~Lifetime Brands, Inc.~~		/s/ Robert B. Kay		August 6, 2020
		Robert B. Kay
		Chief Executive Officer and Director
		(Principal Executive Officer)

~~/s/ Robert B. Kay~~			~~August 8, 2019~~
~~Robert B. Kay~~		/s/ Laurence Winoker		August 6, 2020
		Laurence Winoker
~~Chief Executive Officer and Director~~
~~(Principal Executive Officer)~~

~~/s/ Laurence Winoker~~	~~August 8, 2019~~
~~Laurence Winoker~~
Senior Vice President – Finance, Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

- 4549 -


	June 30,			December 31,
	2019			2018
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	10,535		$	7,647
Accounts receivable, less allowances of $7,473 at June 30, 2019 and $7,855 at December 31, 2018		91,109			125,292
Inventory		205,607			173,601
Prepaid expenses and other current assets		12,724			10,822
Income taxes receivable		10,690			1,442

TOTAL CURRENT ASSETS		330,665			318,804
PROPERTY AND EQUIPMENT, net		26,563			25,762
OPERATING LEASE RIGHT-OF-USE ASSETS		109,757			—
INVESTMENTS		20,935			22,582
INTANGIBLE ASSETS, net		331,314			338,847
DEFERRED INCOME TAXES		122			733
OTHER ASSETS		3,345			1,844

TOTAL ASSETS	$	822,701		$	708,572

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturity of term loan	$	13,261		$	1,253
Accounts payable		48,495			38,167
Accrued expenses		50,966			45,456
Current portion of operating lease liability		11,163			—

TOTAL CURRENT LIABILITIES		123,885			84,876
DEFERRED RENT & OTHER LONG-TERM LIABILITIES		10,055			23,339
DEFERRED INCOME TAXES		15,103			15,141
OPERATING LEASE LIABILITIES		114,630			—
INCOME TAXES PAYABLE, LONG-TERM		949			949
REVOLVING CREDIT FACILITY		44,913			42,080
TERM LOAN		250,062			262,694
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, $.01 par value, shares authorized: 50,000,000 at June 30, 2019 and December 31, 2018; shares issued and outstanding: 21,255,218 at June 30, 2019 and 20,764,143 at December 31, 2018		213			208
Paid-in capital		260,461			258,637
Retained earnings		37,090			55,264
Accumulated other comprehensive loss		(34,660	)		(34,616	)

TOTAL STOCKHOLDERS’ EQUITY		263,104			279,493

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	822,701		$	708,572


	Common stock					Paid-in			Retained			Accumulated other
Six Months Ended June 30, 2018	Shares			Amount		capital			earnings			comprehensive loss			Total
BALANCE AT DECEMBER 31, 2017		14,903		$	149	$	178,909		$	60,546		$	(29,325	)	$	210,279
Comprehensive loss:
Net loss		—			—		—			(11,598	)		—			(11,598	)
Translation adjustment		—			—		—			—			3,380			3,380
Derivative fair value adjustment		—			—		—			—			(14	)		(14	)
Effect of retirement benefit obligations		—			—		—			—			18			18

Total comprehensive loss																(8,214	)

Issuance of 5,593,116 shares of common stock for acquisition of Filament, net of equity issuance costs		5,593			56		75,920			—			—			75,976
Restricted shares issued to directors		3			—		—			—			—			—
Net issuance of restricted shares to employees		126			1		(1	)		—			—			—
Stock compensation expense		—			—		838			—			—			838
Shares effectively repurchased for required employee withholding taxes		(19	)		—		(258	)		—			—			(258	)
Dividends⁽¹⁾		—			—		—			(880	)		—			(880	)

BALANCE AT MARCH 31, 2018		20,606			206		255,408			48,068			(25,941	)		277,741
Comprehensive loss:
Net loss		—			—		—			(6,057	)		—			(6,057	)
Translation adjustment		—			—		—			—			(5,489	)		(5,489	)
Derivative fair value adjustment		—			—		—			—			(263	)		(263	)
Effect of retirement benefit obligations		—			—		—			—			17			17

Total comprehensive loss																(11,792	)

Filament net equity issuance costs adjustment		—			—		(6	)								(6	)
Restricted shares issued to directors		54			—		—			—			—			—
Net issuance of restricted shares to employees		93			1		(1	)		—			—			—
Stock compensation expense		—			—		921			—			—			921
Shares effectively repurchased for required employee withholding taxes		(12	)		—		(140	)		—			—			(140	)
Dividends⁽¹⁾		—			—		—			(885	)		—			(885	)

BALANCE AT JUNE 30, 2018		20,741			207		256,182			41,126			(31,676	)		265,839


	Common stock					Paid-in			Retained			Accumulated other
Six Months Ended June 30, 2019	Shares			Amount		capital			earnings			comprehensive loss			Total
BALANCE AT DECEMBER 31, 2018		20,764		$	208	$	258,637		$	55,264		$	(34,616	)	$	279,493
Comprehensive loss:
Net loss		—			—		—			(4,867	)		—			(4,867	)
Translation adjustment		—			—		—			—			1,306			1,306
Net change in cash flow hedges		—			—		—			—			596			596
Effect of retirement benefit obligations		—			—		—			—			13			13

Total comprehensive loss																(2,952	)

Net issuance of restricted shares to employees		169			1		(1	)		—			—			—
Stock compensation expense		—			—		900			—			—			900
Net exercise of stock options		19			—		—			—			—			—
Shares effectively repurchased for required employee withholding taxes		(25	)		—		(232	)		—			—			(232	)
Dividends⁽¹⁾		—			—		—			(898	)		—			(898	)

BALANCE AT MARCH 31, 2019		20,927		$	209	$	259,304		$	49,499		$	(32,701	)	$	276,311
Comprehensive loss:
Net loss		—			—		—			(11,513	)		—			(11,513	)
Translation adjustment		—			—		—			—			(2,953	)		(2,953	)
Net change in cash flow hedges		—			—		—			—			982			982
Effect of retirement benefit obligations		—			—		—			—			12			12

Total comprehensive loss																(13,472	)

Restricted shares issued to directors		61			1		(1	)		—			—			—
Net issuance of restricted shares to employees		250			3		(3	)		—			—			—
Stock compensation expense		—			—		1,186			—			—			1,186
Net exercise of stock options		34			—		133			—			—			133
Shares effectively repurchased for required employee withholding taxes		(17	)		—		(158	)		—			—			(158	)
Dividends⁽¹⁾		—			—		—			(896	)		—			(896	)

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


	Three Months Ended		Six Months Ended
	June 30, 2019		June 30, 2019
U.S. Segment
Kitchenware	$	65,625	$	134,892
Tableware		28,759		55,211
Home Solutions		28,708		60,027

Total U.S.Segment		123,092		250,130

International Segment
Kitchenware		12,376		26,512
Tableware		7,068		15,820

Total International Segment		19,444		42,332

Total net sales	$	142,536	$	292,462

United States	$	116,683	$	238,092
United Kingdom		14,775		30,712
Rest of World		11,078		23,658

Total net sales	$	142,536	$	292,462


Accounts receivable	$	26,224
Inventory		29,044
Other assets		5,620
Other liabilities		(23,018	)
Deferred income tax		(13,881	)
Goodwill and other intangibles		270,427

Total allocated value	$	294,416


	Three Months Ended			Six Months Ended
	June 30, 2018			June 30, 2018
	(in thousands, except per share data)
Net sales	$	148,651		$	292,631
Loss before income taxes and equity in earnings		(6,694	)		(22,904	)
Net loss		(5,092	)		(17,235	)
Basic and diluted loss per common share		(0.25	)		(0.85	)


	Operating
2019 (excluding the six months ending June 30, 2019)	$	9,952
2020		17,461
2021		17,102
2022		17,178
2023		17,343
Thereafter		88,825

Total lease payments		167,861
Less: Interest		(42,068	)

Present value of lease liabilities	$	125,793


	June 30, 2019							December 31, 2018
			Accumulated										Accumulated
	Gross		Amortization			Net		Gross		Impairment			Amortization			Net
Goodwill	$	92,637	$	—		$	92,637	$	93,895	$	(2,205	)	$	—		$	91,690
Indefinite-lived intangible assets:
Trade names		58,216		—			58,216		58,216		—			—			58,216
Finite-lived intangible assets:
Licenses		15,847		(10,059	)		5,788		15,847		—			(9,825	)		6,022
Trade names		43,559		(15,545	)		28,014		43,689		—			(13,965	)		29,724
Customer relationships		175,396		(33,691	)		141,705		175,482		—			(27,538	)		147,944
Other		6,508		(1,554	)		4,954		6,510		—			(1,259	)		5,251

Total	$	392,163	$	(60,849	)	$	331,314	$	393,639	$	(2,205	)	$	(52,587	)	$	338,847


	Options			Weighted- average exercise price		Weighted- average remaining contractual life (years)		Aggregate intrinsic value
Options outstanding, January 1, 2019		1,548,825		$	13.87
Grants		296,500			9.21
Exercises		(75,000	)		4.28
Cancellations		(6,750	)		13.34
Expirations		(68,125	)		15.57

Options outstanding, June 30, 2019		1,695,450			13.41		4.9	$	87,425

Options exercisable, June 30, 2019		1,212,172		$	14.27		3.1	$	87,425


	Performance- based stock awards⁽¹⁾			Weighted- average grant date fair value
Non-vested performance-based awards, January 1, 2019		339,287		$	14.82
Grants		156,775			9.21
Vested		(66,761	)		15.69
Cancellations		(25,767	)		15.46

Non-vested performance-based awards, June 30, 2019		403,534		$	12.45

Total unrecognized compensation expense remaining	$	3,037,000
Weighted-average years expected to be recognized over		1.9


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(in thousands, except per share amounts)
Net loss– basic and diluted	$	(11,513	)	$	(6,057	)	$	(16,380	)	$	(17,655	)
Weighted-average shares outstanding – basic and diluted		20,545			20,327			20,527			18,474
Basic and diluted loss per common share	$	(0.56	)	$	(0.30	)	$	(0.80	)	$	(0.96	)


	Consolidated adjusted EBITDA for the Four Quarters Ended June 30, 2019
	(in thousands)
Three months ended June 30, 2019	$	4,306
Three months ended March 31, 2019		6,127
Three months ended December 31, 2018		30,876
Three months ended September 30, 2018		22,722
Pro forma projected synergies		4,763

Consolidated adjusted EBITDA, before limitation		68,794
Permitted non-recurring charge limitation		(8,008	)

Consolidated adjusted EBITDA	$	60,786


													Twelve
	Three Months Ended												Months Ended June 30, 2019
	September 30, 2018			December 31, 2018			March 31, 2019			June 30, 2019			Months Ended June 30, 2019
		(in thousands)
Net income (loss) as reported	$	5,948		$	9,987		$	(4,867	)	$	(11,513	)	$	(445	)
Undistributed equity (earnings) losses, net		(185	)		(128	)		116			69			(128	)
Income tax provision (benefit)		906			7,558			(2,458	)		(5,795	)		211
Interest expense		5,634			5,591			4,922			4,694			20,841
Depreciation and amortization		6,076			6,522			6,359			6,290			25,247
Impairment of goodwill		2,205			—			—			—			2,205
Stock compensation expense		1,268			1,108			907			1,193			4,476
Contingent consideration fair value adjustment		—			(1,774	)		—			—			(1,774	)
Unrealized gain on foreign currency contracts		(190	)		(33	)		—			—			(223	)
Other permitted non-cash charges⁽¹⁾		307			—			—			—			307
SKU Rationalization		—			—			—			8,500			8,500
Acquisition related expenses		43			523			151			—			717
Restructuring expenses⁽²⁾		552			971			608			173			2,304
Integration charges⁽²⁾		103			433			174			695			1,405
Warehouse relocation⁽²⁾		55			118			215			—			388
Projected synergies⁽³⁾		—			—			—			—			4,763

Consolidated adjusted EBITDA, before limitation	$	22,722		$	30,876		$	6,127		$	4,306		$	68,794

Permitted non-recurring charge limitation⁽²⁾														(8,008	)

Consolidated adjusted EBITDA													$	60,786


	Three Months Ended										Twelve Months Ended June 30, 2020
	September 30, 2019		December 31, 2019		March 31, 2020		June 30, 2020
	(in thousands)
Net loss as reported	$	(13,519)	$	(14,516)	$	(28,164)	$	(3,977)	$	(60,176)
Undistributed equity losses (earnings), net	210		(738)		(339)		848		(19)
Income tax provision (benefit)	15,066		(5,704)		(3,729)		3,031		8,664
Interest expense	5,172		5,590		4,736		4,230		19,728
Mark to market loss on interest rate derivatives	—		—		2,251		164		2,415
Depreciation and amortization	6,122		6,344		6,234		6,061		24,761
Goodwill and other impairments	9,748		33,242		20,100		—		63,090
Stock compensation expense	1,505		1,436		1,326		1,420		5,687




Acquisition and divestment related expenses	—		55		47		55		157
Restructuring expenses	338		316		—		253		907
Integration charges	235		159		—		—		394
Warehouse relocation	881		1,689		790		303		3,663

Consolidated adjusted EBITDA	$	25,758	$	27,873	$	3,252	$	12,388	$	69,271