More annual reports from Lifetime Brands:
2023 ReportPeers and competitors of Lifetime Brands:
Hamilton Beach Brands CompanySCAN THIS QR CODE TO VISIT THE LIFETIME BRANDS WEBSITE SCAN THIS QR CODE TO VISIT THE LIFETIME BRANDS WEBSITE Lifetime Brands Annual Report 2010 S N O I T C E N N O C G N I K A M 0 3 5 1 1 k r o Y w e N y, Cit n e d r a G e, u n e v A d n t a r a r B w e e t tim S 0 e 0 Lif 0 1 s, In c. LTB 10 AnnualReport Cover NEW ALT.indd 1-2 4/25/11 3:12 PM 1 0 0 1 0 0 0 0 1 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 2 0 0 2 0 0 0 0 2 0 0 0 0 0 2 0 0 0 2 0 0 0 0 0 0 2 0 0 0 0 0 0 2 0 0 0 0 0 2 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 3 0 0 3 0 0 0 0 3 0 0 0 0 0 3 0 0 0 3 0 0 0 0 0 0 3 0 0 0 0 0 0 3 0 0 0 0 0 3 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Financial Highlights 2 0 0 2 7 0 0 2 7 2 0 0 0 0 2 7 2 8 0 0 2 0 0 0 7 2 8 0 2 0 2 7 0 0 0 0 2 0 8 2 9 2 0 7 0 2 0 0 0 0 0 8 2 9 0 2 7 0 2 2 8 0 0 0 0 2 0 1 2 0 9 0 0 2 7 0 2 8 0 0 2 0 0 7 1 0 0 0 9 2 0 2 8 2 0 9 0 0 1 2 0 0 0 2 0 2 8 2 0 0 9 0 2 2 0 0 1 8 0 2 0 0 0 2 7 0 0 1 2 9 0 0 2 0 7 0 0 0 2 2 7 2 0 7 2 0 1 0 0 0 9 0 2 0 0 0 2 0 0 9 2 7 0 2 7 2 1 2 8 0 0 0 0 0 2 0 2 0 0 0 8 0 0 0 7 2 2 7 2 8 2 0 1 8 2 0 0 0 2 0 0 7 0 0 0 0 1 0 2 0 0 2 0 7 8 0 2 2 8 2 9 2 0 7 0 0 0 2 0 0 0 0 0 9 0 0 0 8 2 2 8 9 2 0 9 2 7 0 2 0 2 0 8 0 0 0 0 0 0 2 2 0 1 2 0 9 8 0 2 9 0 0 2 7 0 2 2 8 0 0 0 1 2 0 0 0 0 0 7 1 0 0 1 0 9 2 9 2 0 0 2 2 8 0 2 0 0 9 0 0 0 1 2 1 0 0 0 2 0 9 0 2 2 8 0 2 0 9 0 0 2 2 0 0 1 8 1 2 0 0 0 0 0 7 2 2 0 0 1 2 9 0 0 0 2 0 7 0 0 0 1 2 2 7 2 0 0 7 2 0 0 1 0 0 9 0 2 0 0 0 2 0 0 2 7 9 2 0 2 7 8 1 2 0 0 0 0 0 2 0 2 0 0 0 8 0 0 0 7 2 2 7 8 2 2 0 1 2 8 0 2 0 0 0 0 7 0 0 0 0 1 0 2 0 0 2 0 8 7 2 0 2 8 9 2 2 0 7 0 0 0 2 0 0 0 0 0 9 0 0 0 8 2 2 9 8 2 0 2 9 7 0 2 2 0 0 8 0 0 0 0 0 2 0 2 0 1 2 0 9 0 8 2 9 0 2 0 7 0 2 2 8 0 0 0 1 2 0 0 0 0 7 0 1 0 0 0 1 9 2 2 9 0 0 2 2 8 2 0 0 0 9 0 0 0 1 2 1 0 0 2 0 0 0 2 9 2 8 0 2 0 9 0 0 2 2 0 0 1 8 2 1 0 0 0 0 7 0 2 0 2 0 1 2 9 0 0 2 0 0 7 0 0 0 2 2 1 7 2 0 0 7 2 0 0 1 0 0 9 0 2 0 0 0 2 0 0 2 7 9 2 0 2 7 8 1 0 2 0 0 0 0 2 0 2 0 0 0 0 8 0 0 7 2 2 8 7 2 2 0 1 2 8 0 2 0 0 0 0 7 0 0 0 0 1 0 2 0 0 2 0 8 7 2 0 2 8 9 2 2 0 7 0 0 0 2 0 0 0 0 0 9 0 0 0 8 2 9 2 8 2 0 2 7 9 0 2 2 0 0 8 0 0 0 0 0 2 0 2 0 1 2 0 9 0 8 2 9 0 2 0 7 0 2 2 8 0 0 0 1 2 0 0 0 0 7 0 1 0 0 0 9 1 2 2 9 0 0 2 2 8 2 0 0 0 9 0 0 0 1 2 1 0 0 0 0 0 2 9 2 8 2 0 9 0 0 2 2 0 1 8 0 1 0 0 0 0 2 2 0 1 2 9 0 0 2 0 7 0 0 0 2 1 2 0 0 7 0 1 0 0 9 2 0 0 2 0 9 0 2 7 1 2 0 0 0 0 2 0 8 0 0 2 7 2 2 1 8 0 0 0 0 0 1 0 2 0 7 0 2 8 2 0 0 0 0 9 0 2 8 2 9 0 0 0 0 2 8 2 9 0 2 0 1 0 0 0 1 2 9 0 2 0 0 0 1 0 9 2 0 1 0 2 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 NET SALES IN MILLIONS 1 1 0 0 1 0 1 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 1 0 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 1 0 0 $ 0 0 8 0 0 0 $ 8 0 2 2 0 0 2 0 2 0 0 0 0 0 0 2 0 0 0 0 2 0 0 0 0 0 0 0 2 0 0 0 2 0 0 0 0 0 2 0 0 2 0 0 0 0 0 0 0 2 0 0 0 0 0 0 0 0 0 2 0 0 0 0 0 2 0 0 2 0 0 0 0 0 0 0 0 . . . . . . . . . . . . . . . . . . . . . . . . $ 3 $ 3 $ 3 $ 3 $ 3 $ 3 $ 3 2 0 2 0 0 0 0 2 0 0 0 0 0 2 0 0 0 0 2 0 0 0 0 0 0 1 5 1 5 1 5 1 1 5 5 1 5 1 5 1 1 5 5 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 1 0 0 0 5 0 5 0 5 0 0 5 5 0 5 0 5 0 0 5 5 0 0 ( $ $ 8 4 1 ( 8 $ $ ) 0 0 1 4 8 0 $ . 0 8 ( 0 0 8 $ ) 0 0 1 4 0 0 0 . $ 0 0 8 ( 8 0 0 0 $ ) 0 1 ( 4 0 . $ $ 0 0 8 0 0 8 4 0 ) 0 1 ( 8 0 $ . $ ) 0 NET INCOME (LOSS) 0 0 4 0 0 8 0 $ . 8 ( 0 IN MILLIONS 8 0 $ ) 0 4 0 0 . 8 0 ( $ ) 0 ( 4 . $ 0 8 4 ) 0 8 . ) 0 0 0 ( $ 3 ( ( . $ 9 $ ( 4 9 3 $ 8 ) . 4 ( 9 ) $ 0 0 ( 8 9 3 $ ) . ) 0 0 . 4 ( 9 0 . $ 8 0 ( 9 ( 3 ) $ 0 ) $ . 4 9 . DILUTED INCOME (LOSS) 3 0 0 8 ( 9 . ( 9 ) $ $ 0 ) PER COMMON SHARE 9 4 3 . 0 ) 0 8 . ( 9 ) $ 0 0 9 3 . ) 0 . ( 9 0 $ 9 ( 3 ) $ . 9 3 0 9 9 ) 9 0 ) 0 5 0 0 5 0 0 0 1 0 5 0 1 0 0 0 0 0 5 1 0 0 5 0 0 0 0 1 0 0 5 0 0 0 0 0 1 0 5 0 0 0 0 0 5 0 0 5 0 0 0 0 0 0 0 0 $ 0 5 $ $ 7 0 8 $ 5 8 $ 7 0 $ 8 5 $ 7 0 $ $ 5 8 0 7 5 $ $ 7 0 8 5 $ 7 0 5 $ 7 0 $ 5 0 7 5 7 0 0 5 5 0 5 0 5 0 5 1 1 5 5 1 5 1 5 1 5 $ 0 2 $ $ 2 0 3 $ 2 3 $ 2 0 $ 2 3 $ 2 0 $ $ 2 0 3 2 2 $ 2 3 $ 3 $ 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0 5 7 5 $ 7 0 5 $ 7 0 5 $ 7 0 5 7 . . . $ 0 2 $ 2 0 $ 2 0 2 2 2 . . . . ( $ ( 3 $ 9 3 9 . ( 9 $ ) 9 3 0 ) . $ DEBT ( 9 0 $ 0 9 $ 3 IN MILLIONS ) 0 2 . ( 9 2 0 $ 2 $ 9 3 2 0 ) . 9 0 2 $ 9 2 0 ) 0 2 $ 2 0 2 2 . . . . 5 0 5 0 0 0 0 5 0 0 0 0 0 5 0 0 0 0 5 0 0 0 0 0 0 3 3 0 0 3 0 3 0 0 0 0 0 0 3 0 0 0 0 3 0 0 0 0 0 0 0 3 0 0 0 3 0 0 0 0 0 3 0 0 3 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 3 0 0 3 0 0 0 0 0 0 0 0 3 0 3 0 0 0 0 3 0 0 0 0 0 3 0 0 0 0 3 0 0 0 0 0 0 . . . . 2 5 2 5 2 5 2 2 5 5 2 5 2 5 2 2 5 5 . . . . . . . . 2 2 5 5 2 5 2 5 2 5 . . . . . . . . . . . 2 0 2 0 2 0 2 2 0 0 2 0 2 0 2 2 0 0 1 0 0 1 0 0 0 0 1 0 2 0 0 0 2 0 0 1 0 0 0 0 1 2 0 0 0 0 0 0 0 1 2 0 0 0 0 0 0 0 1 0 2 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 . . . . . 1 0 1 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 $ 9 5 $ 9 5 $ 9 5 $ 9 $ 5 9 5 $ 9 5 $ 9 5 $ 9 $ 5 9 5 $ 2 0 $ 2 0 $ 2 0 $ 2 $ 0 2 0 $ 2 0 $ 2 0 $ 2 $ 0 2 0 $ 1 . 6 $ $ 4 2 1 $ 0 . 6 2 $ 0 4 $ 1 . 2 6 0 $ 4 $ 1 $ . 2 6 1 0 4 . 6 $ $ 4 2 1 0 . 6 $ 4 1 . 6 $ 4 1 $ . 6 1 4 . 6 4 $ 1 $ . 6 1 4 . 6 $ 4 1 . 6 $ 4 1 . 6 $ 4 1 . 6 4 $ 7 8 $ 7 8 $ 7 8 $ 7 $ 8 7 8 $ 7 8 $ 7 8 $ 7 $ 8 7 8 $ 7 $ 8 7 8 $ 7 8 $ 7 8 $ 7 8 5 0 0 5 0 0 0 0 5 0 0 0 0 0 5 0 0 0 5 0 0 0 0 0 0 5 0 0 0 0 0 0 5 0 0 0 0 0 5 0 0 0 5 0 0 0 0 0 0 0 0 0 0 0 $ 4 9 $ 4 4 9 $ 4 4 9 $ 4 4 $ 9 4 4 9 $ 4 4 9 $ 4 4 9 $ 4 4 $ 9 4 4 9 4 $ 4 8 $ 8 4 8 $ 8 4 8 $ 8 4 $ 8 4 8 8 $ 8 4 8 $ 8 4 8 $ 8 4 $ 8 4 8 8 8 5 5 0 0 5 0 5 0 0 0 0 0 0 5 0 0 0 0 5 0 0 0 0 0 0 0 5 0 0 0 5 0 0 0 0 0 5 0 0 5 0 0 0 0 0 0 0 5 0 0 0 0 0 0 0 0 0 5 0 0 0 0 0 5 0 0 5 0 0 0 0 0 0 0 0 $ 4 $ 9 4 4 9 $ 4 4 9 4 $ 4 9 $ 4 4 9 4 $ 4 $ 8 4 8 8 $ 8 4 8 8 $ 4 8 8 $ 4 8 8 . . . . . . . . . 5 0 4 5 0 0 0 0 0 4 5 0 0 0 0 0 0 4 5 0 0 0 0 0 4 5 0 0 4 0 0 0 0 0 4 0 0 4 0 4 4 0 0 2 0 0 2 0 0 0 0 2 0 4 0 0 0 4 0 0 2 0 0 0 0 2 4 0 0 0 0 0 0 0 2 4 0 0 0 0 0 0 0 2 0 4 0 0 0 0 0 2 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 . . . . . 2 0 2 0 0 0 0 2 0 0 0 0 0 0 2 0 0 0 0 0 0 2 0 0 0 0 0 0 0 0 $ 4 1 $ 5 4 1 5 $ 4 1 5 $ 4 $ 1 4 5 1 $ 5 4 1 5 $ 4 1 5 $ 4 $ 1 4 5 1 5 . . 3 5 3 5 $ 4 3 $ 1 . 4 5 5 1 5 $ 3 4 . 3 5 1 5 . $ 5 4 3 1 . 5 5 $ 4 3 1 . 5 5 3 3 5 5 . . $ 4 4 $ 3 4 4 $ 3 4 4 $ 3 4 $ 4 4 3 4 $ 3 4 4 $ 3 4 4 $ 3 4 $ 4 4 3 4 3 $ 4 $ 4 4 3 4 $ 3 4 4 $ 3 4 4 $ 3 4 4 3 . . . 3 3 5 5 3 5 3 5 3 5 . . 4 0 0 4 0 0 0 0 4 0 0 0 0 0 4 0 0 0 4 0 0 0 0 0 0 4 0 0 0 0 0 0 4 0 0 0 0 0 4 0 0 0 4 0 0 0 0 0 0 0 0 0 0 0 4 4 0 0 4 0 4 0 0 0 0 0 0 4 0 0 0 0 4 0 0 0 0 0 0 0 4 0 0 0 4 0 0 0 0 0 4 0 0 4 0 0 0 0 0 0 0 4 0 0 0 0 0 0 0 0 0 4 0 0 0 0 0 4 0 0 4 0 0 0 0 0 0 0 0 4 0 4 0 0 0 0 4 0 0 0 0 0 4 0 0 0 0 4 0 0 0 0 0 0 $ 1 5 7 $ 1 5 7 $ 1 5 7 $ 1 $ 5 7 1 5 7 $ 1 5 7 $ 1 5 7 $ 1 $ 5 7 1 5 7 $ 1 $ 5 1 7 5 7 $ 1 5 7 $ 1 5 7 $ 1 5 7 Officers and Directors Offices JEFFREY SIEGEL Chairman of the Board of Directors Chief Executive Officer and President RONALD SHIFTAN Vice Chairman of the Board of Directors Chief Operating Officer CRAIG PHILLIPS Senior Vice President – Distribution Executive Officer and Director LAURENCE WINOKER Senior Vice President – Finance Treasurer and Chief Financial Officer DANIEL SIEGEL Executive Vice President SARA SHINDEL General Counsel and Secretary DAVID E. R. DANGOOR Director MICHAEL JEARY Director JOHN KOEGEL Director CHERRIE NANNINGA Director WILLIAM U. WESTERFIELD Director CORPORATE HEADQUARTERS 1000 Stewart Avenue Garden City, NY 11530 (516) 683-6000 Corporate Information CORPORATE COUNSEL Samuel B. Fortenbaugh III New York, NY 10111 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Jericho, NY 11753 TRANSFER AGENT & REGISTRAR The Bank of New York Mellon 480 Washington Boulevard Jersey City, NJ 07310 FORM 10-K Shareholders may obtain, without charge, a copy of the Company’s annual report on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission. Requests should be sent to: INVESTOR RELATIONS Lifetime Brands, Inc. 1000 Stewart Avenue Garden City, NY 11530 ANNUAL MEETING The Annual Meeting of Shareholders will be held at 10:30 a.m. on Thursday, June 16, 2011, at the Corporate Headquarters. . . . . . . . . . 3 0 3 0 3 0 3 3 0 0 3 0 3 0 3 3 0 0 1 5 0 1 0 5 0 0 1 0 3 0 5 0 3 0 0 1 0 0 0 5 1 3 0 0 5 0 0 0 0 1 3 0 0 5 0 0 0 0 1 0 3 0 5 0 0 0 1 0 0 5 1 0 0 5 0 0 0 0 0 0 0 0 . . . . . 1 5 1 0 5 0 0 1 0 0 5 0 0 0 1 0 0 5 0 0 0 1 0 5 0 0 0 0 0 0 $ 1 3 $ 4 1 3 4 $ 1 3 4 $ 1 $ 3 4 1 3 4 $ 1 3 4 $ 1 3 4 $ 1 $ 3 1 4 3 4 $ 1 $ 3 1 4 3 4 $ 1 3 4 $ 1 3 4 $ 1 3 4 $ 9 $ 5 9 5 $ 9 5 $ 9 5 $ 9 Year Ended December 31, 5 (in thousands, except per share data) 2007 2008 2009 2010 NET SALES $493,725 $487,935 $415,040 $443,171 NET INCOME (LOSS) $7,529 ($47,755) $2,715 $20,261 DILUTED INCOME (LOSS) PER COMMON SHARE $0.57 ($3.99) $0.22 $1.64 DEBT $134,128 $157,164 $95,128 $77,657 LTB 10 AnnualReport Cover NEW ALT.indd 3-4 4/25/11 3:12 PM Lifetime Brands, Inc. | 2010 Annual Report Lifetime Brands, Inc. is North America’s leading designer, developer and marketer of a broad range of nationally branded consumer products used in the home, including Kitchenware, Cutlery & Cutting Boards, Bakeware & Cookware, Pantryware & Spices, Dinnerware, Flatware, Glassware and Home Décor. LTB 10 AnnualReport.indd 1 4/26/11 2:34 PM 1 Lifetime Brands, Inc. | 2010 Annual Report Dear Fellow Shareholders The year 2010 was a period of renewed growth for Lifetime Brands, In mid–April, at the New York Tabletop show, we introduced over 200 Inc. Net sales increased 6.8% to $443.2 million, while net income new patterns of dinnerware, glassware, and flatware under our many rose to $20.3 million, or $1.64 per diluted share. Excluding certain tabletop brands, including Mikasa®, Pfaltzgraff®, Towle®, Wallace®, non-recurring items, adjusted net income was $15 million, or $1.21 per and International® Silver. A large number of these were selected by diluted share, in 2010, as compared to $5.2 million, or $0.43 per diluted our most important customers for shipment this year. Tabletop has share, in 2009. Consolidated EBITDA for the year was $42.9 million, as become a significant and a profitable part of our business. compared to $32 million for 2009. Over the past two years, we have greatly enhanced Lifetime’s Although the economic climate in the U.S. was characterized product development efforts through our “open innovation” initiative. by uncertainty, all parts of our business recorded improvement in In addition to our almost 100 in-house designers, we now have a profitability. We achieved these results by focusing on expanding formal, organized network of thousands of “garage inventors,” who market share in every product category, maintaining gross margins, provide us with a steady stream of exciting new ideas. In 2010 we controlling expenses, and strengthening our balance sheet. Based screened more than 1,000 inventions submitted from this network and on the success of these efforts, as well as on our positive outlook for have brought several major product launches to market. We expect 2011, the Board of Directors decided in March 2011 to resume paying a the same success with this initiative in 2011. quarterly cash dividend, at the rate of $0.025 per common share. New growth initiatives Growing through innovation In addition to introducing a wide array of new products, we launched Lifetime’s growth in 2010 occurred primarily as a result of increased two exciting system initiatives. The first initiative is our internally market share within our established customer base, which includes most developed IDEATE™ computer design system, which dramatically major retailers in North America. We accomplished this by creating reduces the time needed to design a complete kitchen gadget line. and introducing over 5,500 exciting, new, and innovative products that We will use the system primarily to facilitate the launch of the exclusive reflect our awareness of consumer demands, trends, and buying habits. and the private label gadget lines, which have grown in importance At the 2011 International Home + Housewares Show, held in Chicago in to retailers in recent years. The retailers who were invited to preview March, we introduced more new products than at any time in our history, the IDEATE™ new system in Chicago were impressed by the speed at and we exhibited several new product categories, line extensions, and which we could design a product. The accelerated “speed-to-market” ideas, all of which have great potential. I am happy to report that our that the IDEATE™ system provides, allows retailers for the first time to offerings were very well received. Retailers understand that the key to address changes in consumer trends and demand virtually on a “real maintaining their own margins is to embrace new products that provide time” basis. We plan to expand the IDEATE™ system to other product innovative solutions to improve everyday tasks. categories in the near future. New product categories include food storage — a category that The second initiative is LifetimeBrandsWholesale.com, a new we have been developing for several years and that is larger than B2B website targeted to independent retailers. The new site will be kitchen tools and gadgets, Lifetime’s biggest product classification. the cornerstone of our efforts to reach the thousands of independent In an important extension of our cutlery category, we introduced housewares and tabletop retailers in the U.S. and Canada, primarily an expanded selection of ceramic kitchen knives. Sharper and more individual stores or small chains, on which our sales teams currently durable than even the best metal knives, ceramic cutlery has been do not call. The website will expand the number of doors to which we gaining consumer acceptance at every level. We have already will offer Lifetime’s products, increase the range of products that these introduced ceramic cutlery under the Farberware®, Cuisinart®, independent retailers can carry and provide those retailers with the KitchenAid®, and Sabatier® brands, and more lines are on the way. ability to place orders instantly. All have been enthusiastically received, and we have obtained In our Retail Direct segment, our Mikasa.com website and our commitments from key retailers to add these lines in the third and new HousewaresDeals.com and LifetimeSterling.com websites fourth quarters of 2011. We already are the number–one supplier of contributed to our sales growth in 2010. The Mikasa.com website kitchen cutlery in North America and believe that ceramic knives has become the key reference site for many consumers looking have the potential to expand the market. for dinnerware, glassware, and flatware, and the HousewaresDeals. In addition, we exhibited enamel–on–cast iron cookware — a com site has proven an effective vehicle for selling discontinued niche that is perfect for Lifetime — and showed a new line of whimsical merchandise. LifetimeSterling.com, on the other hand, offers luxury kitchen gadgets that complements our other kitchen gadget lines. silver flatware, serveware, gifts, and collectibles from our leading These too were enthusiastically embraced by key retailers and will be silver brands, giving consumers an easy way to replace items from or shipping to stores by the third quarter of this year. expand their existing collections. LTB 10 AnnualReport.indd 1 4/26/11 2:34 PM Lifetime Brands, Inc. | 2010 Annual Report 2 One very positive attribute of the Retail Direct business is that the In Canada, Accent-Fairchild Group, Inc., our strategic partner, increased same infrastructure can be used to launch additional sites, and, as a its business significantly in 2010. A number of U.S. retailers recently result, the additional costs of doing so are relatively modest. We are announced that they are considering expanding into Canada, which now working with Grupo Vasconia SAB, our Mexican partner company, should augur well for Accent-Fairchild’s business there. to enable them to share our extensive and proven B2B and B2C Given the higher rates of growth that are possible outside the U.S., Internet infrastructure. we intend to explore additional international opportunities that can help us accelerate Lifetime’s growth. Sustaining gross margins In January, we announced that Lifetime, Accent-Fairchild, and In 2010 we were successful in maintaining Lifetime’s gross margins even Vasconia had teamed with Fackelmann GmbH Co. KG — a leading though input costs increased throughout the industry, especially for raw housewares company based in Germany — to form a new business, materials. Our advanced design capabilities were a key factor in helping Housewares Corporation of Asia Limited (“HCA”). HCA’s focus is us temper the effects of these increases. We redesigned many of our on supplying direct–import kitchenware programs to retailers in products and their packaging — a skill we have developed over the years North, Central, and South America. Fackelmann has developed a while maintaining the quality of our product offerings. In addition, in some significant business supplying private–label and branded kitchenware cases, we moved to suppliers with lower labor costs. For example, we products to retailers in Europe on a direct import basis. HCA will share currently source from many other countries in Asia in addition to China Fackelmann’s Hong Kong showroom and design facilities. (including Japan, Indonesia, Taiwan, Malaysia, Thailand, India, Vietnam, and HCA provides new opportunities for Lifetime, Accent- Korea) as well as from countries in Eastern Europe (including Slovakia, Fairchild, and Grupo Vasconia to expand their relationships Czech Republic, and Slovenia). As costs go up in one country, we explore with retailers throughout the Americas by offering customers moving production to other countries where costs are lower at the time. who wish to develop proprietary kitchenware programs that Working with our key retailers, we have also been selectively raising are sourced directly from Asia access to Fackelmann’s product prices with the goal of keeping our margins neutral. While it will take design resources, factories, and sourcing network. continuous work on our part to ensure that we have the right products at Lifetime Brands has made enormous progress over the past two the right price points for consumers in 2011, we believe we can maintain years. In addition to offering trusted brands, outstanding design and our margins in the coming year. Strengthened balance sheet significant values, our company is once again operationally effective, financially solid and taking advantage of growth opportunities. Based on what we have accomplished in recent months — as well as the In June 2010, we refinanced our bank credit agreement, arranged new exceptional response to our new product offerings at the International financing to provide for the repayment of our convertible notes, and Home + Housewares Show — we expect continued growth and repurchased approximately $51 million of those convertible notes. The improvement in 2011; much of this will take place in the second half of new credit facilities mature in five years and provide us with access to the year, as we roll out our key programs and products. capital on favorable terms that will enable us to grow our business and I want to express my appreciation to our suppliers, our customers, satisfy our obligations, including payment of the remaining $24 million of our financial partners, our employees, and you, our shareholders, for convertible notes that come due in July 2011. the dedication and commitment upon which we rely every day. Our Expanding international ventures which all can be proud. Once again, our strategic alliance with Grupo Vasconia provided In case it is not already clear, and despite the many uncertainties positive results for both Vasconia and Lifetime. For 2010, Vasconia’s net in the global economic outlook, I have never been more enthusiastic sales and net income, in Mexican Pesos, rose 12.1% and 12%, respectively. about the future of our company. progress over the past two years is a result of a combined effort of Our equity in Grupo Vasconia’s earnings, net of taxes, increased to $2.7 million, as compared to $2.2 million in 2009 and $1.5 million in 2008. Vasconia is well connected with most major retailers in Mexico, where its thrust now is to expand its product offerings to include Lifetime’s key housewares and tabletop lines. Vasconia also is actively expanding its distribution into other Latin American countries, and in Jeffrey Siegel late 2010 Vasconia completed the acquisition of its key Ekco® brand Chairman of the Board, for Colombia and seven countries in Central America, allowing it to President and Chief Executive Officer assume distribution of that brand in those markets. LTB 10 AnnualReport.indd 2 4/26/11 2:34 PM 3 Lifetime Brands, Inc. | 2010 Annual Report SCAN THIS QR CODE TO LEARN MORE ABOUT MISTO Making Connections: Consumers At Lifetime Brands, we have a fi rm dedication to identifying and An exciting array of products recently added to these brands responding to consumer demand in the marketplace. We believe refl ects our awareness of consumer demands, trends, and buying that success is intertwined with developing an ever-increasing habits. In cutlery, we are proud to be the leader in ceramic awareness of our consumers’ needs and desires, and that our technology. Our new line of ceramic knives features advanced growth results from addressing and fulfi lling them. manufacturing techniques and next-generation design; these attributes enable us to be fi rst to market with a new chip-resistant ceramic blade that provides the sharpest cutting edge available today. We are entering the food storage category by offering consumers superior performance from our Perfect Seal and Microban® collections. Perfect Seal food storage — made from Eastman Tritan™ copolyester, a naturally unbreakable material that resists odors and stains — features a patent-pending lid- locking system that is easy to open and to close. We’ve enhanced food storage at “better” price points by adding Microban® to polypropylene, which provides antibacterial properties without increasing the price point. The Kizmos Get Happy™ Collection is a whimsical new line of tools and gadgets designed to surprise and to delight cooks of all ages with a lively burst of bright, vibrant MISTO GOURMET OLIVE OIL SPRAYER color and upbeat, smiling faces. And we’ve broadened the line of A deep understanding of our consumers’ buying habits is a consumer favorite — Misto®, The Gourmet Olive Oil Sprayer® — essential to our continued success, and our sustained commitment by adding a fi lter for infusing oils and providing more choices in to staying ahead of these habits is a crucial component of our color, bottle shape, and materials, such as Tritan™ and glass. business. Our speed-to-market capabilities address consumer demand as it develops, allowing us to deliver fi nished products Part of our strategy for success is to anticipate where the consumer to the marketplace in time to take advantage of emerging trends. will be, rather than to look at where she has been. This includes an ongoing effort to relate to consumers through such avenues as social Our in-house product design and development department of nearly media. Social networks have created a more informed consumer, 100 professionals responds to trends by creating and introducing and we embrace interacting with and educating consumers through innovative products quickly and effi ciently. The products we design are this technology. Additionally, we have incorporated the use of not only innovative and fresh but must also stand the test of time. Quick Response (QR) codes — small square bar codes that provide These products become part of our stable of nationally known many of our packages and other promotional materials. We keep brands that consumers trust and recognize. Currently Lifetime our fi nger on the pulse of the consumer by proactively participating has more than 25 of the top brands in kitchenware and tabletop, in the media she uses today and anticipating the channels of including Farberware, Mikasa, Pfl atzgraff, KitchenAid and Cuisinart. including Farberware, Mikasa, Pfl atzgraff, KitchenAid and Cuisinart. communication she will use tomorrow. communication she will use tomorrow. additional product information when scanned by smartphones — on *Microban® is a registered trademark of Microban Products Company *Eastman Tritan™ is a trademark of Eastman Chemical Company. Making Connections with Kizmos Get Happy™ Making Connections with Kizmos Get Happy™ The Kizmos Get Happy™ Collection is a whimsical new line of tools and The Kizmos Get Happy™ Collection is a whimsical new line of tools and gadgets designed to surprise and to delight cooks of all ages with a gadgets designed to surprise and to delight cooks of all ages with a lively burst of bright, vibrant color and upbeat, smiling faces. lively burst of bright, vibrant color and upbeat, smiling faces. LTB 10 AnnualReport.indd 3 4/26/11 2:34 PM Lifetime Brands, Inc. | 2010 Annual Report 4 SABATIER LIGHTWEIGHT CAST IRON PANS KIZMOS GET HAPPY COLLECTION SCAN THIS QR CODE TO LEARN MORE ABOUT DESIGN FOR LIVING STACKABLE WATER BOTTLES LTB 10 AnnualReport.indd 4 4/26/11 2:34 PM DESIGN FOR LIVING STACKABLE WATER BOTTLES 5 Lifetime Brands, Inc. | 2010 Annual Report SCAN THIS QR CODE TO VISIT OUR B2B WEBSITE Making Connections: Industry Our revolutionary IDEATE™ product design program was developed by us to allow our sales force to work directly with buyers to quickly create and to customize virtually any kitchenware item for their private-label programs. By enabling this direct collaboration in the design phase, the product development timeline from concept to fi nished product is reduced by months, which again increases our speed-to- market capabilities. Additionally, IDEATE affords the buyer the ability to create customized solutions to meet display and inventory needs. We supply product for all channels of distribution: from warehouses, clubs, and department stores to electronic retailers, direct-to-consumer, and specialty shops. Our six distribution centers are strategically located near ports of entry on both the East and West coasts, enabling us to fulfi ll and to ship orders to retailers across the nation with speed and accuracy. With Lifetime Brands, each retailer regardless of size will not only fi nd a large assortment of product at LIFETIME BRANDS WHOLESALE WEBSITE every price point to fi t its needs but also have its orders arrive quickly and effi ciently. We are proud to have launched the most advanced and retailer-friendly B2B site in the housewares industry. Retailers are able to enjoy our product assortment, ordering LifetimeBrandsWholesale.com serves independent retailers, technology, and distribution speed as a “one-stop shop” for all offering a unique functionality specifi cally designed to their food preparation, dining, entertaining, and home décor facilitate ordering, merchandise planning and delivery of inventory needs. inventory needs. collateral sales and web materials to promote business. The site allows for open account processing as well as credit cards, and gives independent retailers real-time availability, up-to-date pricing and previews of our newest products and innovations. We realize that there is tremendous potential in this very valuable segment of the market, and, along with our sales representatives, we are actively seeking to further develop this segment of our business. Making Connections with IDEATE This web-based application allows our sales force to work directly with buyers to create and to customize virtually any kitchenware item for their private-label programs. MONITOR SHOWS THE WEB–BASED INTERFACE FOR DESIGN AND DEVELOPMENT USING THE IDEATE SYSTEM. LTB 10 AnnualReport.indd 5 4/26/11 2:34 PM Lifetime Brands, Inc. | 2010 Annual Report 6 MIKASA SILK FLORAL DINNERWARE MIKASA GARDEN PALETTE BOUQUET DINNERWARE SCAN THIS QR CODE TO LEARN MORE ABOUT CUISINART CERAMIC KNIVES CUISINART CERAMIC KNIVES LTB 10 AnnualReport.indd 6 4/26/11 2:34 PM 7 Lifetime Brands, Inc. | 2010 Annual Report Making Connections: Community Lifetime Brands measures success not only in financial terms but We also consider that intelligent business and environmental also by the impact it has on communities and the environment. At responsibility go hand in hand. Our goal is to implement Lifetime, we believe that social responsibility is an essential element sustainable practices in all facets of our operations and through of being a conscious corporate citizen and as the industry leader we the actions of our associates. Through “green” practices and have an obligation to affect our surroundings in a positive way. energy management, our warehouses have recycled over 400 tons of cardboard and saved over 2 million kilowatt-hours of electricity. We actively support many worthy charities and organizations through Our facilities make use of programmable thermostats, occupancy monetary and product donations as well as by participating in local sensors, and high-efficiency lighting, which enables us to save events. Jeffrey Siegel, our president and CEO of Lifetime Brands, is a significant amounts of electricity each year. founder of the Housewares Charity Foundation. Since its inception 13 years ago, the Housewares Charity Foundation has donated almost Additionally, we have taken considerable steps to reducing our $20 million to various organizations such as The Breast Cancer company’s carbon footprint. Travel for corporate meetings has been Research Foundation, HCF Haiti Relief Fund, and Feeding America significantly scaled down through the use of video conferencing. (formerly America’s Second Harvest). Through its participation in the Meetings that once involved flying in more than 50 associates KitchenAid® Cook fot the Cure® program, Lifetime Brands is a proud from around the country are now handled on associates’ desktops supporter of Susan G. Komen for the Cure®. For each pink product sold without a single flight being booked. We’ve also drastically and registered, 10 percent of the retail price is donated to Komen for reduced paper consumption by making most sales materials and the Cure. To date, Lifetime has proudly raised over $2 million for the employee benefit information available electronically. fight against breast cancer. For years, Lifetime Brands has supported the not-for-profit Long Island Head Injury Association by contributing Our environmentally-minded thinking extends to the products we over $75,000 to date. The company is also active in various children’s produce as well. We make a constant effort to minimize material charities, including Toys for Tots, Boys & Girls Club, Friends of Costco use in our designs and to seek out alternative, environmentally- Guild, and the Chi Heng Foundation in China. conscious materials to replace plastics and metals where applicable. LTB 10 AnnualReport.indd 7 4/26/11 2:34 PM Lifetime Brands, Inc. | 2010 Annual Report 8 Making Connections: Culture of Innovation INTERNAL CULTURE INNOVATION ECO-SYSTEM EXTERNAL OUTREACH At Lifetime Brands, we recognize that innovation does not occur in a vacuum. That’s why we focus our efforts on fostering a vibrant eco-system of innovation. This system is a living network that has been fostered by the interactions between our own internal resources as well as external sources, allowing us to embrace the world and our surroundings. The ability to immerse ourselves in a culture of innovation is not only a source of strength, but it also gives us the insight to drive growth, deliver value, and become more adaptive in a time of accelerated change. Turn the page to see how our system of innovation is effective ›› LTB 10 AnnualReport.indd 8 4/26/11 2:34 PM 9 Lifetime Brands, Inc. | 2010 Annual Report WEB & E-COMMERCE INVENTOR NETWORKS CUSTOMER SERVICE MARKETING CONSUMER FEEDBACK MANUFACTURING COUNCIL TREND RESEARCH GRAPHIC DESIGN SOCIAL TRENDS ADVISORY BOARD INTERNAL CULTURE ADVANCED DESIGN IDEAS OF A LIFETIME SOCIAL MEDIA AND PR CONSUMER INSIGHT GREEN COUNCIL INDUSTRIAL DESIGN & ENGINEERING GLOBAL PARTNERS COMPETITION WEB AND E-COMMERCE We are proud to be the industry leader MARKETING Consumer-based information and insight GRAPHIC DESIGN Our Graphic Design team finds innovative in online innovation. With a staff of 50 in from our marketing department help ways to present goods to our custromers. three worldwide offices, Lifetime Brands us to identify new needs and ways of With over 40 members working globally, is building relationships and brands bringing contextually relevant products this team’s insight into new methods of online through social networks, online to our customers. Insight gathered by this product presentation, web design, and visual customer interactions, and business-to- team leads to innovations that affect the communication has attracted customers and business portals. entire company. reinforced brand identity. IDEAS OF A LIFETIME Through a formal system of monthly meetings, INDUSTRIAL DESIGN & ENGINEERING The heart of creating innovative products GREEN COUNCIL At Lifetime Brands, our goal is to every associate contributes thoughts on how lies in the strength of the Industrial implement sustainable practices to improve our products, our processes, or our Design group, which has over 50 in all facets of our operations and performance through our “Ideas of a Lifetime” industrial designers and engineers. The through the actions of our associates. program. As a result of their submissions, we group’s expert combination of applied art Insight from this council has led to have increased efficiencies, saved money, and and applied science is a cornerstone in improvements in design, logistics, and improved customer product satisfaction. our innovation efforts. facilities that are sustainable. ADVANCED DESIGN Our Advanced Design Group manifests TREND RESEARCH Through our Global Trend and Design CUSTOMER SERVICE Input from our customers is a critical social trends, material research, and Initiative, our team of experts travels asset, and we’ve aligned our entire ethnographic data into strategies that around the globe to numerous trade organization around one mission: to illuminate opportunities for future fairs and retailers in markets outside provide the best customer service products. Their consumer-focused the United States, exploring new trends, possible. We’re always listening openly ideas grow the company through materials and technologies. and attentively to find ways to make our insight and innovation. customers’ lives better. LTB 10 AnnualReport.indd 9 4/26/11 2:34 PM WEB & E-COMMERCE INVENTOR NETWORKS CUSTOMER SERVICE MARKETING CONSUMER FEEDBACK MANUFACTURING COUNCIL Lifetime Brands, Inc. | 2010 Annual Report 10 TREND RESEARCH GRAPHIC DESIGN SOCIAL TRENDS ADVISORY BOARD EXTERNAL OUTREACH ADVANCED DESIGN IDEAS OF A LIFETIME SOCIAL MEDIA AND PR CONSUMER INSIGHT GREEN COUNCIL INDUSTRIAL DESIGN & ENGINEERING GLOBAL PARTNERS COMPETITION INVENTOR NETWORKS By embracing external innovation, MANUFACTURING COUNCIL Participation in this premier advisory ADVISORY BOARD We rely on input from individuals from we’ve brought numerous products body to the President and the U.S. various industries. Leaders in the fields of from outside inventors to market. Secretary of Commerce has given retailing, international commerce, media, Our involvement with independent us intimate insight into factors of design, and finance offer their extensive inventor networks brings us new international trade law and trends in experience to help us innovate in new ways. perspectives, ideas, and solutions. global commerce, as well as input on U.S. policy. CONSUMER INSIGHT Using methods that range from in-person COMPETITION We would be disingenuous if we did not GLOBAL PARTNERS In a world that is more interconnected interviews to consumer clinics, we are acknowledge that we often are motivated by than ever, we are proud to have always listening to the voice of the what we see others in our industry doing. We forged strong global partnerships with consumer. Engaging real consumers face- love to compete because it helps us think of manufacturers, vendors, suppliers, and to-face allows us to uncover unmet needs newer, more efficient ways to solve problems. retailers across the globe, this gives us and keep our customers coming back. Staying ahead of the competition for the past a unique international perspective of 55 years has made us the industry leader. innovative business practices. SOCIAL MEDIA AND PR We are an industry leader in using social SOCIAL TRENDS Our diverse team brings new CONSUMER FEEDBACK We welcome our customers to share media to connect with our customers. Our perspectives and insights on social trends ideas and help us find new ways to team embraces dialogue with consumers that result in new ways to think about our improve the products we devlop. By and invites them to participate in business. From gaining intimate insight embracing the unique insight that each conversations on Facebook® and Twitter®. on specific user groups to getting the of our customers have, we strengthen By engaging our customers, we receive latest fashion trends, we work to ensure relationships that lead to new innovations. valuable feedback and insight. that we maintain cultural relevance. LTB 10 AnnualReport.indd 10 4/26/11 2:34 PM This page purposely left blank LTB 10 AnnualReport.indd 11 4/26/11 2:34 PM UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 or _ TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number: 0-19254 LIFETIME BRANDS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Delaware 11-2682486 1000 Stewart Avenue, Garden City, New York 11530 (Address of principal executive offices, including Zip Code) (516) 683-6000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Common Stock, $.01 par value The NASDAQ Stock Market LLC (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No (cid:2) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1) No (cid:2) 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 (cid:2) No (cid:1) Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes (cid:1) No (cid:1) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:2) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act: Accelerated filer (cid:2) Non-accelerated filer (do not check if a smaller reporting company) (cid:1) Smaller reporting company (cid:1) Large accelerated filer (cid:1) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:1) No (cid:2) The aggregate market value of 9,543,453 shares of the voting stock held by non-affiliates of the registrant as of June 30, 2010 was approximately $139,525,283. Directors, executive officers, and trusts controlled by said individuals are considered affiliates for the purpose of this calculation and should not necessarily be considered affiliates for any other purpose. The number of shares of common stock, par value $.01 per share, outstanding as of March 11, 2011 was 12,065,543. DOCUMENTS INCORPORATED BY REFERENCE Parts of the registrant’s definitive proxy statement for the 2011 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 are incorporated by reference in Part III of this Annual Report. LIFETIME BRANDS, INC. FORM 10-K TABLE OF CONTENTS PART I 1. Business ............................................................................................................................................................ 3 1A. Risk Factors ...................................................................................................................................................... 6 1B. Unresolved Staff Comments ............................................................................................................................ 9 2. Properties ......................................................................................................................................................... 9 3. Legal Proceedings............................................................................................................................................ 9 4. (Removed and Reserved) ................................................................................................................................ 9 PART II 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .......................................................................................................................................... 10 6. 7. Selected Financial Data .................................................................................................................................. 12 Management’s Discussion and Analysis of Financial Condition and Results of Operations ........................ 13 7A. Quantitative and Qualitative Disclosures About Market Risk ........................................................................ 25 8. Financial Statements and Supplementary Data .............................................................................................. 26 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........................ 27 9A. Controls and Procedures ................................................................................................................................. 27 9B. Other Information ........................................................................................................................................... 29 PART III 10. Directors, Executive Officers and Corporate Governance ............................................................................. 29 11. Executive Compensation ................................................................................................................................ 29 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...... 29 13. Certain Relationships and Related Transactions, and Director Independence ............................................... 29 14. Principal Accounting Fees and Services ....................................................................................................... 29 PART IV 15. Exhibits, Financial Statement Schedules ....................................................................................................... 30 SIGNATURES ...................................................................................................................................................... 34 1 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include information concerning Lifetime Brands, Inc.’s (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, under the headings Business and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 1 of Part I and Item 7 of Part II, respectively. When used in this Annual Report on Form 10-K, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, the Company’s examination of historical operating trends, are based upon the Company’s current expectations and various assumptions. The Company believes there is a reasonable basis for its expectations and assumptions, but there can be no assurance that the Company will realize its expectations or that the Company’s assumptions will prove correct. There are a number of risks and uncertainties that could cause the Company’s actual results to differ materially from the forward-looking statements contained in this Annual Report. Important factors that could cause the Company’s actual results to differ materially from those expressed as forward-looking statements are set forth in this Annual Report, including the risk factors discussed in Part I, Item 1A under the heading Risk Factors. Except as may be required by law, the Company undertakes no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events. OTHER INFORMATION The Company is required to file its annual reports on Forms 10-K and quarterly reports on Forms 10-Q, and other reports and documents as required from time to time with the United States Securities and Exchange Commission (the “SEC”). The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information may be obtained with respect to the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. 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 also maintains a website at http://www.lifetimebrands.com where users can access the Company’s electronic filings free of charge. 2 PART I Item 1. Business OVERVIEW The Company is one of North America’s leading resources for nationally branded kitchenware, tabletop and home décor products. The Company either owns or licenses its brands. The Company’s licenses generally only permit the Company to sell certain products using the licensed brand name. The Company sells its products to retailers and distributors, and directly to consumers through its Internet websites and mail-order catalog operations. The Company markets its products under well-respected and widely-recognized brand names in the U.S. housewares industry. According to the Home Furnishing News Brand Survey issued in 2009, three of the Company’s brands, KitchenAid®, Cuisinart®, and Farberware®, are among the four most recognized brands in the “Kitchen Tool, Cutlery and Gadgets” category. The Company primarily targets moderate to premium price points through every major level of trade and generally markets several lines within each of its product categories under more than one brand. At the heart of the Company is a strong culture of innovation and new product development. The Company brought over 4,000 new or redesigned products to market in 2010 and expects to introduce between 4,000 and 5,000 new or redesigned products in 2011. The Company’s major product categories are Kitchenware, consisting primarily of kitchen tools and gadgets, cutlery, cutting boards, cookware/bakeware and pantryware, Tabletop, consisting primarily of dinnerware and flatware, and Home Décor, which consists primarily of wall décor, picture frames and decorative shelving products. The Company sources almost all of its products from suppliers located outside the United States, primarily in the People’s Republic of China. The Company manufactures its sterling silver products at a leased facility in San Germán, Puerto Rico and fills spices and assembles spice racks at its owned Winchendon, Massachusetts distribution facility. The Company seeks to expand its presence in international markets by making investments in various companies that operate outside of the United States. In 2007, the Company acquired a 30% interest in Grupo Vasconia, S.A.B. (“Vasconia”), a Mexican company. In January 2011, the Company, together with Vasconia and unaffiliated partners, formed Housewares Corporation of Asia Limited, a Hong Kong-based company that will supply direct import kitchenware programs to retailers in North, Central and South America. In addition, the Company licenses certain of its brands to other companies, including Vasconia, that operates in various foreign markets. The Company continues to evaluate opportunities to expand the reach of its brands and to invest in other companies that operate principally outside the United States. These opportunities involve risks as the industry and foreign markets may not evolve as anticipated and the Company’s strategic objectives may not be achieved. The Company’s top brands and their respective product categories are: Brand Farberware® Mikasa® KitchenAid® Pfaltzgraff® Melannco® Elements® Cuisinart® Kamenstein® Wallace Silversmiths® Towle® Licensed/Owned Product Category Licensed* Owned Licensed Owned Owned Owned Licensed Owned Owned Owned Kitchenware and Tabletop Tabletop and Home Décor Kitchenware Tabletop and Home Décor Home Décor Home Décor Kitchenware and Tabletop Kitchenware Tabletop and Home Décor Tabletop and Home Décor * The Company has a 184 year royalty free license to utilize the Farberware® brand for kitchenware products. The Company’s wholesale customers include mass merchants, specialty stores, national chains, department stores, warehouse clubs, supermarkets, off-price retailers and Internet retailers. 3 BUSINESS SEGMENTS The Company operates in two business segments: the Wholesale segment, which is the Company’s primary business that designs, markets and distributes its products to retailers and distributors, and the Retail Direct segment in which the Company markets and sells its products through its Pfaltzgraff®, Mikasa®, Lifetime SterlingTM and Housewares DealsTM Internet websites and Pfaltzgraff® mail-order catalogs. The Company has segmented its operations to reflect the manner in which management reviews and evaluates the results of its operations. While both segments distribute similar products, the segments are distinct due to the different types of customers and the different methods the Company uses to sell, market and distribute the products. Additional information regarding the Company’s reportable segments is included in Note J of the Notes to the Consolidated Financial Statements included in Item 15. CUSTOMERS The Company’s products are sold in North America to a diverse customer base including mass merchants (such as Wal-Mart and Target), specialty stores (such as Bed Bath & Beyond), national chains (such as Kohl’s, JC Penney and Sears), department stores (such as Macy’s), warehouse clubs (such as Costco, BJ’s Wholesale Club and Sam’s Club), supermarkets (such as Stop & Shop and Kroger), off-price retailers (such as TJX and Ross Stores), and Internet retailers (such as Amazon.com). The Company also operates Internet and catalog operations that sell the Company’s products directly to consumers. During the years ended December 31, 2010, 2009 and 2008, Wal-Mart Stores, Inc. (including Sam’s Club) accounted for 15%, 18%, and 20% of sales, respectively. No other customer accounted for 10% or more of the Company’s sales during these periods. For the years ended December 31, 2010, 2009 and 2008, the Company’s ten largest customers accounted for 67%, 64%, and 60% of sales, respectively. DISTRIBUTION The Company operates the following distribution centers: Location Fontana, California Robbinsville, New Jersey Winchendon, Massachusetts Medford, Massachusetts Size (square feet) 753,000 700,000 175,000 5,590 SALES AND MARKETING The Company’s sales and marketing staff coordinate directly with its wholesale customers to devise marketing strategies and merchandising concepts and to furnish advice on advertising and product promotion. The Company has developed several promotional programs for use in the ordinary course of business to promote sales throughout the year. The Company’s sales and marketing efforts are supported from its principal offices and showroom in Garden City, New York; as well as showrooms in New York, New York; Medford, Massachusetts; Atlanta, Georgia; Bentonville, Arkansas; and Menomonee Falls, Wisconsin. The Company generally collaborates with its largest wholesale customers and in many instances produces specific versions of the Company’s product lines with exclusive designs and/or packaging for their stores. 4 DESIGN AND INNOVATION At the heart of the Company is a strong culture of innovation and new product development. The Company’s in- house design and development teams currently consist of 77 professional designers, artists and engineers. Utilizing the latest available design tools, technology and materials, these teams create new products, redesign products, and create packaging and merchandising concepts. SOURCES OF SUPPLY The Company sources its products from over 400 suppliers. Most of the Company’s suppliers are located in the People’s Republic of China. The Company also sources products from suppliers in the United States, India, Japan, Indonesia, Korea, Italy, Thailand, Germany, Slovakia, Vietnam, American Samoa, Czech Republic, United Kingdom, Canada, Poland, Portugal, Switzerland, Malaysia, Slovenia, and Mexico. The Company orders products substantially in advance of the anticipated time of their sale. The Company does not have any formal long-term arrangements with any of its suppliers and its arrangements with most manufacturers allow for flexibility in modifying the quantity, composition and delivery dates of orders. All purchase orders issued by the Company are cancelable. MANUFACTURING The Company manufactures its sterling silver products at its leased manufacturing facility in San Germán, Puerto Rico and fills spices and assembles spice racks at its owned Winchendon, Massachusetts distribution facility. COMPETITION The markets for kitchenware, tabletop and home décor products are highly competitive and include numerous domestic and foreign competitors, some of which are larger than the Company. The primary competitive factors in selling such products to retailers are innovative products, brand, quality, aesthetic appeal to consumers, packaging, breadth of product line, distribution capability, prompt delivery and selling price. PATENTS The Company owns 133 design and utility patents on the overall design of some of its products. The Company believes that the expiration of any of its patents would not have a material adverse effect on the Company’s business. BACKLOG Backlog is not material to the Company’s business because actual confirmed orders from the Company’s customers are typically not received until close to the required shipment dates. EMPLOYEES At December 31, 2010, the Company had a total of 1,040 full-time employees, 154 of whom are located in China. In addition, the Company employed 60 people on a part-time basis, predominately in customer service. None of the Company’s employees are represented by a labor union. The Company considers its employee relations to be good. REGULATORY MATTERS The products the Company sells are subject to various Federal, state and local statutes and the jurisdiction of various regulatory agencies, as well as the scrutiny of consumer groups. The Company’s spice container filling operation in Winchendon, Massachusetts is regulated by the Food and Drug Administration. The Company’s sterling silver manufacturing operations are subject to the jurisdiction of the Environmental Protection Agency. The Company’s products are also subject to regulation under certain state laws pertaining to product safety and liability. 5 Item 1A. Risk Factors The Company’s businesses, operations, and financial condition are subject to various risks. The risks and uncertainties described below are those that the Company considers material. General Economic Factors and Political Conditions The Company’s performance is affected by general economic factors and political conditions that are beyond its control. These factors include, among other factors, recession, inflation, deflation, housing markets, consumer credit availability, consumer debt levels, fuel and energy costs, material input costs, foreign currency translation, labor cost inflation, interest rates, tax rates and policy, unemployment trends, the impact of natural disasters and terrorist activities, conditions affecting the retail environment for the home and other matters that influence consumer spending. Unfavorable economic conditions in the United States adversely affected the Company’s performance in 2008 and 2009 and could continue to adversely affect the Company’s performance in the future. Unstable economic and political conditions, civil unrest and political activism, particularly in Asia, could adversely impact the Company’s businesses. Liquidity The Company has substantial indebtedness and depends upon its bank lenders to finance its liquidity needs. In June 2010, the Company entered into a new $125.0 million secured credit agreement (the “Revolving Credit Facility”) and a $40.0 million second lien credit agreement (the “Term Loan”). Amounts loaned under these agreements bear interest at floating rates. Therefore, an increase in interest rates would adversely affect the Company’s performance. To the extent that the Company’s access to credit was to be restricted because of its own performance, its bank lenders’ performances, or conditions in the markets generally, the Company would not be able to operate normally. Competition The markets for the Company’s products are intensely competitive and the Company competes with numerous other suppliers, some of which are larger than the Company, have greater financial and other resources or employ brands that are more established, have greater consumer recognition or are more favorably perceived by consumers or retailers than the Company’s brands. The Company believes it possesses certain competitive advantages; however, many factors could erode these competitive advantages or prevent their strengthening. Accordingly, future operating results will depend on the Company’s ability to protect or enhance its competitive advantages. Customers The Company’s wholesale customers include mass merchants, specialty stores, national chains, department stores, warehouse clubs, supermarkets, off-price retailers, and Internet retailers. Unanticipated changes in purchasing and other practices by its customers, including customers’ pricing and other requirements, could adversely affect the Company. In its e-commerce and catalog businesses, the Company sells to individual consumers nationwide. Many of the Company’s wholesale customers are significantly larger than the Company, have greater financial and other resources and also purchase goods directly from vendors in Asia and elsewhere. Decisions by large customers to increase their purchases directly from overseas vendors could have a materially adverse affect on the Company. Significant changes or financial difficulties, including consolidations of ownership, restructurings, bankruptcies, liquidations or other events that affect retailers could result in fewer stores selling the Company’s products, the Company having to rely on a smaller group of customers, an increase in the risk of extending credit to these customers or limitations on the Company’s ability to collect amounts due from these customers. In 2010, Wal-Mart Stores, Inc. (including Sam’s Club) accounted for 15% of the Company’s sales. A material reduction in purchases by Wal-Mart Stores, Inc. could have a significant adverse effect on the Company’s business and operating results. In addition, pressures by Wal-Mart Stores, Inc. that would cause the Company to materially reduce the price of the Company’s products could result in reductions of the Company’s operating margin. 6 Supply Chain The Company sources its products from suppliers located principally in Asia and, to a lesser extent, in Europe and in the United States. The Company’s Asia vendors are located primarily in the People’s Republic of China. Interruption of supply from any of the Company’s suppliers, or the loss of one or more key vendors, could have a negative effect on the Company’s business and operating results. Changes in currency exchange rates might negatively affect the profitability and business prospects of the Company and its overseas vendors. The Company does not have access to its vendors’ financial information and is unable to assess its vendors’ financial conditions including their liquidity. The Company is subject to risks and uncertainties associated with economic and political conditions in foreign countries, including but not limited to, foreign government regulations, taxes, import and export duties and quotas, anti-dumping regulations, incidents and fears involving security, terrorism and wars, political unrest and other restrictions on trade and travel. The Company imports its products for delivery to its distribution centers as well as arranges for its customers to import goods to which title has passed overseas. For purchases that are to be delivered to its distribution centers, the Company arranges for transportation, primarily by sea, from ports in Asia and Europe to ports in the United States, principally New York/Newark/Elizabeth and Los Angeles/Long Beach. Accordingly, the Company is subject to risks incidental to such transportation. These risks include, but are not limited to, increases in fuel costs, the availability of ships, increased security restrictions, work stoppages and carriers’ ability to provide delivery services to meet the Company’s shipping needs. Transportation disruptions and increased transportation costs could adversely affect the Company’s business. The Company delivers its products to its customers or makes such products available for customer pickup from its distribution centers. Prolonged domestic transportation disruptions, as well as workforce or systems issues related to the Company’s distribution centers, could have a negative affect on the Company’s ability to deliver goods to its customers. Intellectual Property Significant portions of the Company’s business are dependent on trade names, trademarks and patents, some of which are licensed from third-parties. Several of these license agreements are subject to termination by the licensor. The loss of certain licenses or a material increase in the royalties the Company pays under such licenses upon renewal could result in a reduction of the Company’s operating margin. Regulatory The Company is subject in the ordinary course of its business, in the United States and elsewhere, to many statutes, ordinances, rules and regulations that if violated by the Company could have a material adverse effect on the Company’s business. The Company’s operations could be conducted by its employees, contractors, representatives, or agents in ways which violate the Foreign Corrupt Practices Act or other similar anti-bribery laws. The marketing of certain of the Company’s consumer products involve an inherent risk of product liability claims or recalls or other regulatory or enforcement actions initiated by the U.S. Consumer Product Safety Commission, by state regulatory authorities or through private causes of action. Any defects in products the Company markets could harm the Company’s credibility, adversely affect its relationship with its customers and decrease market acceptance of the Company’s products and the strength of the brand names under which the Company markets such products. Potential product liability claims may exceed the amount of the Company’s insurance coverage and could materially damage the Company’s business and its financial condition. The Company is subject to significant regulations, including the Sarbanes-Oxley Act of 2002. The Company cannot assure that it will not find material weaknesses in the future or that the Company’s independent registered public accounting firm will conclude that the Company’s internal control over financial reporting is operating effectively. The Company is subject to general business regulations and laws, as well as regulations and laws specifically governing the Internet and e-commerce. Such existing and future laws and regulations may impede the growth of the Internet or other online services. These regulations and laws may cover taxation, user privacy, data protection, 7 pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, broadband residential Internet access, and the characteristics and quality of products and services. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, and personal privacy apply to the Internet and e-commerce. Unfavorable resolutions of these issues would harm the Company’s business. This could, in turn, diminish the demand for the Company’s products on the Internet and increase the Company’s cost of doing business. Technology The Company relies on several different information technology systems for the operation of its principal business functions, including the Company’s enterprise, warehouse management, inventory forecast and re-ordering and call center systems. In the case of the Company’s inventory forecast and re-ordering system, most of the Company’s orders are received directly through electronic connections with the Company’s largest customers. The failure of any one of these systems could have a material adverse effect on the Company’s business and results of operations. The Company has made significant efforts to secure its computer network. However, the Company’s computer network could be compromised and confidential information such as customer credit card information could be misappropriated. This could lead to adverse publicity, loss of sales and profits or cause the Company to incur significant costs to reimburse third-parties for damages which could adversely impact profits. In addition, although the Company’s systems and procedures comply with Payment Card Industry (“PCI”) data security standards, failure by the Company to maintain compliance with the PCI requirements or rectify a security issue could result in fines and the imposition of restrictions on the Company’s ability to accept credit cards. Personnel The Company’s success depends on its ability to identify, hire and retain skilled personnel. The Company’s industry is characterized by a high level of employee mobility and aggressive recruiting among competitors for personnel with successful track records. The Company may not be able to attract and retain skilled personnel or may incur significant costs in order to do so. If Jeffrey Siegel, the Company’s Chairman, President and Chief Executive Officer, was no longer employed by the Company, it could have a material adverse effect on the Company. 8 Item 1B. Unresolved Staff Comments None Item 2. Properties The following table lists the principal properties at which the Company operates its business at December 31, 2010: Location Description Size (square feet) Owned/ Leased Fontana, California Principal West Coast warehouse and distribution facility 753,000 Leased Robbinsville, New Jersey Principal East Coast warehouse and distribution facility 700,000 Leased Winchendon, Massachusetts Warehouse and distribution facility, and spice packing line 175,000 Owned Garden City, New York Corporate headquarters/main showroom 146,000 Leased Medford, Massachusetts Offices, showroom, warehouse and distribution facility 69,000 Leased San Germán, Puerto Rico Sterling silver manufacturing facility Guangzhou, China Offices New York, New York Showrooms York, Pennsylvania Offices Atlanta, Georgia Shanghai, China Showrooms Offices Item 3. Legal Proceedings 55,000 Leased 18,000 Leased 17,000 Leased 14,000 Leased 11,000 Leased 11,000 Leased In March 2008, the Environmental Protection Agency (“EPA”) announced that the San Germán Ground Water Contamination site in Puerto Rico was added to the Superfund National Priorities List due to contamination present in the local drinking water supply. Wallace Silversmiths de Puerto Rico, Ltd. (“Wallace”), a wholly- owned subsidiary of the Company, received 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, Liability Act regarding the San Germán Ground Water Contamination Superfund Site, San Germán, Puerto Rico dated May 29, 2008 from the EPA. The Company responded to the EPA’s Request for Information on behalf of Wallace. At this time, it is not possible for the Company to evaluate the outcome of this matter. 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. Item 4. (Removed and Reserved) 9 PART II Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities (a) The Company’s common stock is traded under the symbol “LCUT” on The NASDAQ Global Select Market (“NASDAQ”). The following table sets forth the quarterly high and low sales prices for the common stock of the Company for the fiscal periods indicated as reported by NASDAQ. 2010 2009 High Low High Low First quarter $ 12.00 $ 6.61 $ 3.96 $ 0.97 Second quarter 15.86 11.87 4.59 1.38 Third quarter 15.68 13.53 5.95 3.33 Fourth quarter 15.23 12.70 7.40 5.34 At December 31, 2010, the Company estimates that there were approximately 2,586 beneficial holders of the Company’s common stock. The Company is authorized to issue 100 shares of Series A Preferred stock and 2,000,000 shares of Series B Preferred stock, none of which were issued or outstanding at December 31, 2010. The Company paid quarterly cash dividends of $0.0625 per share, or a total annual cash dividend of $0.25 per share, on its common stock during 2008. In February 2009, the Company suspended paying cash dividends on its outstanding shares of common stock. In March 2011, the Company determined that it will resume paying cash dividends on its outstanding shares of common stock. On March 4, 2011, the Board of Directors declared a quarterly dividend of $0.025 per share payable on May 16, 2011, to shareholders of record on May 2, 2011. The following table summarizes the Company’s equity compensation plan as of December 31, 2010: Plan category Number of shares of common stock to be issued upon exercise of outstanding options Weighted- average exercise price of outstanding options Number of shares of common stock remaining available for future issuance Equity compensation plan approved by security holders 2,219,200 $12.46 733,926 Equity compensation plan not approved by security holders ― Total 2,219,200 ― $12.46 ― 733,926 10 PERFORMANCE GRAPH The following chart compares the cumulative total return on the Company’s common stock with the NASDAQ Market Index and the Hemscott Group Index for Housewares & Accessories. The comparisons in this chart are required by the SEC and are not intended to forecast or be indicative of the possible future performance of the Company’s common stock. COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG LIFETIME BRANDS, INC., NASDAQ MARKET INDEX, AND HEMSCOTT GROUP INDEX Lifetime Brands, Inc. NASDAQ Market Index Hemscott Group Index $140 $120 $100 S R A L L O D $80 $60 $40 $20 $0 2005 2006 2007 2008 2009 2010 Date 12/31/2005 12/31/2006 12/31/2007 12/31/2008 12/31/2009 12/31/2010 Lifetime Brands, Inc. $ 100.00 80.37 64.33 18.16 36.69 72.04 Hemscott Group Index $ 100.00 124.17 107.75 45.94 85.53 98.49 NASDAQ Market Index $ 100.00 110.26 121.89 73.10 106.23 125.37 Note: (1) The chart assumes $100 was invested on December 31, 2005 and dividends were reinvested. Measurement points are at the last trading day of each of the fiscal years ended December 31, 2006, 2007, 2008, 2009 and 2010. The material in this chart is not soliciting material, is not deemed filed with the Securities and Exchange Commission and is not incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether or not made before or after the date of this Annual Report on Form 10-K and irrespective of any general incorporation language in such filing. A list of the companies included in the Hemscott Group Index will be furnished by the Company to any stockholder upon written request to the Chief Financial Officer of the Company. 11 Item 6. Selected Financial Data The selected consolidated statement of operations data for the years ended December 31, 2010, 2009 and 2008, and the selected consolidated balance sheet data as of December 31, 2010 and 2009, have been derived from the Company’s audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The selected consolidated statement of operations data for the years ended December 31, 2007 and 2006, and the selected consolidated balance sheet data at December 31, 2008, 2007 and 2006, have been derived from the Company’s audited consolidated financial statements included in the Company’s Annual Reports on Form 10-K for those respective years, which are not included in this Annual Report on Form 10-K. This information should be read together with the discussion in Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Company’s consolidated financial statements and notes to those statements included elsewhere in this Annual Report on Form 10-K. STATEMENT OF OPERATIONS DATA (1) 2010(2) Year ended December 31, 2009 2008(3) (in thousands, except per share data) 2007(3) 2006(3) Net sales $ 443,171 $ 415,040 $ 487,935 $ 493,725 $ 457,400 265,749 49,729 112,122 ― ― 29,800 Cost of sales Distribution expenses Selling, general and administrative expenses Goodwill and intangible asset impairment Restructuring expenses 273,774 44,570 95,044 ― ― 257,839 43,329 95,647 ― 2,616 303,535 57,695 131,226 29,400 17,992 288,997 53,493 128,527 ― 1,924 Income (loss) from operations Interest expense Loss on early retirement of debt Other income, net Income (loss) before income taxes, equity in earnings of Grupo Vasconia, S.A.B. and extraordinary item Income tax benefit (provision) Equity in earnings of Grupo Vasconia, S.A.B., 29,783 15,609 (51,913) 20,784 (9,351) (13,185) (11,577) (10,623) (5,616) ― ― (764) ― 31 ― ― ― ― 3,935 19,668 2,424 (63,490) 14,096 24,215 (4,602) (1,880) 14,249 (6,567) (9,320) net of taxes 2,718 2,171 1,486 ― ― Income (loss) before extraordinary item Extraordinary item, net of taxes $ 17,784 2,477 $ 2,715 $ (47,755) $ 7,529 ― ― ― $ 14,895 ― Net income (loss) $ 20,261 $ 2,715 $ (47,755) $ 7,529 $ 14,895 Basic income (loss) per common share before extraordinary item Basic income per common share of extraordinary item Basic income (loss) per common share Weighted-average shares outstanding – basic Diluted income (loss) per common share before extraordinary item Diluted income per common share of $ 1.48 $ 0.23 $ (3.99) $ 0.58 $ 1.13 $ 0.20 $ 1.68 12,036 $ ― $ ― $ ― $ 0.23 $ (3.99) $ 0.58 $ 1.13 13,171 11,976 $ ― 12,969 12,009 $ 1.44 $ 0.22 $ (3.99) $ 0.57 $ 1.10 extraordinary item Diluted income (loss) per common share $ 0.20 $ 1.64 $ ― $ ― $ 0.22 $ (3.99) $ 0.57 $ 1.10 $ ― $ ― Weighted-average shares outstanding – diluted 12,376 12,075 11,976 13,099 14,716 Cash dividends per common share $ ― $ ― $ 0.25 $ 0.25 $ 0.25 12 BALANCE SHEET DATA (1) Current assets Current liabilities Working capital Total assets Short-term borrowings Long-term debt Convertible senior notes Stockholders’ equity Notes: December 31, 2010 2009 2008(3) 2007(3) 2006(3) (in thousands) $ 182,253 $ 173,850 $ 232,678 $ 228,078 $ 231,633 89,727 77,210 149,981 71,283 60,512 141,906 96,640 82,697 156,795 121,741 343,064 276,723 341,781 371,415 277,586 21,500 24,601 89,300 13,500 4,100 5,000 ― ― 55,200 50,000 63,203 70,527 67,864 65,428 23,557 168,836 104,012 97,509 153,102 127,606 (1) The Company acquired the business and certain assets of the following in the respective years noted which affects the comparability of the periods: Syratech in April 2006, Pomerantz® and Design for Living® in April 2007, Gorham® in July 2007, a 30% interest in Grupo Vasconia, S.A.B. in December 2007 and Mikasa® in June 2008. (2) In 2010, the Company recorded an extraordinary gain of $2.5 million in conjunction with the elimination of negative goodwill related to the 2008 acquisition of Mikasa, Inc. (3) Certain amounts have been adjusted in these years to reflect the provisions of ASC Topic No. 470-20, Debt with Conversion and Other Options, on a retrospective basis. See Note E of the Notes to the Consolidated Financial Statements included in Item 15 for further information regarding the provisions of ASC Topic No. 470-20. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the consolidated financial statements for the Company and notes thereto set forth in Item 15. This discussion contains forward-looking statements relating to future events and the future performance of the Company based on the Company’s current expectations, assumptions, estimates and projections about it and the Company’s industry. These forward-looking statements involve risks and uncertainties. The Company’s actual results and timing of various events could differ materially from those anticipated in such forward-looking statements as a result of a variety of factors, as more fully described in this section and elsewhere in this Annual Report. The Company undertakes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. ABOUT THE COMPANY The Company is one of North America’s leading resources for nationally branded kitchenware, tabletop and home décor products. The Company’s major product categories are Kitchenware, Tabletop and Home Décor. The Company markets several product lines within each of these product categories and under most of the Company’s brands, primarily targeting moderate to premium price points, through 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 the leading brands in its industry including Farberware®, KitchenAid®, Cuisinart®, Pfaltzgraff®, Mikasa® and Pedrini®. Historically, the Company’s sales growth has come from expanding product offerings within its product categories, by developing existing brands, acquiring new brands 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. 13 BUSINESS SEGMENTS The Company operates in two reportable business segments; the Wholesale segment, which is the Company’s primary business that designs, markets and distributes its products to retailers and distributors, and the Retail Direct segment in which the Company markets and sells to consumers through its Pfaltzgraff®, Mikasa®, Lifetime Sterling™, and Housewares Deals™ Internet websites and Pfaltzgraff® mail-order catalogs. In 2007 and 2008, the Company discontinued operating retail outlet stores utilizing the Pfaltzgraff® and Farberware® names that were included in the Retail Direct segment’s results for those years. INVESTMENT IN GRUPO VASCONIA, S.A.B. The Company owns approximately 30% of the outstanding capital stock of Grupo Vasconia, S.A.B. (“Vasconia”), a leading Mexican housewares company. The Company accounts for its investment in Vasconia using the equity method of accounting and has recorded its proportionate share of Vasconia’s net income, net of taxes, as equity in earnings of Grupo Vasconia, S.A.B. in the Company’s consolidated statements of operations. Vasconia is an integrated cookware manufacturer. Through its subsidiary, Industria Mexicana del Aluminio, S.A. de C.V., Vasconia manufactures and sells aluminum disks, sheets, strips, plates and coils. Vasconia sells cookware and other housewares product items in Mexico and in Central and South America under its Ekco®, Vasconia®, Regal®, Presto® and Thermos® brands and sells housewares products under several of the Company’s owned and licensed brands, including CasaMōda®, Farberware®, KitchenAid®, Mikasa® and Pedrini®. Vasconia purchases certain housewares products directly from third-party vendors in Asia. In connection with such purchases, Vasconia reimburses the Company for the use of the Company’s sourcing offices and personnel services. The Company sells certain cookware products in the United States under the Vasconia® brand. The Company and Vasconia have entered into a cookware supply agreement, pursuant to which the Company is able to purchase cookware from Vasconia at Vasconia’s manufactured cost. Pursuant to a Shares Subscription Agreement (the “Agreement”), the Company may designate four persons to be nominated as members of Vasconia’s Board of Directors. The Agreement also provides mechanisms whereby, through December 2012, the Company is able to acquire a controlling interest in Vasconia or to require Vasconia to repurchase the Company’s ownership interest. Jeffrey Siegel, Ronald Shiftan, Daniel Siegel and C.P. Eduardo Manuel Arturo Argil y Aguilar have been designated as the Company’s nominees and currently serve as directors of Vasconia. Mr. Argil, a Certified Public Accountant, also serves as a member of Vasconia’s Audit Committee. Shares of Vasconia’s capital stock are traded on the Bolsa Mexicana de Valores, the Mexican Stock Exchange (www.bmv.com.mx). The Quotation Key is VASCONI. On January 29, 2010, Vasconia filed a Schedule 13D with the Securities and Exchange Commission, in which it disclosed that it had acquired 639,000 shares of the Company’s common stock. INVENTORY REDUCTION PLAN In 2007, the Company initiated a plan to reduce the number of individual items offered for sale and to shorten the period between procurement and sale. Consistent with this plan, the Company sold some slower moving inventory at lower than regular gross margin levels. The Company’s inventory was $144 million at December 31, 2007, $142 million at December 31, 2008, $104 million at December 31, 2009, and $100 million at December 31, 2010. 14 RESTRUCTURING EXPENSES During the year ended December 31, 2009, the Company recognized restructuring and non-cash impairment charges of $2.6 million. The restructuring charges consisted of lease obligations, employee related expenses and other related costs. The restructuring costs recognized in 2009 and 2008 were incurred in connection with: (i) the Company’s closure of its unprofitable retail outlet store operations, (ii) the closure of the Company’s York, Pennsylvania distribution center, the operations of which were consolidated with those of the Company’s main East Coast and West Coast distribution centers, (iii) the vacating of certain excess showroom space, (iv) the realignment of the management structure of certain of the Company’s divisions and (v) the elimination of a portion of the workforce at its Puerto Rico sterling silver manufacturing facility. These restructuring activities were completed by the end of 2009. The Company has not accounted for the retail outlet store operations as discontinued operations pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 205-20, Presentation of Financial Statements- Discontinued Operations, since the Company determined that the operations and cash flows of the retail outlet store operations would not be eliminated from the on-going operations of the Company. Specifically, the Company also determined that the migration of customers from the Company’s retail outlet stores to the Company’s retail direct and wholesale businesses would not be insignificant. For this purpose, the Company concluded that the migration of greater than 5% of sales from the retail outlet stores to the retail direct and wholesale businesses would be significant. 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 2010, 2009 and 2008, net sales for the third and fourth quarters accounted for 60%, 58%, and 61% 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. EFFECT OF ADOPTION OF ACCOUNTING PRINCIPLE Effective January 1, 2010, the Company adopted the provisions of ASC Topic No. 860, Transfers and Servicing. ASC Topic No. 860 revised the guidance required to determine controlling interests in a variable interest entity (“VIE”) and also added additional disclosure requirements regarding a company’s involvement with such entities. The new guidance requires a qualitative approach to identifying a controlling financial interest in a VIE, requires an on-going assessment of whether an entity is a VIE and whether the holder of the interest in a VIE is the primary beneficiary of the VIE. This guidance became effective for the Company beginning in 2010. The adoption of this guidance did not have an impact on the Company’s consolidated financial position or results of operations. 15 RESULTS OF OPERATIONS The following table sets forth statement of operations data of the Company as a percentage of net sales for the periods indicated below. Net sales Cost of sales Distribution expenses Selling, general and administrative expenses Goodwill and intangible asset impairment Restructuring expenses Income (loss) from operations Interest expense Loss on early retirement of debt Income (loss) before income taxes, equity in earnings of Grupo Vasconia, S.A.B. and extraordinary item Income tax benefit (provision) Equity in earnings of Grupo Vasconia, S.A.B., net of 2010 100.0 % 61.8 10.1 21.4 ― ― Year Ended December 31, 2009 100.0 % 62.1 10.4 23.0 ― 0.6 62.2 11.8 26.9 6.0 3.7 2008 100.0 % 6.7 3.9 (10.6) (2.1) (0.2) (3.2) ― (2.4) ― 4.4 0.7 (13.0) (1.0) (0.5) 2.9 taxes 0.6 0.5 0.3 Income (loss) before extraordinary item 4.0 % 0.7 % (9.8) % Extraordinary item, net of taxes 0.6 ― ― Net income (loss) 4.6 % 0.7 % (9.8) % MANAGEMENT’S DISCUSSION AND ANALYSIS 2010 COMPARED TO 2009 Net Sales Net sales for the year were $443.2 million, an increase of 6.8% compared to net sales of $415.0 million in 2009. Net sales for the Wholesale segment in 2010 were $413.8 million, an increase of $24.8 million or 6.4% compared to net sales of $389.0 million in 2009. Net sales in 2009 included approximately $4.7 million of net sales in the going-out-of-business sales of a customer that was liquidated. Excluding the impact of the customer’s 2009 going-out-of business sales, net sales for the Wholesale segment in 2010 increased approximately $29.5 million or 7.7% compared to 2009. More specifically, excluding the impact of the customer’s 2009 going-out-of business sales, net sales in the Company’s Kitchenware product category increased approximately $19.6 million, or 8.9%, in 2010 as compared to 2009, net sales for the Company’s Tabletop product category increased approximately $12.7 million, or 11.5%, in 2010 as compared to 2009, and net sales for the Company’s Home Décor product category decreased approximately $2.8 million, or 5.3%, in 2010 as compared to 2009. Net sales to Wal-Mart Stores Inc. decreased $8.5 million in 2010 as compared to 2009, principally due to changes in Wal-Mart’s inventory management strategy, which have resulted in the maintenance of fewer product offerings in its stores during the first half of 2010. The decrease in net sales to Wal-Mart Stores Inc., within the Kitchenware, Tabletop and Home Décor product categories, was substantially offset by an increase in sales to other retailers attributable to higher volume and the introduction of new products. Net sales for the Retail Direct segment in 2010 were $29.4 million, an increase of $3.4 million, as compared to $26.0 million for 2009. The increase in net sales was primarily attributable to targeted sales promotions on the Company’s Pfaltzgraff® and Mikasa® websites and additional net sales from the Company’s new Lifetime Sterling™ and Housewares Deals™ websites. The increase was partially offset by lower shipping income from free shipping promotions. 16 Cost of sales Cost of sales for 2010 was $273.8 million compared to $257.8 million for 2009. Cost of sales as a percentage of net sales was 61.8% for 2010 compared to 62.1% for 2009. Cost of sales as a percentage of net sales for the Wholesale segment was 63.7% for 2010 compared to 64.3% for 2009. Gross margin in 2010 increased as a result of favorable product mix. Gross margin in 2009 was negatively affected by lower margin sales in the going-out-of-business sales of the customer that was liquidated. Cost of sales as a percentage of net sales for the Retail Direct segment increased to 34.9% in 2010 from 29.4% in 2009. The decrease in gross margin was principally due to an increase in free shipping promotions. Distribution expenses Distribution expenses for 2010 were $44.6 million compared to $43.3 million for 2009. Distribution expenses as a percentage of net sales were 10.1% in 2010 and 10.4% for 2009. Distribution expenses as a percentage of net sales for the Wholesale segment was unchanged at 8.7% in both 2010 and 2009. Distribution expenses as a percentage of net sales for the Retail Direct segment were 29.2% for 2010 compared to 35.3% for 2009. The decrease is primarily attributable to improved labor efficiencies due to the Company’s exit from its York, Pennsylvania distribution center in July 2009. Selling, general and administrative expenses Selling, general and administrative expenses for 2010 were $95.0 million, a decrease of 0.6% compared to $95.6 million for 2009. Selling, general and administrative expenses for 2010 for the Wholesale segment were $71.3 million, a decrease of $2.2 million or 3.0% compared to $73.5 million in 2009. As a percentage of net sales, selling, general and administrative expenses were 17.2% for 2010 compared to 18.9% for 2009. The decrease of 3.0% was attributable to the benefit of the 2009 restructuring activities and lower depreciation and amortization resulting from the write-off of fixed assets at exited facilities and a reduction of occupancy expenses primarily from consolidating showrooms and the Company’s continued expense reduction efforts. The decrease was offset by higher incentive compensation. Selling, general and administrative expenses for 2010 for the Retail Direct segment were $11.5 million compared to $10.8 million for 2009. The increase was in support of sales growth and was attributable to higher employee expenses and an increase in web related search expenses. This increase was partially offset by lower catalog related expenses. Unallocated corporate expenses for 2010 and 2009 were $12.2 million and $11.3 million, respectively. The increase was primarily attributable to higher compensation expense, including incentive compensation and stock options. Interest expense Interest expense for 2010 was $9.4 million compared to $13.2 million for 2009. The decrease in interest expense was primarily attributable to lower average borrowings and lower interest rates resulting from the Company’s debt refinancing in 2010. Loss on early retirement of debt During 2010, the Company entered into a new revolving credit facility and term loan and repurchased $50.9 million principal amount of its convertible senior notes. In connection with these activities, the Company incurred a non-cash pre-tax charge of approximately $764,000 consisting primarily of the write-off of deferred financing costs and unamortized debt discount related to the Company’s prior revolving credit facility and the 4.75% convertible senior notes that were repurchased. 17 Income tax provision The income tax provision for 2010 was $4.6 million compared to $1.9 million for 2009. The effective tax rates in 2010 and 2009 reflect a reduction in the valuation allowance related to certain deferred tax assets. The increase in the income tax provision resulted from higher income before income taxes offset by the effect of the valuation allowance reduction. Equity in earnings of Grupo Vasconia, S.A.B. Equity in earnings of Grupo Vasconia, net of taxes, was $2.7 million for 2010 compared to $2.2 million for 2009. Grupo Vasconia reported income from operations for the year ended 2010 of $15.1 million compared to $11.8 million for 2009; and net income of $9.9 million in 2010 compared to $8.3 million in 2009. The increase in income from operations in 2010 as compared to 2009 is primarily attributable to the growth in aluminum sales during 2010. Increased margins from kitchenware sales during 2010 were offset by increases in selling and distribution expenses. Extraordinary item In 2010, the Company recorded an extraordinary gain of $2.5 million in conjunction with the elimination of negative goodwill related to the 2008 acquisition of Mikasa, Inc. Net Sales Net sales for the year were $415.0 million, a decrease of 14.9% compared to net sales of $487.9 million in 2008. 2009 COMPARED TO 2008 Net sales for the Wholesale segment in 2009 were $389.0 million, a decrease of $14.6 million or 3.6% compared to net sales of $403.6 million in 2008. On a comparable basis, adjusting 2009 net sales of Mikasa®, which was acquired on June 6, 2008, to reflect net sales only for the period after June 6, 2009, the same post acquisition period as 2008, net sales for the Company’s Wholesale segment were $374.4 million for 2009, a decrease of $29.2 million or 7.2% compared to net sales for 2008. Net sales for the Company’s Kitchenware product category decreased approximately $14.8 million. The decrease was primarily attributable to changes in the Company’s key customers’ sourcing patterns and product mix, and the liquidation of a significant customer in 2008. Net sales for the Company’s Tabletop product category, excluding Mikasa® sales, decreased approximately $12.9 million primarily as the result of lower sales of flatware and giftware which management attributes to the weak economy and its negative impact on consumer spending habits, particularly for luxury items. Net sales for the Company’s Home Décor product category decreased approximately $4.3 million due primarily to the elimination of certain low margin business in 2009. Net sales of other Wholesale products increased by $2.8 million due to the addition of a product line in 2009. Net sales for the Retail Direct segment in 2009 were $26.0 million compared to $84.3 million for 2008. On a comparable basis, excluding (a) 2009 net sales related to Mikasa® of $1.4 million to reflect net sales for the same post acquisition period as 2008, and (b) 2008 net sales of $55.8 million attributable to the retail outlet stores that the Company closed by the end of 2008, net sales for the Retail Direct segment were $24.6 million for 2009 compared to $28.5 million in 2008, a decrease of $3.9 million. During 2009, the Company de-emphasized its catalog business due to low profitability which, together with the weak retail sales environment, contributed to the decline. Cost of sales Cost of sales for 2009 was $257.8 million compared to $303.5 million for 2008. Cost of sales as a percentage of net sales was 62.1% for 2009 compared to 62.2% for 2008. Cost of sales as a percentage of net sales for the Wholesale segment was 64.3% for 2009 compared to 64.0% for 2008. The decrease in gross margin, primarily attributable to a shift in customer mix, was substantially offset by lower in-bound freight costs and lower minimum royalties during 2009. 18 Cost of sales as a percentage of net sales for the Retail Direct segment decreased to 29.4% in 2009 from 53.4% in 2008. On a comparable basis, excluding 2008 cost of sales attributable to the retail outlet stores that the Company closed by the end of 2008, cost of sales as a percentage of net sales for the Retail Direct segment were 31.8% for 2008. The increase in gross margin was primarily attributable to selective price increases and less promotional free shipping in 2009. Distribution expenses Distribution expenses for 2009 were $43.3 million compared to $57.7 million for 2008. Distribution expenses as a percentage of net sales were 10.4% in 2009 and 11.8% for 2008. Distribution expenses as a percentage of net sales for the Wholesale segment decreased to 8.7% in 2009 from 11.0% in 2008. The decrease was primarily attributable to the elimination of duplicative costs incurred while the Company consolidated its West Coast distribution centers in 2008 and distribution services for Mikasa® provided by the seller and offset in part by additional costs to integrate the Mikasa® inventory into the Company’s existing distribution centers in 2008, collectively which accounted for approximately 1.3% of the decrease in distribution expenses as a percentage of net sales. The balance of the decrease was primarily attributable to improved labor efficiencies realized in 2009. Distribution expenses as a percentage of net sales for the Retail Direct segment were 35.3% for 2009 compared to 15.9% for 2008. On a comparable basis, excluding 2008 distribution expenses for the retail outlet stores that the Company closed by the end of 2008, distribution expenses as a percentage of net sales for the Retail Direct segment were 39.6% for 2008. The decrease was due primarily to the benefit of the Company’s closure of its York, Pennsylvania distribution center. Selling, general and administrative expenses Selling, general and administrative expenses for 2009 were $95.6 million, a decrease of 27.1% compared to $131.2 million for 2008. Selling, general and administrative expenses for 2009 for the Wholesale segment were $73.5 million, a decrease of $9.5 million or 11.4% compared to $83.0 million in 2008. As a percentage of net sales, selling, general and administrative expenses were 18.9% for 2009 compared to 20.6% for 2008. The decrease in selling, general and administrative expenses was primarily attributable to the Company’s expense reduction efforts and the non- recurrence of the costs incurred in 2008 for transitional services related to Mikasa®. The decrease as a percentage of net sales was offset in part due to the lower sales volume in 2009. Selling, general and administrative expenses for 2009 for the Retail Direct segment were $10.8 million compared to $37.3 million for 2008. On a comparable basis, excluding 2008 selling, general and administrative expenses for the retail outlet stores that the Company closed by the end of 2008, selling, general and administrative expenses for the Retail Direct segment were $12.7 million for 2008. The decrease was primarily attributable to reductions in postage and catalog production costs as a result of the Company’s de-emphasis of its catalog channel. Unallocated corporate expenses for 2009 and 2008 were $11.3 million and $10.9 million, respectively. The increase was primarily attributable to an increase in short-term incentive compensation expense offset by a decrease in professional fees and stock option expense. Restructuring expenses During 2009, the Company recorded restructuring expenses and non-cash impairment charges of $2.6 million related to the Company’s 2008 restructuring initiative, the realignment of the management structure of certain divisions and the elimination of a portion of the workforce at its Puerto Rico sterling silver manufacturing facility. The restructuring expenses consisted principally of charges for lease obligations, employee related expenses and other related costs. The restructuring charges in 2009 also reflect adjustments reducing the restructuring charges recognized in 2008 by $1.9 million as the result of decisions by the Company not to vacate certain leased space that the Company had expected to vacate and a decision not to terminate the employment of certain employees, whose employment the Company had expected to terminate. 19 Interest expense Interest expense for 2009 was $13.2 million compared to $11.6 million for 2008. The increase in interest expense was primarily attributable to higher interest rates in 2009 primarily as the result of an increase in the applicable margin rates under the Company’s Credit Facility and a reclassification from other comprehensive loss to interest expense as a result of the de-designation of a cash flow hedge. The increase was offset in part by lower average borrowings during 2009. Income tax benefit (provision) The income tax provision for 2009 was $1.9 million compared to a benefit of $14.2 million for 2008. The Company’s effective tax rate for 2009 primarily reflects state taxes and deferred taxes related to basis differences in certain assets. Equity in earnings of Grupo Vasconia, S.A.B. Equity in earnings of Grupo Vasconia, net of taxes, was $2.2 million for 2009 compared to $1.5 million for 2008. Grupo Vasconia reported income from operations for the year ended 2009 of $11.8 million compared to $11.7 million for 2008; and net income of $8.3 million in 2009 compared to $6.3 million in 2008. The increase in net income for the year ended 2009 was primarily attributable to the growth in sales of kitchenware during 2009. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses the Company’s consolidated financial statements which have been prepared in accordance with U.S. generally accepted accounting principles and with the instructions to Form 10-K and Article 10 of Regulation S-X. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on- going basis, management evaluates its estimates and judgments based on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. The Company evaluates these estimates including those related to revenue recognition, allowances for doubtful accounts, reserves for sales returns and allowances and customer chargebacks, inventory mark-down provisions, impairment of tangible and intangible assets, stock option expense, derivative valuation, accruals related to the Company’s tax positions and tax valuation allowances. Actual results may differ from these estimates using different assumptions and under different conditions. The Company’s significant accounting policies are more fully described in Note A of the Notes to the Consolidated Financial Statements included in Item 15. The Company believes that the following discussion addresses its most critical accounting policies, which are those that are most important to the portrayal of the Company’s consolidated financial condition and results of operations and require management’s most difficult, subjective and complex judgments. 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 by the lower of cost (first-in, first-out basis) or market method. The Company estimates the selling price of its inventory on a product by product basis based on the current selling environment and considering the various available channels of distribution (e.g. wholesale: specialty store, off-price retailers, etc. or the Internet and catalog). If the estimated selling price is lower than the inventory’s cost, the Company reduces the value of inventory to its net realizable value. If a variance exists between the Company’s estimated selling prices and actual selling prices, material fluctuations in gross margin could occur. Historically, the Company’s adjustments to inventory have been appropriate and have not resulted in material unexpected charges. 20 Receivables The Company periodically reviews the collectibility of its accounts receivable and establishes allowances for estimated losses that could result from the inability of its customers to make required payments. A considerable amount of judgment is required to assess the ultimate realization of these receivables including assessing the initial and on-going creditworthiness of the Company’s customers. The Company also maintains an allowance for anticipated customer deductions. The allowances for deductions are primarily based on contracts with customers. However, in certain cases the Company does not have a formal contract and therefore, customer deductions are non-contractual. To evaluate the reasonableness of non-contractual customer deductions, the Company analyzes currently available information and historical trends of deductions. If the financial conditions of the Company’s customers or general economic conditions were to deteriorate, resulting in an impairment of their ability to make payments or sell the Company’s products at reasonable sales prices, or the Company’s estimate of non-contractual deductions varied from actual deductions, revisions to allowances would be required, which could adversely affect the Company’s financial condition. Historically, the Company’s allowances have been appropriate and have not resulted in material unexpected charges. Intangible assets and long-lived assets Intangible assets deemed to have indefinite lives are not amortized but instead are subject to an annual impairment assessment. Long-lived assets, including intangible assets deemed to have finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that such assets may have been impaired. Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit or material adverse changes in the business climate that indicate that the carrying amount of an asset may be impaired. When impairment indicators are present, the Company compares the carrying value of the assets to the estimated undiscounted future cash flows expected to be generated by the assets. If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company considered indicators of impairment of its long-lived assets and determined that no such indicators were present at December 31, 2010. Revenue recognition The Company sells products wholesale, to retailers and distributors, and retail, directly to the consumer through the Company’s Retail Direct operations. Wholesale sales and Retail Direct sales are recognized when title passes to the customer. Wholesale sales are recognized at shipping point and Retail Direct sales are recognized upon delivery to the customer. Shipping and handling fees that are billed to customers in sales transactions are recorded in net sales. Net sales exclude taxes that are collected from customers and remitted to the taxing authorities. Employee stock options The Company accounts for its stock options in accordance with ASC Topic No. 718-20, Awards Classified as Equity, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period for awards expected to vest. The Company uses the Black-Scholes option valuation model to estimate the fair value of its stock options. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s common stock and the risk-free interest rate. Changes in these subjective input assumptions can materially affect the fair value estimate of the Company’s stock options on the date of the option grant. The Company historically has not issued options which would be variable awards under ASC 718-20. 21 Income taxes The Company applies the provisions of ASC Topic No. 740, Income Taxes, for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the Company’s financial statements. Tax positions must meet a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken. The valuation allowance is also calculated in accordance with the provisions of ASC Topic No. 740, which requires a valuation allowance be established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. Derivatives The Company accounts for derivative instruments in accordance with ASC Topic No. 815, Derivatives and Hedging, which requires that all derivative instruments be recognized on the balance sheet at fair value as either an asset or a 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 to the extent the derivative is considered perfectly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged, until the hedged item is recognized in earnings. For derivatives that do not qualify or are not designated as hedging instruments for accounting purposes, changes in fair value are recorded in operations. LIQUIDITY AND CAPITAL RESOURCES The Company’s principal sources of cash to fund liquidity needs are: (i) cash provided by operating activities and (ii) amounts available under the Company’s revolving credit facility. The Company’s primary uses of funds consist of cash used in operating activities, capital expenditures and payment of principal and interest on its debt. At December 31, 2010, the Company had cash and cash equivalents of $3.4 million compared to $682,000 at December 31, 2009, working capital was $121.7 million at December 31, 2010 compared to $96.6 million at December 31, 2009 and the current ratio was 3.01 to 1 at December 31, 2010 compared to 2.25 to 1 at December 31, 2009. Borrowings under the Company’s revolving credit facility decreased to $14.1 million at December 31, 2010 compared to $24.6 million at December 31, 2009. The decrease in borrowings was primarily attributable to the use of cash from operations to pay down the amounts outstanding under the revolving credit facility. The Company believes that availability under the Revolving Credit Facility and cash flows from operations is sufficient to fund the Company’s operations. However, if circumstances were to adversely change, the Company may seek alternative sources of liquidity including debt and 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 the evaluation of changes in customers’ creditworthiness, the Company may modify credit limits and/or terms of sale. The Company has not been materially affected by the bankruptcy or liquidation of any of its customers to date. However, notwithstanding the Company’s efforts to monitor its customers’ financial condition, the Company may be materially affected in the future. In 2010, Wal-Mart Stores, Inc. (including Sam’s Club) accounted for 15% of the Company’s sales. A material reduction of product orders by Wal-Mart Stores, Inc. could have significant adverse effects on the Company’s business and operating results and ultimately the Company’s liquidity, including the loss of predictability and volume production efficiencies associated with such a large customer. Revolving Credit Facility On June 9, 2010, the Company entered into a $125.0 million secured credit agreement (the “Revolving Credit Facility”), which matures on June 9, 2015, with a bank group led by JPMorgan Chase Bank, N.A. The Revolving Credit Facility contains an expansion option permitting the Company, subject to certain conditions, to increase the amount available up to $150.0 million. Borrowings under the Revolving Credit Facility are secured by a first lien priority security interest in all of the assets of the Company and its domestic subsidiaries, including a pledge of the Company’s outstanding shares of stock in its subsidiaries (limited, in the case of its foreign subsidiaries, to 65.0% of the Company’s equity interests), except as set forth below regarding the Company’s shares in its wholly-owned subsidiary LTB de Mexico, S.A. de C.V. (“LTB de Mexico”). 22 Availability under the Revolving Credit Facility is subject to a borrowing base calculation equal to the sum of (i) 85.0% of eligible accounts receivable, (ii) 85.0% of the net orderly liquidation value of eligible inventory and (iii) the lesser of 50.0% of the orderly liquidation value of eligible trademarks and $10.0 million. Availability is subject to a $24.1 million reserve which represents the outstanding principal amount of the Company’s 4.75% convertible senior notes. The borrowing base is also subject to reserves that may be established by the administrative agent in its permitted discretion. Borrowings under the Revolving Credit Facility bear interest, at the Company’s option, at one of the following rates: (i) the Alternate Base Rate, defined as the greater of the Prime Rate, Federal Funds Rate plus 0.5% or the Adjusted LIBOR rate plus 1.0%, plus a margin of 1.25% to 1.75%, or (ii) the Eurodollar Rate, defined as the Adjusted LIBOR Rate plus a margin of 2.25% to 2.75%. The respective margin is based upon availability. In addition, the Company pays a commitment fee of 0.50% on the unused portion of the Revolving Credit Facility. The Revolving Credit Facility provides for customary restrictions and events of default. Restrictions include limitations on additional indebtedness, acquisitions, investments and payment of dividends among others. Furthermore, if availability under the Revolving Credit Facility is less than 14.0% of the total facility commitment, the Company will be required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00, which covenant would remain effective until availability is at least 16.0% of the total facility commitment for a period of three consecutive months. Availability under the Revolving Credit Facility was approximately 54.1% of the total loan commitment at December 31, 2010. At December 31, 2010, the Company had $1.4 million of open letters of credit and $14.1 million of borrowings outstanding under the Revolving Credit Facility. Borrowings during the period were used to repay in full the Company’s prior credit facility and to repay, in part, a portion of the Company’s 4.75% convertible senior notes. The interest rate on the outstanding borrowings at December 31, 2010 ranged from 2.81% to 4.75%. Pursuant to the provisions of the ASC Topic No. 470-10, Short-term Obligations Expected to be Refinanced, at December 31, 2010, the Company had classified $4.1 million of the Revolving Credit Facility as a current liability, based on planned repayments associated with anticipated changes in working capital principally from cash flows from operations, including collections of accounts receivable and sales of inventory which is expected to occur within one year. Repayments are planned to the extent that such anticipated cash flows are generated although the Company is not obligated to repay any portion of the debt until maturity of the facility in June 2015, provided that availability exists under the facility. Repayments and borrowings under the facility can vary significantly from planned levels based on cash flow needs or general economic conditions. The Company had classified the remaining amount outstanding under the Revolving Credit Facility of $10.0 million as long-term at December 31, 2010. The Company expects that it will continue to borrow and repay funds under the facility based on working capital needs which is subject to availability. Amounts outstanding under the Company’s prior credit facility were classified as current because at that time the lenders had full access to remittances paid into the Company’s lock-box to pay down amounts outstanding. Term Loan On June 9, 2010, the Company entered into a $40.0 million second lien credit agreement (the “Term Loan”), which matures on June 8, 2015, with Citibank, N.A. Borrowings under the Term Loan are secured by a second lien priority interest in the same collateral securing the Revolving Credit Facility, except that Citibank N.A. has a first lien pledge of 65.0% of the Company’s shares of LTB de Mexico which holds the Company’s investment in Vasconia. The Term Loan bears interest, at the Company’s option, at one of the following rates: (i) the Alternate Base Rate, defined as the greater of the corporate rate published by the lender and the Federal Funds Rate plus 0.50% provided that such calculated rate is a minimum of 2.50%, plus a margin of 7.50%, or (ii) the Adjusted LIBOR rate which shall be a minimum of 1.50%, plus a margin of 8.50%. On June 9, 2010 and August 5, 2010, the Company drew $10.0 million and $30.0 million, respectively, under the Term Loan. Proceeds of these borrowings were used to repay a portion of the outstanding borrowings under the Revolving Credit Facility. The interest rate on the outstanding borrowings at December 31, 2010 was 10.0%. The Term Loan requires the Company to have EBITDA, as defined, of not less than $30.0 million for all trailing four fiscal quarters and limited capital expenditures to $7.0 million for the year ending December 31, 2010. The Company was in compliance with these financial covenants at December 31, 2010. The Term Loan also provides for customary restrictions and events of default as described above for the Revolving Credit Facility. 23 The Company’s EBITDA for the four quarters ended December 31, 2010 was $42.9 million and was determined as follows: EBITDA for the four quarters ended December 31, 2010 (in thousands) Three months ended December 31, 2010 Three months ended September 30, 2010 Three months ended June 30, 2010 Three months ended March 31, 2010 Total for the four quarters $ 17,544 13,529 6,117 5,728 $ 42,918 Capital expenditures for the year ended December 31, 2010 were $2.9 million. Non-GAAP financial measure EBITDA is a non-GAAP financial measure within the meaning of Regulation G promulgated by the Securities and Exchange Commission. The following is a reconciliation of net income as reported to EBITDA for the three and twelve months ended December 31, 2010 and 2009: Net income as reported Subtract out: Undistributed earnings of Grupo Vasconia, S.A.B Extraordinary item, net of taxes Add back: Provision for income taxes Interest expense Depreciation and amortization Restructuring expenses Stock compensation expense Loss on early retirement of debt Consolidated EBITDA Three Months Ended December 31, Year Ended December 31, 2010 2009 2010 2009 (in thousands) $ 13,928 $ 5,048 $ 20,261 $ 2,715 (733) (2,477) (534) ― (2,321) (2,477) (1,953) ― 1,600 2,188 2,292 ― 746 ― $ 17,544 1,311 4,124 3,214 1,784 611 ― $ 15,558 4,602 9,351 9,810 ― 2,928 764 $ 42,918 1,880 13,185 11,472 2,616 2,099 ― $ 32,014 Convertible Notes The Company has outstanding $24.1 million aggregate principal amount of 4.75% Convertible Senior Notes (the “Notes”) due July 15, 2011. The Notes are convertible at the option of the holder any time prior to maturity into shares of the Company’s common stock at a conversion price of $28.00 per share, subject to adjustment in certain events. The Notes bear interest at 4.75% per annum, payable semiannually in arrears on January 15th and July 15th of each year and are unsubordinated except with respect to the Company’s debt outstanding under its Revolving Credit Facility and Term Loan. The Company may not redeem the Notes at any time prior to maturity. Pursuant to the provisions of ASC Topic No. 470-10, the Company classified the Notes as a long-term liability based on the Company’s intent and ability to refinance the Notes using the proceeds from the Revolving Credit Facility. In June 2010, the Company purchased $50.9 million principal amount of the Notes in privately negotiated transactions for $51.0 million, reducing the aggregate principal amount to $24.1 million. 24 Dividends In February 2009, the Company suspended paying cash dividends on its outstanding common shares. In March 2011, the Company determined that it will resume paying cash dividends on its outstanding shares of common stock. On March 4, 2011, the Board of Directors declared a quarterly dividend of $0.025 per share payable on May 16, 2011, to shareholders of record on May 2, 2011. Operating activities Cash provided by operating activities was $30.1 million in 2010 compared to $64.0 million in 2009. In 2009, operating cash flows reflected reductions in working capital principally from planned inventory reductions as compared to a lower level of inventory reductions in 2010. The decrease was also attributable to an increase in receivables which was offset by an increase in accounts payable and accrued expenses, as a result of higher sales volumes in the fourth quarter of 2010 as compared to 2009. In addition, in 2009, the Company received an income tax refund of $11.3 million. This reduction was partially offset by the significant increase in net income in 2010. Investing activities Cash used in investing activities was $2.8 million in 2010 compared to $1.9 million in 2009. The increase in investing activities relates to equipment purchases in 2010 principally for the Company’s distribution centers. The Company’s 2011 planned capital expenditures are estimated not to exceed $4.0 million. Financing activities Cash used in financing activities was $24.6 million in 2010 compared to $64.8 million in 2009. In 2010, net repayments of the Company’s borrowings were $21.5 million compared to $64.7 million in 2009. In June 2010, the Company repaid in full its prior revolving credit facility and repurchased $50.9 million principal amount of the Notes for $51.0 million. The sources of funds to repay these borrowings were drawings on the Revolving Credit Facility and the Term Loan. As discussed above in Operating Activities, the Company generated significant cash flows in 2009 from its inventory reduction plan and income tax refund. These cash flows were used to repay indebtedness. Contractual obligations As of December 31, 2010, the Company’s contractual obligations were as follows (in thousands): Payment due by period Operating leases Long-term debt Interest on long-term debt Minimum royalty payments Post retirement benefits Capitalized leases Total Less than 1 year Total $ 107,069 $ 12,698 24,100 5,110 5,320 144 94 $ 47,466 74,100 20,707 14,510 3,343 94 $ 219,823 1-3 years 3-5 years $ 25,611 $ 25,372 50,000 6,523 692 232 ― $ 82,819 ― 9,074 6,022 266 ― $ 40,973 More than 5 years $ 43,388 ― ― 2,476 2,701 ― $ 48,565 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk represents the risk of loss that may impact the consolidated financial position, results of operations or cash flows of the Company. The Company is exposed to market risk associated with changes in interest rates and foreign currency exchange rates. The Company’s Revolving Credit Facility bears interest at variable rates and, therefore, the Company is subject to increases and decreases in interest expense resulting from fluctuations in interest rates. The Company had entered into interest rate swap agreements with an aggregate notional amount of $10.0 million and had interest rate collar agreements with an aggregate notional amount of $40.2 million to manage interest rate exposure in connection with these variable interest rate borrowings. The Company has foreign operations through its equity investment in Grupo Vasconia, S.A.B. which has operations in Mexico; therefore, the Company is subject to increases and decreases in its investment resulting from the impact of fluctuations in foreign currency exchange rates on equity income. There have been no changes in interest rates or foreign currency exchange rates that would have a material impact on the consolidated financial position, results of operations or cash flows of the Company for the year ended December 31, 2010. 25 Item 8. Financial Statements and Supplementary Data The Company’s Consolidated Financial Statements as of and for the year ended December 31, 2010 in Item 15 commencing on page F-1 are incorporated herein by reference. The following table sets forth certain unaudited consolidated quarterly statement of operations data for the eight quarters ended December 31, 2010. This information is unaudited, but in the opinion of management, it has been prepared substantially on the same basis as the audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to present fairly the unaudited consolidated quarterly results of operations. The consolidated quarterly data should be read in conjunction with the Company’s audited consolidated financial statements and the notes to such statements appearing elsewhere in this Annual Report. The results of operations for any quarter are not necessarily indicative of the results of operations for any future period: Net sales Gross profit Income from operations Income (loss) before extraordinary item Extraordinary item, net of taxes Net income (loss) Basic income (loss) per common share before extraordinary item Basic income per common share of extraordinary item Basic income (loss) per common share Diluted income (loss) per common share before extraordinary item Diluted income per common share of extraordinary item Diluted income (loss) per common share Net sales Gross profit Income (loss) from operations Net income (loss) Basic income (loss) per common share Diluted income (loss) per common share Notes: Year ended December 31, 2010 First quarter Second quarter(1) Third quarter Fourth quarter (2) (in thousands, except per share data) $ 88,736 $ 86,889 $ 124,918 $ 142,628 54,510 33,947 34,784 14,505 2,527 2,522 11,451 729 (981) 2,477 ― ― 13,928 729 (981) 46,156 10,229 6,585 ― 6,585 0.06 (0.08) ― ― 0.06 (0.08) 0.55 0.96 ― 0.20 0.55 1.16 0.06 (0.08) ― ― 0.06 (0.08) 0.52 0.87 ― 0.20 0.52 1.07 Year ended December 31, 2009 First quarter(3) Second quarter(3) Third quarter(3) Fourth quarter(3) (in thousands, except per share data) $ 90,214 $ 85,334 32,228 32,066 1,434 (3,373) (1,253) (5,959) (0.50) (0.10) (0.50) (0.10) 41,644 7,599 4,879 $ 111,422 $ 128,070 51,263 9,949 5,048 0.41 0.42 0.40 0.41 (1) The Company recognized a loss on the early retirement of debt of $764,000 in the second quarter of 2010. (2) The Company recognized an extraordinary gain of $2.5 million during the fourth quarter of 2010. (3) The Company recognized restructuring and fixed asset impairment expenses of $824,000, $(663,000), $671,000 and $1.8 million in the first, second, third and fourth quarters of 2009, respectively. 26 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None Item 9A. Controls and Procedures (a) (b) 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 and accounting officer, respectively) have concluded, based on their evaluation as of December 31, 2010, that the Company’s controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed by it under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), 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. Changes in Internal Controls There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of December 31, 2010. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principle executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. All internal control systems, no matter how well designed, have inherent limitations. Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Accordingly, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management performed an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010 using the criteria set forth in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2010 is effective. The effectiveness of the Company’s internal control over financial reporting as of December 31, 2010 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report. 27 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Lifetime Brands, Inc. We have audited Lifetime Brands Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Lifetime Brands Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Lifetime Brands, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010 based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Lifetime Brands, Inc. as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010 of Lifetime Brands, Inc. and our report dated March 11, 2011 expressed an unqualified opinion thereon. /s/ ERNST & YOUNG LLP Jericho, New York March 11, 2011 28 Item 9B. Other Information Not applicable PART III Items 10, 11, 12, 13 and 14 The information required under these items is contained in the Company’s 2011 Proxy Statement, which will be filed with the Securities and Exchange Commission within 120 days after the close of the Company’s fiscal year covered by this Annual Report on Form 10-K and is herein incorporated by reference. 29 PART IV Item 15. Exhibits, Financial Statement Schedules (a) See Financial Statements and Financial Statement Schedule on page F-1. (b) Exhibits*: Exhibit No. Description 3.1 Second Restated Certificate of Incorporation of the Company (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2005)** 3.2 4.1 10.1 10.2 10.3 10.4 Amended and Restated By-Laws of the Company (incorporated by reference to the Registrant’s Form 8-K dated November 1, 2007)** Indenture dated as of June 27, 2006, Lifetime Brands, Inc. as issuer, and HSBC Bank USA, National Association as trustee, $75,000,000 4.75% Convertible Senior Notes due 2011 (incorporated by reference to the Registrant’s registration statement No. 333-137575 on Form S-3)** License agreement dated December 14, 1989 between the Company and Farberware, Inc. (incorporated by reference to the Registrant’s registration statement No. 33-40154 on Form S-1)** Evan Miller employment agreement dated July 1, 2003 (incorporated by reference to the Registrant’s Form 10-Q dated September 30, 2003)** Employment agreement dated May 2, 2006 between Lifetime Brands, Inc. and Jeffrey Siegel (incorporated by reference to the Registrant’s Form 8-K dated May 2, 2006)** Lease agreement dated as of May 10, 2006 between AG Metropolitan Endo, L.L.C and Lifetime Brands, Inc. for the property located at 1000 Stewart Avenue in Garden City, New York (incorporated by reference to the Registrant’s Form 8-K dated May 10, 2006)** 10.5 Amended 2000 Long-Term Incentive Plan (incorporated by reference to the Registrant’s Form 8-K dated June 8, 2006)** 10.6 Amended 2000 Incentive Bonus Compensation Plan (incorporated by reference to the Registrant’s Form 8-K dated June 8, 2006)** 10.7 10.8 10.9 First Amendment to the Lease Agreement dated as of May 10, 2006 between AG Metropolitan Endo, L.L.C and Lifetime Brands, Inc. for the property located at 1000 Stewart Avenue in Garden City, New York (incorporated by reference to the Registrant’s Form 10-Q dated September 30, 2006)** Employment agreement dated June 28, 2007 between Lifetime Brands, Inc. and Laurence Winoker (incorporated by reference to the Registrant’s Form 8-K dated July 3, 2007)** Shares Subscription Agreement by and among Lifetime Brands, Inc., Ekco, S.A.B. and Mr. José Ramón Elizondo Anaya and Mr. Miguel Ángel Huerta Pando, dated as of June 8, 2007 (incorporated by reference to the Registrant’s Form 8-K dated June 11, 2007)** 30 10.10 Lease Agreement between Granite Sierra Park LP and Lifetime Brands, Inc. dated June 29, 2007 (incorporated by reference to the Registrant’s Form 8-K dated June 29, 2007)** 10.11 Evan Miller Amendment of Employment Agreement dated June 29, 2007 (incorporated by reference to the Registrant’s Form 8-K dated June 29, 2007)** 10.12 Amendment No.1 dated September 5, 2007 to the Shares Subscription Agreement by and among Lifetime Brands, Inc., Ekco, S.A.B. and Mr. José Ramón Elizondo Anaya and Mr. Miguel Ángel Huerta Pando, dated as of June 8, 2007 (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008)** 10.13 Amendment to the Lifetime Brands, Inc. 2000 Long-Term Incentive Plan dated November 1, 2007 (incorporated by reference to the Registrant’s Form 8-K dated November 1, 2007)** 10.14 Amendment No. 2 to Second Amended and Restated Credit Agreement by and among Lifetime Brands, Inc., Lenders party hereto, Citibank, N.A. and Wachovia Bank, National Association, as Co- Documentation Agents, JP Morgan Chase Bank, N.A., as Syndication Agent, and HSBC Bank USA, National Association, as Administrative Agent (incorporated by reference to the Registrant’s Form 8-K/A dated April 17, 2008)** 10.15 Asset Purchase Agreement between Mikasa, Inc. and Lifetime Brands, Inc. dated June, 6 2008 (incorporated by reference to the Registrant’s Form 10-Q dated June 30, 2008)** 10.16 Amendment No. 2 dated September 25, 2008 to the Shares Subscription Agreement by and among Lifetime Brands, Inc., Ekco, S.A.B. and Mr. José Ramón Elizondo Anaya and Mr. Miguel Ángel Huerta Pando, dated as of June 8, 2007 (incorporated by reference to the Registrant’s Annual Report on Form 10- K for the year ended December 31, 2008)** 10.17 Amendment to the Company’s Second Amended and Restated Credit Agreement, Amendment No. 3, dated September 29, 2008 (incorporated by reference to the Registrant’s Form 8-K dated September 29, 2008)** 10.18 Forbearance Agreement and Amendment No. 4, dated as of February 12, 2009, by and among Lifetime Brands, Inc., the several financial institutions party hereto and HSBC Bank USA, National Association, as Administrative Agent for the Lenders (incorporated by reference to the Registrant’s Form 8-K dated February 12, 2009)** 10.19 Amendment to Forbearance Agreement and Amendment No. 4, dated as of March 6, 2009, by and among Lifetime Brands, Inc., the several financial institutions party hereto and HSBC Bank USA, National Association, as Administrative Agent for the Lenders (incorporated by reference to the Registrant’s Form 8-K dated March 6, 2009)** 10.20 Waiver and Amendment No. 5 to Second Amended and Restated Credit Agreement, dated as of March 31, 2009, by and among Lifetime Brands, Inc., the several financial institutions party hereto and HSBC Bank USA, National Association, as Administrative Agent for the Lenders (incorporated by reference to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008)** 10.21 Amendment of the Lifetime Brands, Inc. 2000 Long-Term Incentive Plan dated June 11, 2009 (incorporated by reference to the Registrant’s Form 8-K dated June 11, 2009)** 10.22 Amended and Restated Employment Agreement, dated August 10, 2009 by and between Lifetime Brands, Inc. and Ronald Shiftan (incorporated by reference to the Registrant’s Form 8-K dated August 10, 2009)** 10.23 Amendment of Employment Agreement, dated August 10, 2009 by and between Lifetime Brands, Inc. and Jeffrey Siegel (incorporated by reference to the Registrant’s Form 8-K dated August 10, 2009)** 31 10.24 Waiver to the Second Amended and Restated Credit Agreement, dated as of October 13, 2009, by and among Lifetime Brands, Inc., the several financial institutions party hereto and HSBC Bank USA, National Association, as Administrative Agent and Co-Collateral Agent for the Lenders (incorporated by reference to the Registrant’s Form 8-K dated October 13, 2009)** 10.25 Amendment No. 6 to Second Amended and Restated Credit Agreement, dated as of October 30, 2009, by and among Lifetime Brands, Inc., the several financial institutions party hereto and HSBC Bank USA, National Association, as Administrative Agent for the Lenders (incorporated by reference to the Registrant’s Form 8-K dated October 30, 2009)** 10.26 Termination of Lease and Sublease Agreement dated December 1, 2009 by and between Crispus Attucks Association of York, Pennsylvania, Inc. and Lifetime Brands, Inc. (incorporated by reference to the Registrant’s Form 8-K dated December 1, 2009)** 10.27 Amendment No. 7 to Second Amended and Restated Credit Agreement by and among Lifetime Brands, Inc., Lenders party hereto, Citibank, N.A. and Wachovia Bank, National Association, as Co- Documentation Agents, JP Morgan Chase Bank, N.A., as Syndication Agent, and HSBC Bank USA, National Association, as Administrative Agent (incorporated by reference to the Registrant’s Form 8-K dated February 12, 2010)** 10.28 Amendment to Employment Agreement, dated March 8, 2010, between Lifetime Brands, Inc. and Laurence Winoker (incorporated by reference to the Registrant’s Form 8-K dated March 10)** 10.29 Amended and Restated Executive Employment Agreement, dated March 8, 2010, between Lifetime Brands, Inc. and Craig Phillips (incorporated by reference to the Registrant’s Form 8-K dated March 10)** 10.30 Credit Agreement, dated as of June 9, 2010, among Lifetime Brands, Inc., JPMorgan Chase Bank, N.A., as administrative agent and a co-collateral agent, and HSBC Business Credit (USA) Inc., as syndication agent and a co-collateral agent, with exhibits (incorporated by reference to the Registrant’s Form 8-K dated June 15, 2010)** 10.31 Second Lien Credit Agreement, dated as of June 9, 2010, among Lifetime Brands, Inc. and Citibank, N.A., as administrative agent and collateral agent, with exhibits (incorporated by reference to the Registrant’s Form 8-K dated June 15, 2010)** 10.32 Second Amendment of Employment Agreement, dated November 9, 2010, by and between Lifetime Brands, Inc. and Jeffrey Siegel*** 10.33 Amendment of Amended and Restated Employment Agreement, dated November 9, 2010, by and between Lifetime Brands, Inc. and Ronald Shiftan*** 10.34 Amendment No. 1 to the Second Lien Credit Agreement, dated as of March 9, 2011, among Lifetime Brands, Inc. and Citibank, N.A., as administrative agent and collateral agent*** 14.1 Code of Conduct dated March 25, 2004, as amended on June 7, 2007 (incorporated by reference to the Registrant’s Form 8-K dated June 7, 2007)** 18.1 Letter from Ernst & Young LLP stating an acceptable change in accounting method for the impairment of goodwill dated October 28, 2008 (incorporated by reference to the Registrant’s Form 10-Q dated September, 30 2008)** 21.1 Subsidiaries of the registrant*** 23.1 Consent of Ernst & Young LLP*** 31.1 Certification by Jeffrey Siegel, Chief Executive Officer and President, 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 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 Jeffrey Siegel, Chief Executive Officer and President, and Laurence Winoker, Senior Vice President – Finance, Treasurer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**** 99.1 Grupo Vasconia, S.A.B. (formerly Ekco, S.A.B.), Report of Independent Registered Accounting Firm *** Notes to exhibits: * The Company will furnish a copy of any of the exhibits listed above upon payment of $5.00 per exhibit to cover the cost of the Company furnishing the exhibit. Incorporated by reference. ** *** Filed herewith. **** This exhibit is being “furnished” pursuant to Item 601(b)(32) of SEC Regulation S-K and is not deemed “filed” with the Securities and Exchange Commission and is not incorporated by reference in any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934. (c) Financial Statement Schedules — the response to this portion of Item 15 is submitted as a separate section of this report. 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Lifetime Brands, Inc. /s/ Jeffrey Siegel Jeffrey Siegel Chairman of the Board of Directors, Chief Executive Officer, President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Jeffrey Siegel Jeffrey Siegel Chairman of the Board of Directors, Chief Executive Officer, President and Director March 11, 2011 /s/ Ronald Shiftan Ronald Shiftan Chief Operating Officer and Director Vice Chairman of the Board of Directors, March 11, 2011 /s/ Laurence Winoker Laurence Winoker Senior Vice President – Finance, Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer) March 11, 2011 /s/ Craig Phillips Craig Phillips Senior Vice-President – Distribution and Director March 11, 2011 /s/ David Dangoor David Dangoor /s/ Michael Jeary Michael Jeary /s/ John Koegel John Koegel /s/ Cherrie Nanninga Cherrie Nanninga /s/ William Westerfield William Westerfield Director Director Director Director March 11, 2011 March 11, 2011 March 11, 2011 March 11, 2011 Director March 11, 2011 34 Item 15 LIFETIME BRANDS, INC. LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE The following consolidated financial statements of Lifetime Brands, Inc. are filed as part of this report under Item 8 – Financial Statements and Supplementary Data. Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2010 and 2009 Consolidated Statements of Operations for the Years ended December 31, 2010, 2009 and 2008 Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2010, 2009 and 2008 Consolidated Statements of Cash Flows for the Years ended December 31, 2010, 2009 and 2008 Notes to Consolidated Financial Statements F-2 F-3 F-4 F-5 F-6 F-7 The following consolidated financial statement schedule of Lifetime Brands, Inc. required pursuant to Item 15(a) is submitted herewith: Schedule II – Valuation and Qualifying Accounts S-1 All other financial schedules are not required under the related instructions or are inapplicable, and therefore have been omitted. The unaudited supplementary data regarding quarterly results of operations are incorporated by reference to the information set forth in Item 8 – Financial Statements and Supplementary Data. F-1 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Lifetime Brands, Inc. We have audited the accompanying consolidated balance sheets of Lifetime Brands, Inc. (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. The financial statements of Grupo Vasconia, S.A.B. and Subsidiaries (a corporation in which the Company has a 30.21% interest), have been audited by other auditors whose report has been furnished to us, and our opinion on the consolidated financial statements, insofar as it relates to the amounts included for Grupo Vasconia, S.A.B. and Subsidiaries, is based solely on the report of the other auditors. In the consolidated financial statements, the Company’s investment in Grupo Vasconia, S.A.B. and Subsidiaries is stated at $24.1 million at December 31, 2010 and the Company’s equity in the net income of Grupo Vasconia, S.A.B. and Subsidiaries is stated at $2.7 million for the year then ended. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lifetime Brands, Inc. at December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Notes A and E to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board Accounting Standards Codification Topic No. 470-20, Debt with Conversion and Other Options, effective January 1, 2009. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Lifetime Brands, Inc.’s internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 11, 2011 expressed an unqualified opinion thereon. Jericho, New York March 11, 2011 /s/ ERNST & YOUNG LLP F-2 LIFETIME BRANDS, INC. CONSOLIDATED BALANCE SHEETS (in thousands-except share data) ASSETS CURRENT ASSETS Cash and cash equivalents Accounts receivable, less allowances of $12,611 at 2010 $ 3,351 $ 682 December 31, 2010 2009 and $16,557 at 2009 Inventory (Note M) Deferred income taxes (Note I) Prepaid expenses and other current assets TOTAL CURRENT ASSETS PROPERTY AND EQUIPMENT, net (Note M) INTANGIBLE ASSETS, net (Note D) INVESTMENT IN GRUPO VASCONIA, S.A.B. (Note C) OTHER ASSETS TOTAL ASSETS LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Revolving Credit Facility (Note E) Accounts payable Accrued expenses (Note M) Deferred income tax liabilities (Note I) Income taxes payable (Note I) TOTAL CURRENT LIABILITIES 72,795 99,935 1,124 5,048 182,253 61,552 103,931 ― 7,685 173,850 36,093 30,818 24,068 4,354 $ 277,586 41,623 37,641 20,338 3,271 $ 276,723 $ 4,100 19,414 31,962 ― 5,036 60,512 $ 24,601 21,895 29,827 207 680 77,210 DEFERRED RENT & OTHER LONG-TERM LIABILITIES (Note M) DEFERRED INCOME TAXES (Note I) REVOLVING CREDIT FACILITY (Note E) TERM LOAN (Note E) 4.75% CONVERTIBLE SENIOR NOTES (Note E) 14,482 1,429 10,000 40,000 23,557 20,527 4,447 ― ― 70,527 STOCKHOLDERS’ EQUITY Preferred stock, $.01 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: 25,000,000; shares issued and outstanding: 12,064,543 in 2010 and 12,015,273 in 2009 Paid-in capital Retained earnings (accumulated deficit) Accumulated other comprehensive (loss) TOTAL STOCKHOLDERS’ EQUITY ― ― 121 131,350 1,312 (5,177) 127,606 120 129,655 (18,949) (6,814) 104,012 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 277,586 $ 276,723 See notes to consolidated financial statements. F-3 LIFETIME BRANDS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands – except per share data) Net sales Cost of sales Distribution expenses Selling, general and administrative expenses Goodwill and intangible asset impairment (Note D) Restructuring expenses (Note B) Year ended December 31, 2009 2010 2008 $ 443,171 $ 415,040 $ 487,935 273,774 44,570 95,044 ― ― 257,839 43,329 95,647 ― 2,616 303,535 57,695 131,226 29,400 17,992 Income (loss) from operations 29,783 15,609 (51,913) Interest expense (Note E & F) Loss on early retirement of debt (Note E) (9,351) (764) (13,185) ― (11,577) ― Income (loss) before income taxes, equity in earnings of Grupo Vasconia, S.A.B. and extraordinary item Income tax benefit (provision) (Note I) Equity in earnings of Grupo Vasconia, S.A.B., net of taxes (Note C) Income (loss) before extraordinary item Extraordinary item, net of taxes (Note D) 19,668 2,424 (63,490) (4,602) (1,880) 14,249 2,718 2,171 1,486 $ 17,784 2,477 $ 2,715 $ (47,755) ― ― NET INCOME (LOSS) $ 20,261 $ 2,715 $ (47,755) Basic income (loss) per common share before extraordinary item (Note H) Basic income per common share of extraordinary item (Note H) BASIC INCOME (LOSS) PER COMMON SHARE (NOTE H) $ 1.48 0.20 $ 0.23 $ (3.99) ― ― $ 1.68 $ 0.23 $ (3.99) Diluted income (loss) per common share before extraordinary item (Note H) $ 1.44 $ 0.22 $ (3.99) Diluted income per common share of extraordinary item (Note H) 0.20 ― ― DILUTED INCOME (LOSS) PER COMMON SHARE (NOTE H) $ 1.64 $ 0.22 $ (3.99) See notes to consolidated financial statements. F-4 LIFETIME BRANDS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Common stock Shares Amount Paid-in capital Retained earnings (accumulated deficit) Accumulated other comprehensive (loss) Total BALANCE AT DECEMBER 31, 2007 11,964 $ 120 $ 121,857 $ 31,250 $ (125) $ 153,102 Comprehensive (loss): Net loss Grupo Vasconia, S.A.B. translation adjustment (Note C) Derivative fair value adjustment (Note F) Total comprehensive (loss) Tax benefit on exercise of stock options Stock option expense (Note G) Exercise of stock options Shares issued to directors Tax valuation allowance Dividends 2 24 (47,755) 7 2,800 10 57 2,766 (2,766) (2,244) (6,587) (1,881) (47,755) (6,587) (1,881) (56,223) 7 2,800 10 57 ― (2,244) BALANCE AT DECEMBER 31, 2008 11,990 120 127,497 (21,515) (8,593) 97,509 Comprehensive income: Net income Grupo Vasconia, S.A.B. translation adjustment (Note C) Derivative hedge de-designation (Note F) Derivative fair value adjustment (Note F) Total comprehensive income Stock option expense (Note G) Exercise of stock options Retirement of shares (Note G) 2,715 456 780 543 46 (21) 2,099 59 (149) 2,715 456 780 543 4,494 2,099 59 (149) BALANCE AT DECEMBER 31, 2009 12,015 120 129,655 (18,949) (6,814) 104,012 Comprehensive income: Net income Grupo Vasconia, S.A.B. translation adjustment (Note C) Derivative hedge de-designation (Note F) Derivative fair value adjustment (Note F) Interest rate swap termination (Note F) Total comprehensive income Convertible Senior Note repurchase (Note E) Tax effect on Convertible Senior Note repurchase Shares issued to directors Stock compensation expense (Note G) Tax benefit on exercise of stock options Exercise of stock options 20,261 1,088 342 57 150 20,261 1,088 342 57 150 21,898 (2,366) 836 150 2,778 124 174 (2,366) 836 150 2,778 124 173 10 40 1 BALANCE AT DECEMBER 31, 2010 12,065 $ 121 $ 131,350 $ 1,312 $ (5,177) $ 127,606 See notes to consolidated financial statements. F-5 LIFETIME BRANDS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) OPERATING ACTIVITIES Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary gain Provision for doubtful accounts Depreciation and amortization Amortization of debt discount Deferred rent Deferred income taxes Stock compensation expense Undistributed earnings of Grupo Vasconia, S.A.B. Goodwill and intangible asset impairment Fixed asset impairment Loss on early retirement of debt Changes in operating assets and liabilities (excluding the effects of business acquisitions) Accounts receivable Inventory Prepaid expenses, other current assets and other assets Accounts payable, accrued expenses and other liabilities Income taxes receivable Income taxes payable NET CASH PROVIDED BY OPERATING ACTIVITIES INVESTING ACTIVITIES Purchases of property and equipment Business acquisitions Net proceeds from sale of property Year ended December 31, 2009 2010 2008 $ 20,261 $ 2,715 $ (47,755) (2,477) 376 9,810 1,802 306 (2,691) 2,928 (2,321) ― ― 764 ― (420) 11,472 2,663 673 734 2,099 (1,953) ― 789 ― ― 1,458 10,782 2,435 1,999 (3,554) 2,857 (1,132) 29,400 3,912 ― (11,619) 3,996 3,981 628 ― 4,356 6,430 37,680 (271) (10,324) 11,263 438 (3,990) 26,154 (908) 1,142 (11,597) (4,295) 30,100 63,988 6,908 (2,864) ― 70 (2,344) ― 408 (8,859) (16,312) 362 NET CASH USED IN INVESTING ACTIVITIES (2,794) (1,936) (24,809) FINANCING ACTIVITIES Proceeds (repayments) of prior credit facility, net (Note E) Proceeds from Revolving Credit Facility, net (Note E) Proceeds from Term Loan (Note E) Repurchase of 4.75% convertible senior notes (Note E) Financing Costs Cash dividends paid Payment of capital lease obligations Proceeds from the exercise of stock options Excess tax benefits from exercise of stock options (24,601) 14,100 40,000 (51,028) (3,248) ― (158) 174 124 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (24,637) (64,699) ― ― ― ― ― (225) 59 17 (64,848) 20,600 ― ― ― ― (2,995) (414) 10 6 17,207 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year 2,669 682 (2,796) 3,478 (694) 4,172 CASH AND CASH EQUIVALENTS AT END OF YEAR $ 3,351 $ 682 $ 3,478 See notes to consolidated financial statements. F-6 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE A — SIGNIFICANT ACCOUNTING POLICIES Organization and business Lifetime Brands, Inc. (the “Company”) designs, markets and distributes a broad range of consumer products used in the home, including kitchenware, tabletop and home décor products and markets its products under a number of brand names and trademarks, which are either owned or licensed. The Company markets and sells its products principally on a wholesale basis to retailers throughout North America. The Company also markets and sells certain products directly to the consumer through its Pfaltzgraff®, Mikasa®, Lifetime Sterling™ and Housewares Deals™ Internet websites and Pfaltzgraff® mail-order catalogs. In 2007 and 2008, the Company discontinued operating retail outlet stores utilizing the Pfaltzgraff® and Farberware® names that were included in the Retail Direct segment’s results for those years. Principles of consolidation The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Revenue recognition Wholesale sales and Retail Direct sales are recognized when title passes to the customer. Wholesale sales are recognized at shipping point and Retail Direct sales are recognized upon delivery to the customer. Shipping and handling fees that are billed to customers in sales transactions are included in net sales and amounted to $1.9 million, $3.5 million and $4.4 million for the years ended December 31, 2010, 2009 and 2008, respectively. Net sales exclude taxes that are collected from customers and remitted to the taxing authorities. Distribution expenses Distribution expenses consist primarily of warehousing expenses, handling costs of products sold and freight-out expenses. Freight-out expenses for the Wholesale segment amounted to $2.9 million, $2.5 million and $3.1 million for the years ended December 31, 2010, 2009 and 2008, respectively. Freight-out expenses for the Retail Direct segment amounted to $5.3 million, $4.4 million and $5.6 million for the years ended December 31, 2010, 2009 and 2008, respectively. Advertising expenses Advertising expenses are expensed as incurred and are included in selling, general and administrative expenses. Advertising expenses were $775,000, $880,000 and $1.6 million for the years ended December 31, 2010, 2009 and 2008, respectively. Accounts receivable The Company periodically reviews the collectibility of its accounts receivable and establishes allowances for estimated losses that could result from the inability of its customers to make required payments. A considerable amount of judgment is required to assess the ultimate realization of these receivables including assessing the initial and on-going creditworthiness of the Company’s customers. The Company also maintains an allowance for anticipated customer deductions. The allowances for deductions are primarily based on contracts with customers. However, in certain cases the Company does not have a formal contract and therefore, customer deductions are non-contractual. To evaluate the reasonableness of non-contractual customer deductions, the Company analyzes currently available information and historical trends of deductions. F-7 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE A — SIGNIFICANT ACCOUNTING POLICIES (continued) 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 by the lower of cost (first-in, first-out basis) or market method. The Company estimates the selling price of its inventory on a product by product basis based on the current selling environment and considering the various available channels of distribution (e.g. wholesale: specialty store, off-price retailers, etc. or the Internet and catalog). If the estimated selling price is lower than the inventory’s cost, the Company reduces the value of inventory to its net realizable value. Property and equipment Property and equipment is stated at cost. Property and equipment, other than leasehold improvements, is depreciated using the straight-line method over the estimated useful lives of the assets. Building and improvements are being depreciated over 30 years and machinery, furniture, and equipment over periods ranging from 3 to 10 years. Leasehold improvements are amortized over the term of the lease or the estimated useful lives of the improvements, whichever is shorter. Advances paid towards the acquisition of property and equipment and the cost of property and equipment not ready for use before the end of the period are classified as construction in progress. Cash equivalents The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents. Use of estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Amounts subject to estimates include judgments related to revenue recognition, allowances for doubtful accounts, reserves for sales returns and allowances and customer chargebacks, inventory mark-down provisions, impairment of tangible and intangible assets, stock option expense, derivative valuation, accruals related to the Company’s tax provision and tax valuation allowances. Concentration of credit risk The Company’s cash and cash equivalents are potentially subject to concentration of credit risk. The Company maintains cash with several financial institutions that, in some cases, is in excess of Federal Deposit Insurance Corporation insurance limits. Concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company’s customer base and their dispersion across North America. During the years ended December 31, 2010, 2009 and 2008, Wal-Mart Stores, Inc. (including Sam’s Clubs) accounted for 15%, 18% and 20% of sales, respectively. No other customer accounted for 10% or more of the Company’s sales during the three years ended December 31, 2010. For the years ended December 31, 2010, 2009 and 2008, the Company’s ten largest customers accounted for 67%, 64% and 60% of sales, respectively. F-8 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE A — SIGNIFICANT ACCOUNTING POLICIES (continued) Fair value measurements Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 820, Fair Value Measurements and Disclosures, provides enhanced guidance for using fair value to measure assets and liabilities and establishes a common definition of fair value, provides a framework for measuring fair value under U.S. generally accepted accounting principles and expands disclosure requirements about fair value measurements. Fair value measurements included in the Company’s consolidated financial statements relate to the Company’s convertible senior notes, annual intangible asset impairment test and derivatives, described in Notes A, D and F, respectively. Fair value of financial instruments The Company estimated that the carrying amounts of cash and cash equivalents, accounts receivable and accounts payable are a reasonable estimate of their fair value because of their short-term nature. The Company estimated that the carrying amounts of borrowings outstanding under its revolving credit facility approximate fair value since such borrowings bear interest at variable market rates. The fair value of the Company’s $24.1 million 4.75% Convertible Senior Notes (the “Notes”) at December 31, 2010 was $24.0 million. The fair value of the Company’s $75.0 million 4.75% Convertible Senior Notes at December 31, 2009 was $66.8 million. The fair value was based on Level 2 observable inputs consisting of the most recent quoted price for the Notes obtained from the FINRA Trade Reporting and Compliance Engine™ system at December 31, 2010 and 2009, respectively. Derivatives The Company accounts for derivative instruments in accordance with ASC Topic No. 815, Derivatives and Hedging. ASC Topic No. 815 requires that all derivative instruments be recognized on the balance sheet at fair value as either an asset or a 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 to the extent the derivative is considered perfectly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged, until the hedged item is recognized in earnings. For derivatives that do not qualify or are not designated as hedging instruments for accounting purposes, changes in fair value are recorded in 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. Long-lived assets, including intangible assets deemed to have finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that such amounts may have been impaired. Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit or material adverse changes in the business climate that indicate that the carrying amount of an asset may be impaired. When impairment indicators are present, the Company compares the carrying value of the asset to the estimated discounted future cash flows expected to be generated by the assets. If the assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company considered indicators of impairment of its long-lived assets and determined that no such indicators were present at December 31, 2010. F-9 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE A — SIGNIFICANT ACCOUNTING POLICIES (continued) Income taxes The Company accounts for income taxes using the asset and liability method in accordance with ASC Topic No. 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company applies the provisions of ASC Topic No. 740 for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the Company’s financial statements. In accordance with this provision, tax positions must meet a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position. The valuation allowance is calculated in accordance with the provisions of ASC Topic No. 740, which requires a valuation allowance be established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. Stock options The Company accounts for its stock options in accordance with ASC Topic No. 718-20, Awards Classified as Equity, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period for awards expected to vest. The Company uses the Black-Scholes option valuation model to estimate the fair value of its stock options. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s common stock and the risk free interest rate. New accounting pronouncements Effective January 1, 2010, the Company adopted the provisions of ASC Topic No. 860, Transfers and Servicing. ASC Topic No. 860 revised the guidance required to determine controlling interests in a variable interest entity (“VIE”) and also added additional disclosure requirements regarding a company’s involvement with such entities. The new guidance requires a qualitative approach to identifying a controlling financial interest in a VIE, requires an on-going assessment of whether an entity is a VIE and whether the holder of the interest in a VIE is the primary beneficiary of the VIE. This guidance became effective for the Company beginning in 2010. The adoption of this guidance did not have an impact on the Company’s consolidated financial position or results of operations. Subsequent events In January 2011, the Company, together with Grupo Vasconia S.A.B. and unaffiliated partners, formed Housewares Corporation of Asia Limited, a Hong Kong-based company that will supply direct import kitchenware programs to retailers in North, Central and South America. In March 2011, the Company determined that it will resume paying cash dividends on its outstanding shares of common stock. On March 4, 2011, the Board of Directors declared a quarterly dividend of $0.025 per share payable on May 16, 2011, to shareholders of record on May 2, 2011. The Company has evaluated subsequent events through the date of the filing of its consolidated financial statements with the Securities and Exchange Commission. F-10 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE B — RESTRUCTURING The restructuring and impairment charges discussed below are included in restructuring expenses in the accompanying consolidated statements of operations for the years ended December 31, 2009 and 2008. December 2007 store closings In December 2007, management of the Company commenced a plan to close 30 underperforming Farberware® and Pfaltzgraff® factory outlet stores. All 30 stores were closed by the end of the first quarter of 2008. In connection with these store closings the Company incurred restructuring related costs consisting of the following: Year Ended December 31, 2008 (in thousands) $ 2,300 393 141 153 $ 2,987 Store lease obligations Consulting fees Employee related expenses Other related costs Total The remaining store lease obligations of $566,000, that were included in accrued expenses at December 31, 2008 related to these store closings, were paid in the first quarter of 2009. September 2008 restructuring initiative In September 2008, management of the Company commenced a plan to: (i) close its 53 remaining Farberware® and Pfaltzgraff® retail outlet stores due to continued poor performance (in December 2007 the Company had closed 30 underperforming stores), (ii) vacate its York, Pennsylvania distribution center and consolidate the distribution with the Company’s main East and West Coast distribution centers and (iii) vacate certain excess showroom space. In connection with these restructuring activities the Company incurred restructuring related costs consisting of the following: Store lease obligations Consulting fees Employee related expenses Other related costs Total Year Ended December 31, 2008 2009 (in thousands) $ 1,263 — (206) 411 $ 1,468 $ 7,662 1,766 1,354 318 $ 11,100 No restructuring expenses were recognized related to this restructuring initiative during the year ended December 31, 2010. At December 31, 2010, the Company had no remaining obligations related to this restructuring initiative. F-11 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE B — RESTRUCTURING (continued) During the years ended December 31, 2009 and 2008, the Company recorded non-cash asset impairment charges of $789,000 and $3.9 million, respectively, related to these restructuring activities. The non-cash impairment charge for the year ended December 31, 2009 reflects an adjustment reducing the non-cash impairment charge recognized in 2008 by $1.2 million as the result of decisions by the Company not to vacate certain leased space that the Company had expected to vacate. The Company has not accounted for its retail outlet store operations as discontinued operations since the Company believes that the operations and cash flows of the retail outlet store operations would not be eliminated from the on-going operations of the Company as a result of these store closings. Specifically, the Company determined that the migration of customers from the Company’s retail outlet stores to the Company’s retail direct and wholesale businesses would not be insignificant. For this purpose, the Company concluded that the migration of sales from the retail outlet stores to the retail direct and wholesale businesses of greater than 5% would be significant. Third quarter 2009 restructuring activities During the third quarter of 2009, management of the Company commenced a plan to realign the management structure of certain of its divisions and eliminate a portion of the workforce at its Puerto Rico sterling silver manufacturing facility. In connection with these restructuring activities, the Company recorded $363,000 of restructuring expenses consisting of employee related expenses. NOTE C — INVESTMENT IN GRUPO VASCONIA, S.A.B. The Company owns a 30% interest in Grupo Vasconia, S.A.B. (“Vasconia”). The Company accounts for its investment in Vasconia using the equity method of accounting. Accordingly, the Company has recorded its proportionate share of Vasconia’s net income (reduced for amortization expense related to the customer relationships acquired) for the years ended December 31, 2010, 2009 and 2008 in the accompanying consolidated statements of operations. The Company’s investment balance and its proportionate share of Vasconia’s net income has been translated from Mexican Pesos (“MXP”) to U.S. Dollars (“USD”) using the spot rate and average daily exchange rate at and during the years ended December 31, 2010, 2009 and 2008, respectively. The effect of the translation of the Company’s investment resulted in an increase of the investment of $1.1 million and $456,000 during the years ended December 31, 2010 and 2009, respectively, and a decrease of the investment of $6.6 million during the year ended December 31, 2008. These translation effects are recorded in accumulated other comprehensive loss. During the year ended December 31, 2010, the Company received a cash dividend of $398,000 from Vasconia. Included in prepaid expenses and other currents assets at December 31, 2010 and 2009, are amounts due from Vasconia of $102,000 and $202,000, respectively. The Company evaluated the disclosure requirements of ASC Topic No. 860 and determined that at December 31, 2010, the Company did not have a controlling voting interest or variable interest in Vasconia and therefore should continue accounting for its investment using the equity method of accounting. F-12 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE C — INVESTMENT IN GRUPO VASCONIA, S.A.B. (continued) Summarized income statement information for the years ended December 31, 2010, 2009 and 2008, as well as summarized balance sheet information as of December 31, 2010 and 2009, for Vasconia in USD and MXP is as follows: 2010 Year Ended December 31, 2009 (in thousands) 2008 Income Statement Net Sales Gross Profit Income from operations Net Income USD $ 113,454 32,451 15,122 9,910 MXP USD MXP USD MXP $ 1,430,528 409,263 190,862 125,115 $ 94,633 26,251 11,803 8,306 $ 1,276,126 353,500 159,531 111,709 $ 110,026 28,212 11,662 6,270 $ 1,219,151 313,739 129,518 63,014 2010 December 31, (in thousands) 2009 Balance Sheet Current assets Non-current assets Current liabilities Non-current liabilities USD $ 55,944 MXP USD $ 693,118 $ 48,422 $ 630,250 308,447 151,295 48,297 402,733 201,936 68,340 23,698 11,624 3,711 MXP 32,506 16,299 5,516 NOTE D — INTANGIBLE ASSETS AND GOODWILL The Company performed its 2010 annual impairment tests for its indefinite-lived intangible assets as of October 1, 2010. The test involved the assessment of the fair market value of the Company’s indefinite-lived intangible assets which was based on Level 2 observable inputs using a discounted cash flow approach assuming a discount rate of 14% and an annual growth rate of 3%. The result of the assessment of the Company’s indefinite-lived intangibles indicated that their fair values exceeded their carrying amounts at December 31, 2010. In December 2010, the Company paid $2.5 million to ARC International SA (“ARC”) for all outstanding consideration due or payable related to its 2008 acquisition of the business and certain assets of Mikasa, Inc. As a result of payment of all final consideration to ARC, the Company adjusted the remaining book value of the Mikasa intangible assets, including the trade name and associated deferred tax liability, to zero and the negative goodwill balance to approximately $2.5 million. Following these reductions, the remaining balance of negative goodwill was eliminated resulting in an extraordinary gain in the amount of $2.5 million which was recorded in 2010. In 2008, due primarily to the significant decline in the Company’s market capitalization, the Company recognized non-cash impairment charges of $29.4 million consisting of the write-off of all recorded goodwill of $27.4 million and a reduction of the carrying amount of the Company’s indefinite-lived intangibles of $2.0 million. F-13 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE D — INTANGIBLE ASSETS AND GOODWILL (continued) Intangible assets, all of which are included in the Wholesale segment, consist of the following (in thousands): Year Ended December 31, 2010 Accumulated Amortization Gross Net Gross 2009 Accumulated Amortization Net Indefinite-lived intangible assets: Trade names Finite-lived intangible assets: Licenses Trade names Customer relationships Patents Total $ 19,433 $ ― $ 19,433 $ 25,530 $ ― $ 25,530 15,847 2,477 (6,186) (1,267) 9,661 1,210 15,847 2,477 (5,685) (1,185) 10,162 1,292 586 584 $ 38,927 (530) (126) $ (8,109) 56 458 $ 30,818 586 584 $ 45,024 (421) (92) $ (7,383) 165 492 $ 37,641 The weighted-average amortization periods for the Company’s finite-lived intangible assets as of December 31, 2010 are as follows: Trade names Licenses Customer relationships Patents Years 30 33 3 17 Estimated amortization expense for each of the five succeeding fiscal years is as follows (in thousands): Year ending December 31 2011 2012 2013 2014 2015 $ 608 579 579 579 575 Amortization expense for the years ended December 31, 2010, 2009 and 2008 was $726,000, $775,000 and $978,000, respectively. F-14 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE E — DEBT Revolving Credit Facility On June 9, 2010, the Company entered into a $125.0 million secured credit agreement (the “Revolving Credit Facility”), which matures on June 9, 2015, with a bank group led by JPMorgan Chase Bank, N.A. The Revolving Credit Facility contains an expansion option permitting the Company, subject to certain conditions, to increase the amount available up to $150.0 million. Borrowings under the Revolving Credit Facility are secured by a first lien priority security interest in all of the assets of the Company and its domestic subsidiaries, including a pledge of the Company’s outstanding shares of stock in its subsidiaries (limited, in the case of its foreign subsidiaries, to 65.0% of the Company’s equity interests), except as set forth below regarding the Company’s shares in its wholly-owned subsidiary LTB de Mexico, S.A. de C.V. (“LTB de Mexico”). Availability under the Revolving Credit Facility is subject to a borrowing base calculation equal to the sum of (i) 85.0% of eligible accounts receivable, (ii) 85.0% of the net orderly liquidation value of eligible inventory and (iii) the lesser of 50.0% of the orderly liquidation value of eligible trademarks and $10.0 million. Availability is subject to a $24.1 million reserve which represents the outstanding principal amount of the Company’s Notes. The borrowing base is also subject to reserves that may be established by the administrative agent in its permitted discretion. Borrowings under the Revolving Credit Facility bear interest, at the Company’s option, at one of the following rates: (i) the Alternate Base Rate, defined as the greater of the Prime Rate, Federal Funds Rate plus 0.5% or the Adjusted LIBOR rate plus 1.0%, plus a margin of 1.25% to 1.75%, or (ii) the Eurodollar Rate, defined as the Adjusted LIBOR Rate plus a margin of 2.25% to 2.75%. The respective margin is based upon availability. In addition, the Company pays a commitment fee of 0.50% on the unused portion of the Revolving Credit Facility. The Revolving Credit Facility provides for customary restrictions and events of default. Restrictions include limitations on additional indebtedness, acquisitions, investments and payment of dividends, among others. Furthermore, if availability under the Revolving Credit Facility is less than 14.0% of the total facility commitment, the Company will be required to maintain a minimum fixed charge coverage ratio of 1.10 to 1.00, which covenant would remain effective until availability is at least 16.0% of the total facility commitment for a period of three consecutive months. Availability under the Revolving Credit Facility was approximately 54.1% of the total facility commitment at December 31, 2010. At December 31, 2010, the Company had $1.4 million of open letters of credit and $14.1 million of borrowings outstanding under the Revolving Credit Facility. Borrowings during the period were used to repay in full the Company’s prior credit facility and to repay, in part, a portion of the Notes. The interest rate on the outstanding borrowings at December 31, 2010 ranged from 2.81% to 4.75%. Pursuant to the provisions of the FASB ASC Topic No. 470-10, Short-term Obligations Expected to be Refinanced, at December 31, 2010, the Company had classified $4.1 million of the Revolving Credit Facility as a current liability, based on planned repayments associated with anticipated changes in working capital principally from cash flows from operations, including collections of accounts receivable and sales of inventory which is expected to occur within one year. Repayments are planned to the extent that such anticipated cash flows are generated although; the Company is not obligated to repay any portion of the debt until maturity of the facility in June 2015, provided that availability exists under the facility. The Company had classified the remaining amount outstanding under the Revolving Credit Facility of $10.0 million as long-term at December 31, 2010. The Company expects that it will continue to borrow and repay funds under the facility based on working capital needs which is subject to availability. At December 31, 2009, amounts outstanding under the Company’s prior credit facility were classified as current because at that time the lenders had full access to remittances into the Company’s lock-box to pay down amounts outstanding. F-15 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE E — DEBT (continued) Revolving Credit Facility (continued) The Company recognized a loss before income taxes of approximately $408,000 in connection with the repayment of amounts under the prior credit agreement, consisting of the write-off of unamortized debt issuance costs during the year ended December 31, 2010, which is included in loss on early retirement of debt in the accompanying condensed consolidated statements of operations. Term Loan On June 9, 2010, the Company entered into a $40.0 million second lien credit agreement (the “Term Loan”), which matures on June 8, 2015, with Citibank, N.A. Borrowings under the Term Loan are secured by a second lien priority interest in the same collateral securing the Revolving Credit Facility, except that Citibank N.A. has a first lien pledge of 65.0% of the Company’s shares of LTB de Mexico which holds the Company’s investment in Vasconia. The Term Loan bears interest, at the Company’s option, at one of the following rates: (i) the Alternate Base Rate, defined as the greater of the corporate rate published by the lender and the Federal Funds Rate plus 0.50% provided that such calculated rate is a minimum of 2.50%, plus a margin of 7.50%, or (ii) the Adjusted LIBOR rate which shall be a minimum of 1.50%, plus a margin of 8.50%. On June 9, 2010 and August 5, 2010, the Company drew $10.0 million and $30.0 million, respectively, under the Term Loan. Proceeds of these borrowings were used to repay a portion of the outstanding borrowings under the Revolving Credit Facility. The interest rate on the outstanding borrowings at December 31, 2010 was 10.0%. The Term Loan requires the Company to have EBITDA, as defined, of not less than $30.0 million for all trailing four fiscal quarters and limits capital expenditures to $7.0 million for the year ending December 31, 2010. The Company was in compliance with these financial covenants at December 31, 2010. The Term Loan also provides for customary restrictions and events of default as previously described for the Revolving Credit Facility. 4.75% Convertible Senior Notes The Company has outstanding $24.1 million aggregate principal amount of the Notes due July 15, 2011. The Notes are convertible at the option of the holder any time prior to maturity into shares of the Company’s common stock at a conversion price of $28.00 per share, subject to adjustment in certain events. The Company has reserved 860,714 shares of common stock for issuance upon conversion of the Notes. The Notes bear interest at 4.75% per annum, payable semiannually in arrears on January 15th and July 15th of each year and are unsubordinated except with respect to the Company’s debt outstanding under its Revolving Credit Facility and Term Loan. The Company may not redeem the Notes at any time prior to maturity. Pursuant to the provisions of ASC Topic No. 470-10, the Company classified the Notes as a long-term liability based on the Company’s intent and ability to refinance the Notes using the proceeds from the Revolving Credit Facility. In June 2010, the Company purchased $50.9 million principal amount of the Notes in privately negotiated transactions for $51.0 million, reducing the aggregate principal amount to $24.1 million. Pursuant to the provisions of ASC Topic No. 470-20, Debt with Conversion and Other Options, the Company allocated the consideration paid to repurchase the Notes to the debt and equity components of the Notes based on the fair value of the debt component on the date the Company repurchased the Notes. Included in the loss on early retirement of debt in the accompanying condensed consolidated statements of operations is a loss before income taxes of $356,000 related to the debt component of the Notes repurchased and unamortized debt discount and issuance costs written off during the year ended December 31, 2010. In addition, the Company recorded a reduction of additional paid in capital of $2.4 million representing the portion of the consideration paid that was allocated to the equity component of the Notes. F-16 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE E — DEBT (continued) 4.75% Convertible Senior Notes (continued) Effective January 1, 2009, the Company adopted the provisions of ASC Topic No. 470-20 on a retrospective basis as though the provisions were in effect at the date of issuance of the Notes in June 2006. As a result of the adoption, on January 1, 2009 the Company reclassified $7.9 million (net of taxes of $2.8 million) from the Notes balance to additional paid-in-capital and recorded a debt discount of $12.8 million that is being amortized to interest expense over the remaining term of the Notes. At December 31, 2010 and December 31, 2009, the carrying amounts of the debt and equity components of the Notes were as follows (in thousands): December 31, 2010 December 31, 2009 Carrying amount of equity component, net of tax $ 8,262 $ 10,628 Principal amount of debt component Unamortized discount Carrying amount of debt component $ 24,100 (543) $ 23,557 $ 75,000 (4,473) $ 70,527 At December 31, 2010 the remaining period over which the debt discount will be amortized is approximately six months. The effective interest rate of the debt component was 9.02% at the date of issuance. Total interest recognized related to the Notes, including amortization of the debt discount and offering costs, was $4.4 million, $6.8 million and $6.6 million for the years ended December 31, 2010, 2009 and 2008, respectively. NOTE F — DERIVATIVES The Company had interest rate swaps with an aggregate notional amount of $50.0 million, which decreased to $25.0 million in January 2010 and to $10.0 million in June 2010, and interest rate collars with an aggregate notional amount of $40.2 million that are utilized to manage interest rate exposure related to the Company’s variable interest rate borrowings. The interest rate collar agreements expired in November 2010 and the interest rate swap agreements expire in January 2011. An interest rate swap with a notional amount of $15.0 million and the interest rate collars were originally designated as cash flow hedges at inception, with the effective portion of the fair value gains or losses on these derivative instruments recorded as a component of accumulated other comprehensive loss. In November 2009, the interest rate collars were de-designated as cash flow hedges as a result of reductions, and projected future reductions, in the Company’s borrowings hedged by the interest rate collar agreements. Accordingly, the Company reclassified a portion of the loss included in other comprehensive loss related to the interest rate collar agreements of $780,000, representing the ineffective portion of the hedge, to interest expense. The remaining portion of the loss included in other comprehensive loss related to these interest rate collar agreements of $382,000 has been recognized in earnings using the effective interest method over the remaining term of the interest rate collar agreements. In June 2010, the Company terminated the $15.0 million interest rate swap agreement. In connection with the termination of the agreement, the Company made a payment of $403,000 to the counterparty of the agreement which was included in interest expense for the three months ended June 30, 2010. The effect of recording the Company’s cash flow hedges at fair value for the portion of the periods that the swaps and collars qualified for hedge accounting resulted in unrealized gains of $57,000 (net of taxes of $36,000) and $543,000 for the years ended December 31, 2010 and 2009, respectively, and an unrealized loss of $1.9 million for the year ended December 31, 2008. In conjunction with the expiration of the interest rate collar agreement in 2010, there were no remaining cumulative unrealized gains or losses recorded in accumulated other comprehensive loss as of December 31, 2010. F-17 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE F — DERIVATIVES (continued) Interest rate swap agreements with an aggregate notional amount of $10.0 million were not designated as hedges at inception and the fair value gains or losses from these swap agreements are recognized in interest expense. In November 2010, the Company terminated the $40.2 million interest rate collar agreements. In connection with the termination of the agreements, the Company made payments of $236,000 and $100,000 to the counterparties of the agreements, respectively, which was included in interest expense for the year ended December 31, 2010. The fair value of the above derivatives have been obtained from the counterparties to the agreements and are based on Level 2 observable inputs using proprietary models and estimates about relevant future market conditions. The aggregate fair value of the Company’s derivative instruments was a liability of $10,900 and $1.8 million at December 31, 2010 and 2009, respectively, and is included in accrued expenses and deferred rent & other long- term liabilities. NOTE G — CAPITAL STOCK Long-term incentive plan In June 2009, the shareholders of the Company approved an amendment to the Company’s 2000 Long-Term Incentive Plan (the “Plan”) to increase the shares available for grant by 1,000,000 shares to 3,500,000 shares. These shares of the Company’s common stock may be subject to outstanding awards granted to directors, officers, employees, consultants and service providers and affiliates in the form of stock options or other equity-based awards. The Plan authorizes the Board of Directors of the Company, or a duly appointed committee thereof, to issue incentive stock options, non-qualified options, and other stock-based awards. Options that have been granted under the Plan expire over a range of five to ten years from the date of grant and vest over a range of up to five years from the date of grant. As of December 31, 2010, there were 733,926 shares available for the grant of awards under the Plan. All stock options granted through December 31, 2010 under the Plan have exercise prices equal to the market values of the Company’s common stock on the dates of grant. In February 2009, two key executives of the Company irrevocably and voluntarily cancelled their options to purchase a total of 600,000 shares of the Company’s common stock, which had a nominal fair value, in order to increase the shares available for grant under the Plan. Cash dividends The Company did not pay cash dividends on its outstanding shares of common stock during the years ended December 31, 2010 and 2009. During the year ended December 31, 2008, the Company paid a total annual cash dividend of $0.25 per share. Preferred stock The Company is authorized to issue 100 shares of Series A Preferred Stock and 2,000,000 shares of Series B Preferred Stock, none of which is issued or outstanding at December 31, 2010. F-18 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE G — CAPITAL STOCK (continued) Stock options A summary of the Company’s stock option activity and related information for the three years ended December 31, 2010, is as follows: Options outstanding, December 31, 2007 Grants Exercises Cancellations Options outstanding, December 31, 2008 Grants Exercises Cancellations Options 1,808,900 286,000 (1,750) (56,500) 2,036,650 632,000 (12,650) (869,333) Options outstanding, December 31, 2009 1,786,667 Grants Exercises Cancellations Options outstanding, December 31, 2010 Options exercisable, December 31, 2010 573,000 (39,250) (101,217) 2,219,200 1,052,200 Weighted- average remaining contractual life (years) Aggregate intrinsic value Weighted- average exercise price $22.69 7.15 5.50 26.67 20.41 3.43 5.43 25.28 12.14 13.12 4.44 13.65 12.46 13.50 6.73 5.24 $ 10,258,575 $ 5,412,275 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 December 31, 2010. The intrinsic value is calculated for each in-the-money stock option as the difference between the closing price of the Company’s common stock on December 31, 2010 and the exercise price. The total intrinsic value of stock options exercised for the years ended December 31, 2010, 2009 and 2008 was $389,100, $12,000 and $10,000, respectively. The intrinsic value of a stock option that is exercised is calculated at the date of exercise. The Company recognized stock compensation expense of $2.9 million, $2.1 million, and $2.9 million for the years ended December 31, 2010, 2009 and 2008, respectively. Total unrecognized compensation cost related to unvested stock options at December 31, 2010, before the effect of income taxes, was $4.9 million and is expected to be recognized over a weighted-average period of 3.6 years. The Company values stock options using the Black-Scholes option valuation model. The Black-Scholes option valuation model, as well as other available models, was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected stock price volatility and risk-free interest rate. F-19 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE G — CAPITAL STOCK (continued) Because the Company’s stock options have characteristics significantly different from those of traded options, changes in the subjective input assumptions can materially affect the fair value estimate of the Company’s stock options. The weighted-average per share grant date fair value of stock options granted during the years ended December 31, 2010, 2009 and 2008 was $7.96, $1.92 and $5.05, respectively. The fair value for these stock options was estimated at the date of grant using the following weighted-average assumptions: Historical volatility Expected term (years) Risk-free interest rate Expected dividend yield 2010 2009 2008 73% 5.0 2.18% 0.00% 73% 4.4 1.92% 0.00% 50% 4.8 2.41% 5.20% Escrow shares In 2009, the Company received back 20,436 shares of its common stock valued at $149,000 that previously had been held in escrow in connection with its 2006 acquisition of certain assets of Syratech Corporation. Restricted stock In 2010, 2009 and 2008, the Company issued 10,020, 33,335 and 22,586 restricted shares, respectively, of the Company’s common stock to its non-employee directors representing payment of a portion of their annual retainer. In 2010, 2009, and 2008, the total fair value of the restricted shares, based on the number of shares granted and the quoted market price of the Company’s common stock on the date of grant, was $150,000, $150,000 and $172,500, respectively. The shares vest 100% on the one year anniversary from the date of grant. F-20 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE H — INCOME (LOSS) PER COMMON SHARE Basic income (loss) per common share has been computed by dividing net income (loss) by the weighted-average number of shares of the Company’s common stock outstanding. Diluted income (loss) per common share adjusts net income (loss) and basic income (loss) per common share for the effect of all potentially dilutive shares of the Company’s common stock. The calculations of basic and diluted income (loss) per common share for the years ended December 31, 2010, 2009 and 2008 are as follows: 2010 2009 2008 (in thousands - except per share amounts) Income (loss) before extraordinary item Extraordinary item, net of taxes $ 17,784 2,477 $ 2,715 ― Net income (loss) – Basic Net Interest expense, 4.75% Convertible Senior Notes $ 20,261 ― $ 2,715 ― $ (47,755) ― $ (47,755) ― Net income (loss) – Diluted Weighted-average shares outstanding – Basic Effect of dilutive securities: Stock options $ 20,261 $ 2,715 $ (47,755) 12,036 12,009 11,976 340 66 ― 4.75% Convertible Senior Notes ― ― ― Weighted-average shares outstanding – Diluted 12,376 12,075 11,976 Basic income (loss) per common share before extraordinary item $ 1.48 $ 0.23 $ (3.99) Basic income per common share of extraordinary item 0.20 ― ― Basic income (loss) per common share $ 1.68 $ 0.23 $ (3.99) Diluted income (loss) per common share before extraordinary item $ 1.44 $ 0.22 $ (3.99) Diluted income per common share of extraordinary item 0.20 ― ― Diluted income (loss) per common share $ 1.64 $ 0.22 $ (3.99) The computations of diluted income (loss) per common share for the years ended December 31, 2010, 2009 and 2008 excludes options to purchase 1,060,588, 1,435,348 and 2,036,650 shares of the Company’s common stock, respectively. The computations of diluted income per common share for the year ended December 31, 2010 also excludes options to purchase 1,694,002 shares of the Company’s common stock issuable upon the conversion of the Company’s Notes and related interest expense. The computations of diluted income (loss) per common share for the years ended December 31, 2009 and 2008 also excludes 2,678,571 shares of the Company’s common stock issuable upon the conversion of the Company’s Notes and related interest expense. The above shares were excluded due to their antidilutive effect. F-21 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE I — INCOME TAXES The provision (benefit) for income taxes consists of: 2010 Year Ended December 31, 2009 (in thousands) 2008 Current: Federal State and local Foreign Deferred Income tax provision (benefit) $ 4,269 1,437 565 (1,669) $ 4,602 $ 162 984 ― 734 $ 1,880 $ (11,478) 1,388 ― (4,159) $ (14,249) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income tax asset are as follows: Deferred income tax assets: Deferred rent expense Grupo Vasconia, S.A.B. translation adjustment Stock options Inventory Depreciation and amortization Operating loss carry-forward AMT credit Accounts receivable allowances Accrued compensation Derivatives Other Total deferred income tax asset December 31, 2010 2009 (in thousands) $ 2,799 1,981 1,619 1,296 ― 2,618 ― ― 545 ― 529 $ 11,387 $ 2,424 2,403 1,413 1,603 672 617 633 176 389 619 990 $ 11,939 F-22 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE I — INCOME TAXES (continued) Significant components of the Company’s net deferred income tax liability are as follows: Deferred income tax liability: Depreciation and amortization Accounts receivable allowances Indefinite-lived intangibles Convertible Senior Notes Grupo Vasconia, S.A.B. equity in earnings Total deferred income tax liability Net deferred income tax asset Valuation allowance Net deferred income tax liability December 31, 2010 2009 (in thousands) $ (4,035) (102) (2,450) (216) (657) (7,460) $ ― ― (4,273) (1,727) (383) (6,383) 3,927 5,556 (4,232) (10,210) $ (305) $ (4,654) As of December 31, 2010, the Company had fully utilized Federal net operating loss and other credit carryforwards generated in previous years. The Company has generated various state net operating loss carryforwards of which $8.6 million remains at December 31, 2010 that begin to expire in 2014. The Company has net operating losses in foreign jurisdictions of $4.0 million at December 31, 2010 that begin to expire in 2013. In accordance with ASC Topic No. 740, the Company has offset its total deferred tax assets with certain deferred tax liabilities that are expected to reverse in the carryforward period. As of December 31, 2010, management had determined that it was “more likely than not” that certain deferred tax assets would be realized and the corresponding valuation allowance had been released based on the Company’s ability to utilize deferred tax assets currently and the expected future use of temporary differences in the carryback period. The valuation allowance of $4.2 million which remains as of December 31, 2010 relates to certain long-term deferred tax assets for which management determined it was not “more likely than not” that these assets would be realized. The provision (benefit) for income taxes differs from the amounts computed by applying the applicable Federal statutory rates as follows: Year Ended December 31, 2009 2008 2010 Provision (benefit) for Federal income taxes at at the statutory rate Increases (decreases): State and local income taxes, net of Federal income tax benefit Non-deductible stock options Non-deductible expenses Valuation allowance Other Provision (benefit) for income taxes 35.0% 35.0% (35.0)% 5.6 1.2 0.1 (19.8) 1.3 23.4% 37.9 11.5 6.4 (19.3) 6.1 77.6% (3.3) 0.5 1.1 19.4 (5.1) (22.4)% F-23 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE I — INCOME TAXES (continued) The estimated value of the Company’s gross uncertain tax positions at December 31, 2010, 2009 and 2008 is a liability of $356,000, $335,000 and $498,000, respectively, and consists of the following: Balance at January 1 Additions based on tax positions related to the current year Additions for tax positions of prior years Reductions for tax position of prior years Settlements Balance at December 31 2008 2010 Year Ended December 31, 2009 (in thousands) $ 498 ― 28 ― (191) $ 1,437 ― 303 (1,242) ― $ 498 $ 335 ― 200 ― (179) $ 356 $ 335 The Company had approximately $71,000 and $69,000, net of federal tax benefit, accrued at December 31, 2010 and 2009, respectively, for the payment of interest. The Company’s policy for recording interest and penalties is to record such items as a component of income taxes. If the Company’s tax positions are ultimately sustained, the Company’s liability, including interest, would be reduced by $301,000, all of which would impact the Company’s tax provision. On a quarterly basis, the Company evaluates its tax positions and revises its estimates accordingly. The Company believes that it is reasonably possible that $170,000 of its tax positions will be resolved within the next twelve months. The Company has identified the following jurisdictions as “major” tax jurisdictions: U.S. Federal, California, Massachusetts, Pennsylvania, New York and New Jersey. As of December 31, 2009, the Company had settled their Federal tax examination for the periods 2006 through 2008. The Company is no longer subject to U.S. Federal income tax examinations for the years prior to 2009. The periods subject to examination for the Company’s major state jurisdictions are the years ended 2007 through 2009. F-24 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE J — BUSINESS SEGMENTS Segment information The Company operates in two reportable business segments; the Wholesale segment, the Company’s primary business, in which the Company designs, markets and distributes products to retailers and distributors, and the Retail Direct segment, in which the Company markets and sells it products directly to consumers through its Pfaltzgraff®, Mikasa®, Lifetime Sterling™ and Housewares™ Deals Internet websites and the Company’s Pfaltzgraff® mail- order catalogs. As more fully described in Note B, in 2007 and 2008, the Company ceased operating its Pfaltzgraff® and Farberware® retail outlet stores. The results of operations of certain of these stores were included in the Retail Direct segment during 2008. The Company has segmented its operations to reflect the manner in which management reviews and evaluates the results of its operations. While both segments distribute similar products, the segments are distinct due to the different types of customers and the different methods the Company uses to sell, market and distribute the products. Management evaluates the performance of the Wholesale and Retail Direct segments based on net sales and income (loss) from operations. Such measures give recognition to specifically identifiable operating costs such as cost of sales, distribution expenses and selling, general and administrative expenses. Certain general and administrative expenses, such as senior executive salaries and benefits, stock compensation, director fees and accounting, legal and consulting fees, are not allocated to the specific segments and are reflected as unallocated corporate expenses. Assets in each segment consist of assets used in its operations and acquired intangible assets. Assets in the unallocated corporate category consist of cash and tax related assets that are not allocated to the segments. 2010 Year Ended December 31, 2009 (in thousands) 2008 Net sales: Wholesale Retail Direct Total net sales Income (loss) from operations: Wholesale (1) Retail Direct (2) Unallocated corporate expenses Total income (loss) from operations Depreciation and amortization: Wholesale Retail Direct Total depreciation and amortization $ 413,809 29,362 $ 443,171 $ 389,078 25,962 $ 415,040 $ 403,591 84,344 $ 487,935 $ 42,997 (1,018) (12,196) $ 29,783 $ 30,581 (3,637) (11,335) $ 15,609 $ (11,979) (28,998) (10,936) $ (51,913) $ 11,252 220 $ 11,472 $ 9,975 807 $ 10,782 $ 9,609 91 $ 9,700 F-25 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE J — BUSINESS SEGMENTS (continued) Segment information (continued) 2010 Year Ended December 31, 2009 (in thousands) 2008 Assets: Wholesale Retail Direct Unallocated/ corporate/ other Total assets Capital expenditures: Wholesale Retail Direct Total capital expenditures $ 271,670 1,441 4,475 $ 277,586 $ 273,589 2,452 682 $ 276,723 $ 321,284 5,422 15,075 $ 341,781 $ 2,541 323 $ 2,864 $ 1,684 660 $ 2,344 $ 8,538 321 $ 8,859 Notes: (1) In 2009, income from operations for the Wholesale segment included $600,000 for restructuring and impairment expenses. In 2008, loss from operations for the Wholesale segment included non-cash goodwill and intangible asset impairment charges totaling $29.4 million. See Notes B and D. (2) In 2009 and 2008, loss from operations for the Retail Direct segment includes $2.0 million and $18.0 million of restructuring and non- cash fixed asset impairment charges, respectively. See Note B. Product category information – net sales The following table sets forth net sales by the major product categories included within the Company’s Wholesale operating segment: 2010 Year Ended December 31, 2009 (in thousands) 2008 Kitchenware Tabletop Home Décor Total $ 240,534 123,432 49,843 $ 413,809 $ 222,239 113,479 53,360 $ 389,078 $ 234,172 111,769 57,650 $ 403,591 F-26 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE K — COMMITMENTS AND CONTINGENCIES Operating leases The Company has lease agreements for its corporate headquarters, distribution centers, showrooms and sales offices that expire through 2022. These leases generally provide for, among other things, annual base rent escalations, and additional rent for real estate taxes and other costs. Future minimum payments under non-cancelable operating leases are as follows (in thousands): Year ending December 31 2011 2012 2013 2014 2015 Thereafter Total $ 12,698 12,993 12,618 12,629 12,743 43,388 $ 107,069 Future minimum sublease rental income under a non-cancelable operating lease is $76,000 for 2011. Rent and related expenses under operating leases were $13.3 million, $13.5 million and $23.0 million for the years ended December 31, 2010, 2009 and 2008, respectively. Sublease rental income was $82,000 for the year ended December 31, 2010. There was no sublease rental income during the years ended December 31, 2009 and 2008. Capital leases The Company has entered into various capital lease arrangements for the leasing of equipment that is primarily utilized in its distribution centers. These leases expire through 2011 and the future minimum lease payments due under the leases are as follows (in thousands): Year ending December 31 2011 Total minimum lease payments Less: amounts representing interest $ 94 94 (4) Present value of minimum lease payments $ 90 The current and non-current portions of the Company’s capital lease obligations at December 31, 2010 of $90,000 and $0, respectively, and at December 31, 2009 of $154,000 and $90,000, respectively, are included in accrued expenses, and deferred rent & other long-term liabilities, respectively. F-27 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE K — COMMITMENTS AND CONTINGENCIES (continued) Royalties The Company has license agreements that require the payment of royalties on sales of licensed products which expire through 2023. Future minimum royalties payable under these agreements are as follows (in thousands): Year ending December 31 2011 2012 2013 2014 2015 Thereafter Total $ 5,320 5,630 392 344 348 2,476 $ 14,510 Legal proceedings The Company is a defendant in various lawsuits and from time-to-time regulatory proceedings which may require the recall of its products, arising in the ordinary course of its business. Management does not expect the outcome of any of these matters, individually or collectively, to have a material adverse effect on the Company’s financial condition. In March 2008, the Environmental Protection Agency (“EPA”) announced that the San Germán Ground Water Contamination site in Puerto Rico was added to the Superfund National Priorities List due to contamination present in the local drinking water supply. Wallace Silversmiths de Puerto Rico, Ltd. (“Wallace”), a wholly-owned subsidiary of the Company, received 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, Liability Act regarding the San Germán Ground Water Contamination Superfund Site, San Germán, Puerto Rico dated May 29, 2008 from the EPA. The Company responded to the EPA’s Request for Information on behalf of Wallace. At this time, it is not possible for the Company to evaluate the outcome of this matter. F-28 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE L — RETIREMENT PLANS 401(k) plan The Company maintains a defined contribution retirement plan for eligible employees under Section 401(k) of the Internal Revenue Code. Participants can make voluntary contributions up to the Internal Revenue Service limit of $16,500 ($22,000 for employees 50 years or over) for 2010. During 2008, the Company matched 50% of employee contributions up to 4% of an employee’s eligible compensation. Effective January 1, 2009 the Company suspended its matching contribution as an expense savings measure. The Company made matching contributions to the 401(k) plan of $777,000 in 2008. Retirement benefit obligations As part of the acquisition of the business and certain assets of Syratech in April 2006, the Company assumed certain obligations for retirement benefits to be payable to certain former executives of Syratech. The obligations under these agreements are unfunded. At December 31, 2010 and 2009, the total unfunded retirement benefit obligation was $3.3 million and is included in accrued expenses, and deferred rent & other long-term liabilities. During the years ended December 31, 2010 and 2009, the Company paid retirement benefits related to these obligations of $148,000 and $153,000, respectively. The Company expects to pay a total of $144,000 in retirement benefits related to these obligations during the year ending December 31, 2011. NOTE M — OTHER Inventory The components of inventory are as follows: Finished goods Work in process Raw materials Total December 31, 2010 2009 (in thousands) $ 96,375 1,890 1,670 $ 99,935 $ 101,270 1,635 1,026 $ 103,931 F-29 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE M — OTHER (continued) Property and equipment Property and equipment consist of: Machinery, furniture and equipment Leasehold improvements Building and improvements Construction in progress Land Less: accumulated depreciation and amortization Total December 31, 2010 2009 (in thousands) $ 66,450 24,551 1,604 272 100 92,977 (56,884) $ 36,093 $ 64,927 24,283 1,716 123 115 91,164 (49,541) $ 41,623 Depreciation and amortization expense on property and equipment for the years ended December 31, 2010, 2009 and 2008 was $8.2 million, $9.4 million and $9.8 million, respectively. Included in machinery, furniture and equipment and accumulated depreciation at December 31, 2010 are $2.1 million and $1.8 million, respectively, related to assets recorded under capital leases. Included in machinery, furniture and equipment and accumulated depreciation at December 31, 2009 are $2.1 million and $1.7 million, respectively, related to assets recorded under capital leases. As more fully described in Note B, the Company recorded non-cash impairment charges in connection with its restructuring activities of $789,000 and $3.9 million in 2009 and 2008, respectively. Accrued expenses Accrued expenses consist of: Customer allowances and rebates Compensation Interest Vendor invoices Royalties Derivative liability Commissions Freight Restructuring costs Other Total December 31, 2010 2009 (in thousands) $ 13,549 8,287 985 2,020 1,520 11 1,231 771 ― 3,588 $ 31,962 $ 10,693 4,948 2,666 3,020 1,801 1,695 737 704 588 2,975 $ 29,827 F-30 LIFETIME BRANDS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010 NOTE M — OTHER (continued) Deferred rent & other long-term liabilities Deferred rent & other long-term liabilities consist of: Deferred rent liability Negative goodwill Retirement benefit obligations Derivative liability Long-term portion of capital lease obligations Total Supplemental cash flow information December 31, 2010 2009 (in thousands) $ 11,283 ― 3,199 ― ― $ 14,482 $ 10,998 6,215 3,148 76 90 $ 20,527 2010 Year Ended December 31, 2009 (in thousands) 2008 Supplemental disclosure of cash flow information: Cash paid for interest Cash paid for taxes Non-cash investing activities: Grupo Vasconia, S.A.B. translation adjustment Liabilities assumed in business acquisition $ 6,893 $ 8,804 380 1,198 $ 8,635 6,138 $ 1,088 ― $ 456 ― $(6,587) 3,264 F-31 Item 15(a) LIFETIME BRANDS, INC. SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands) COL. A COL. B COL. C Additions charged to costs and expenses (describe) COL. D COL. E Deductions (describe) Balance at end of period Balance at beginning of period Description Year ended December 31, 2010 Deducted from asset accounts: Allowance for doubtful accounts Reserve for sales returns and allowances Year ended December 31, 2009 Deducted from asset accounts: Allowance for doubtful accounts Reserve for sales returns and allowances Year ended December 31, 2008 Deducted from asset accounts: Allowance for doubtful accounts Reserve for sales returns and allowances $ 1,433 $ 1,456 $ (1,832) (a) $ 1,057 15,124 $ 16,557 661 $ 2,117 (c) (4,231) $ (6,063) (b) 11,554 $ 12,611 $ 1,853 $ 1,204 $ (1,624) (a) $ 1,433 12,798 $ 14,651 22,180 $ 23,384 (c) (19,854) $ (21,478) (b) 15,124 $ 16,557 $ 395 $ 1,614 $ (156) (a) $ 1,853 16,005 $ 16,400 23,160 $ 24,774 (c) (26,367) $ (26,523) (b) 12,798 $ 14,651 (a) Uncollectible accounts written off, net of recoveries. (b) Allowances granted. (c) Charged to net sales. S-1 Subsidiaries of the Registrant Name of subsidiary Pfaltzgraff Factory Stores, Inc. TMC Acquisition Inc. Wallace Silversmiths de Puerto Rico Ltd. Lifetime Brands, Inc. (HK) Limited Lifetime Brands Global Sourcing (Shanghai) Consultancy Limited China New Goal Development Limited LTB de México, S.A. de C.V. Hong Kong Mexico Exhibit 21.1 State/Country of Incorporation Ownership Delaware Delaware Cayman Islands Hong Kong 100% 100% 100% 100% 100% 100% 99.99% Exhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333- 105382, 333-146017 and 333-162734) and the Registration Statement on Form S-3 (No. 333-137575) of Lifetime Brands, Inc. of our reports dated March 11, 2011, with respect to the consolidated financial statements and schedule of Lifetime Brands, Inc., and the effectiveness of internal control over financial reporting of Lifetime Brands, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2010. Jericho, New York March 11, 2011 /s/ ERNST & YOUNG LLP I, Jeffrey Siegel, certify that: CERTIFICATION Exhibit 31.1 1. I have reviewed this Annual Report on Form 10-K of Lifetime Brands, Inc. (“the registrant”); 2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-14 and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))) for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: March 11, 2011 /s/ Jeffrey Siegel Jeffrey Siegel Chief Executive Officer and President I, Laurence Winoker, certify that: CERTIFICATION Exhibit 31.2 1. I have reviewed this Annual Report on Form 10-K of Lifetime Brands, Inc. (“the registrant”); 2. Based on my knowledge, this Annual Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Annual Report; 3. Based on my knowledge, the financial statements, and other financial information included in this Annual Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report; 4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-14 and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))) for the registrant and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Annual Report is being prepared; b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions): a. all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: March 11, 2011 /s/ Laurence Winoker Laurence Winoker Senior Vice President – Finance, Treasurer and Chief Financial Officer Exhibit 32.1 Certification by Jeffrey Siegel, Chief Executive Officer and President, 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. I, Jeffrey Siegel, Chief Executive Officer and President, and I, Laurence Winoker, Senior Vice President – Finance, Treasurer and Chief Financial Officer, of Lifetime Brands, Inc., a Delaware corporation (the “Company”), each hereby certifies that: (1) (2) The Company’s Annual report on Form 10-K for the year ended December 31, 2010 (the “Form 10-K”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Jeffrey Siegel /s/ Laurence Winoker Jeffrey Siegel Laurence Winoker Chief Executive Officer and President Senior Vice President- Finance, Treasurer and Chief Financial Officer Date: March 11, 2011 Date: March 11, 2011 A signed original of this written statement required by Section 1350 has been provided to Lifetime Brands, Inc. and will be retained by Lifetime Brands, Inc. and furnished to the Securities and Exchange Commission or its staff, upon request. SECOND AMENDMENT of EMPLOYMENT AGREEMENT Exhibit 10.32 THIS SECOND AMENDMENT Of EMPLOYMENT AGREEMENT, dated as of this 9th day of November, 2010 (this “Second Amendment”), by and between LIFETIME BRANDS, INC., a Delaware corporation (the "Employer"), and JEFFREY SIEGEL (the "Executive"). W I T N E S S E T H: WHEREAS, Employer and Executive entered into an Employment Agreement dated as of May 2, 2006 (the “Original Employment Agreement”); WHEREAS, Employer and Executive entered into an Amendment of Employment Agreement dated as of August 10, 2009 (the “First Amendment”); and WHEREAS, Employer and Executive desire to further amend the Employment Agreement, as amended by the First Amendment (the “Amended Employment Agreement”), upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the promises and the mutual covenants herein contained, the parties hereto hereby agree as follows: 1. Amendment. The second and third sentences of the first paragraph of clause (ii) of Sections 3(b) of the Amended Employment Agreement are hereby amended to read as follows: Similarly, the threshold Adjusted IBIT for such year will be 50% of the target Adjusted IBIT for such year which, if achieved, would entitle the Executive to receive 50% of the target bonus for such year consistent with the Adjusted IBIT Performance Bonus Table for such year. Similarly, the maximum Adjusted IBIT for such year will be 200% of the target Adjusted IBIT for such year which, if achieved, would entitle the Executive to receive 200% of the target bonus for such year, consistent with the Adjusted IBIT Performance Table for such year. 2. No Other Modification or Amendment. Except as specifically provided herein, the Amended Employment Agreement is not modified or amended in any respect and remains in full force and effect. 3. Governing Law. This Second Amendment shall be governed by and construed in accordance with the laws of the State of New York (determined without regard to the choice of law provisions thereof), and the parties consent to jurisdiction in the United States District Court for the Southern District of New York. 4. Counterparts. This Second Amendment may be executed by the parties hereto in counterparts, each of which shall be deemed an original, but both such counterparts shall together constitute one and the same document. IN WITNESS WHEREOF, the parties have executed this Second Amendment effective as of the day and year first written above. LIFETIME BRANDS, INC. By:__/s/ Ronald Shiftan_____________ Name: Ronald Shiftan Title: Chief Operating Officer EXECUTIVE __/s/ Jeffrey Siegel_________________ Jeffrey Siegel AMENDMENT of AMENDED AND RESTATED EMPLOYMENT AGREEMENT Exhibit 10.33 THIS AMENDMENT Of EMPLOYMENT AGREEMENT, dated as of this 9th day of November, 2010 (this “Amendment”), by and between LIFETIME BRANDS, INC., a Delaware corporation (the "Employer"), and RONALD SHIFTAN (the "Executive"). W I T N E S S E T H: WHEREAS, Employer and Executive entered into an Amended and Restated Employment Agreement dated as of August 10, 2009 (the “Amended and Restated Employment Agreement”); and WHEREAS, Employer and Executive desire to amend the Amended and Restated Employment Agreement, upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the promises and the mutual covenants herein contained, the parties hereto hereby agree as follows: 1. Amendment. The second sentence of the first paragraph of clause (ii) of Section 3(b) of the Amended and Restated Employment Agreement is hereby amended to read as follows: Similarly, the threshold Adjusted IBIT for such year will be 50% of the target Adjusted IBIT for such year which, if achieved, would entitle the Executive to receive 50% of the target bonus for such year consistent with the Adjusted IBIT Performance Bonus Table for such year. 2. No Other Modification or Amendment. Except as specifically provided herein, the Amended and Restated Employment Agreement is not modified or amended in any respect and remains in full force and effect. 3. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York (determined without regard to the choice of law provisions thereof), and the parties consent to jurisdiction in the United States District Court for the Southern District of New York. 4. Counterparts. This Amendment may be executed by the parties hereto in counterparts, each of which shall be deemed an original, but both such counterparts shall together constitute one and the same document. IN WITNESS WHEREOF, the parties have executed this Amendment effective as of the day and year first written above. LIFETIME BRANDS, INC. By:_/s/ Jeffrey Siegel______________ Name: Jeffrey Siegel Title: CEO and President EXECUTIVE _/s/ Ronald Shiftan________________ Ronald Shiftan Exhibit 33.4 AMENDMENT NO. 1, dated as of March 9, 2011, among LIFETIME BRANDS, INC., a Delaware corporation (“Borrower”), CITIBANK, N.A., as Administrative Agent (the “Administrative Agent”), and the Subsidiary Guarantors and Lenders listed on the signature pages hereto to that certain Second Lien Credit Agreement, dated as of June 9, 2010 (as further amended, supplemented, amended and restated or otherwise modified from time to time, the “Credit Agreement”) among Borrower, the Subsidiary Guarantors, the Lenders from time to time party thereto and CITIBANK, N.A., as Administrative Agent and Collateral Agent. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement. WHEREAS, Borrower has requested that the Administrative Agent and the Lenders agree to amend certain provisions of the Credit Agreement pursuant to the terms and subject to the conditions set forth herein. NOW, THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: Section 1. Amendments. (a) Section 6.08 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: “SECTION 6.08 Dividends. Dividends under this Agreement shall be permitted in accordance with and so long as such dividends are permitted under Section 6.08(a) of the First Lien Credit Agreement, as such section is in existence as of March 9, 2011, regardless of whether the First Lien Credit Agreement is in effect at the time of such Dividend; provided that for purposes of such section, any references therein to “Default” or “Event of Default” shall mean a “Default” or “Event of Default” under this Agreement; provided further that any such Dividends by the Borrower made pursuant to clauses (ii) or (iv) of such Section 6.08(a) shall not exceed $5.0 million in any fiscal year; provided further still that in the case of such Dividends by the Borrower made pursuant to clause (ii) of such Section 6.08(a), no Default or Event of Default has occurred and is continuing. ” (b) Schedule 1.01(b) to the Credit Agreement is hereby amended and restated in its entirety to read as Schedule 1.01(b) attached hereto. (c) Schedule 3.05 to the Credit Agreement is hereby amended and restated in its entirety to read as Schedule 3.05 attached hereto. (d) Schedule 3.15 to the Credit Agreement is hereby amended and restated in its entirety to read as Schedule 3.15 attached hereto. (e) Exhibit D to the Credit Agreement is hereby amended and restated by removing Schedule 2 thereof in its entirety together with the sentence in item (a) of such Exhibit D which refers to such Schedule 2. Section 2. Representations and Warranties. Borrower represents and warrants to the Lenders as of the date hereof and the date of effectiveness of this Amendment No. 1 that: (a) The execution, delivery and performance by Borrower of this Amendment No. 1 has been duly authorized by all necessary corporate action, and does not and will not (a) contravene the terms of Borrower’s organizational documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Obligations to which Borrower is a party or affecting Borrower or the properties of Borrower or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which Borrower or its property is subject; or (c) violate any law, except, in each case referred to in clauses (b) and (c), to the extent that conflict, breach, contravention, creation, payment or violation could not reasonably be expected to have a Material Adverse Effect; Before and after giving effect to this Amendment No. 1, the representations and warranties set forth in the Credit Agreement are true and correct in all material respects on and as of the date of effectiveness of this Amendment No. 1, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; and (b) At the time of and after giving effect to this Amendment No. 1, no Default or Event of (c) Default has occurred or is continuing. Section 3. Conditions to Effectiveness. This Amendment No. 1 shall become effective on the date on which each of the following conditions is satisfied: (i) The Administrative Agent (or its counsel) shall have received from the Required Lenders and each of the other parties hereto a signature page to Amendment No. 1 signed on behalf of such party; and (ii) The representations and warranties in Section 2 of this Amendment No. 1 shall be true and correct. Section 4. Counterparts. This Amendment No. 1 may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which when taken together shall constitute a single instrument. Delivery of an executed counterpart of a signature page of this Amendment No. 1 by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. Section 5. Applicable Law. THIS AMENDMENT NO. 1 SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. Section 6. Headings. The headings of this Amendment No. 1 are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. Section 7. Effect of Amendment. Except as expressly set forth herein, this Amendment No. 1 shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Secured Parties or the Agents under the Credit Agreement or any other Loan Documents, and shall not alter, modify, amend or in any way affect any of the terms or conditions contained in the Credit Agreement or any other Loan Documents, all of which are ratified and affirmed in all respects, as expressly amended by this Amendment No. 1, and shall continue in full force and effect. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be duly executed as of the date first above written. LIFETIME BRANDS, INC. By: /s/ Laurence Winoker Name: Laurence Winoker Title: Senior Vice President & CFO SUBSIDIARY GUARANTORS: PFALTZGRAFF FACTORY STORES, INC. By: /s/ Laurence Winoker Name: Laurence Winoker Title: Senior Vice President TMC ACQUISITION, INC. By: /s/ Laurence Winoker Name: Laurence Winoker Title: Senior Vice President CITIBANK, N.A., as Administrative Agent and Lender By: /s/ James R. Williams Name: James R. Williams Title: Vice President Exhibit 99.1 1 0 0 1 0 0 0 0 1 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 2 0 0 2 0 0 0 0 2 0 0 0 0 0 2 0 0 0 2 0 0 0 0 0 0 2 0 0 0 0 0 0 2 0 0 0 0 0 2 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 3 0 0 3 0 0 0 0 3 0 0 0 0 0 3 0 0 0 3 0 0 0 0 0 0 3 0 0 0 0 0 0 3 0 0 0 0 0 3 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Financial Highlights 2 0 0 2 7 0 0 2 7 2 0 0 0 0 2 7 2 8 0 0 2 0 0 0 7 2 8 0 2 0 2 7 0 0 0 0 2 0 8 2 9 2 0 7 0 2 0 0 0 0 0 8 2 9 0 2 7 0 2 2 8 0 0 0 0 2 0 1 2 0 9 0 0 2 7 0 2 8 0 0 2 0 0 7 1 0 0 0 9 2 0 2 8 2 0 9 0 0 1 2 0 0 0 2 0 2 8 2 0 0 9 0 2 2 0 0 1 8 0 2 0 0 0 2 7 0 0 1 2 9 0 0 2 0 7 0 0 0 2 2 7 2 0 7 2 0 1 0 0 0 9 0 2 0 0 0 2 0 0 9 2 7 0 2 7 2 1 2 8 0 0 0 0 0 2 0 2 0 0 0 8 0 0 0 7 2 2 7 2 8 2 0 1 8 2 0 0 0 2 0 0 7 0 0 0 0 1 0 2 0 0 2 0 7 8 0 2 2 8 2 9 2 0 7 0 0 0 2 0 0 0 0 0 9 0 0 0 8 2 2 8 9 2 0 9 2 7 0 2 0 2 0 8 0 0 0 0 0 0 2 2 0 1 2 0 9 8 0 2 9 0 0 2 7 0 2 2 8 0 0 0 1 2 0 0 0 0 0 7 1 0 0 1 0 9 2 9 2 0 0 2 2 8 0 2 0 0 9 0 0 0 1 2 1 0 0 0 2 0 9 0 2 2 8 0 2 0 9 0 0 2 2 0 0 1 8 1 2 0 0 0 0 0 7 2 2 0 0 1 2 9 0 0 0 2 0 7 0 0 0 1 2 2 7 2 0 0 7 2 0 0 1 0 0 9 0 2 0 0 0 2 0 0 2 7 9 2 0 2 7 8 1 2 0 0 0 0 0 2 0 2 0 0 0 8 0 0 0 7 2 2 7 8 2 2 0 1 2 8 0 2 0 0 0 0 7 0 0 0 0 1 0 2 0 0 2 0 8 7 2 0 2 8 9 2 2 0 7 0 0 0 2 0 0 0 0 0 9 0 0 0 8 2 2 9 8 2 0 2 9 7 0 2 2 0 0 8 0 0 0 0 0 2 0 2 0 1 2 0 9 0 8 2 9 0 2 0 7 0 2 2 8 0 0 0 1 2 0 0 0 0 7 0 1 0 0 0 1 9 2 2 9 0 0 2 2 8 2 0 0 0 9 0 0 0 1 2 1 0 0 2 0 0 0 2 9 2 8 0 2 0 9 0 0 2 2 0 0 1 8 2 1 0 0 0 0 7 0 2 0 2 0 1 2 9 0 0 2 0 0 7 0 0 0 2 2 1 7 2 0 0 7 2 0 0 1 0 0 9 0 2 0 0 0 2 0 0 2 7 9 2 0 2 7 8 1 0 2 0 0 0 0 2 0 2 0 0 0 0 8 0 0 7 2 2 8 7 2 2 0 1 2 8 0 2 0 0 0 0 7 0 0 0 0 1 0 2 0 0 2 0 8 7 2 0 2 8 9 2 2 0 7 0 0 0 2 0 0 0 0 0 9 0 0 0 8 2 9 2 8 2 0 2 7 9 0 2 2 0 0 8 0 0 0 0 0 2 0 2 0 1 2 0 9 0 8 2 9 0 2 0 7 0 2 2 8 0 0 0 1 2 0 0 0 0 7 0 1 0 0 0 9 1 2 2 9 0 0 2 2 8 2 0 0 0 9 0 0 0 1 2 1 0 0 0 0 0 2 9 2 8 2 0 9 0 0 2 2 0 1 8 0 1 0 0 0 0 2 2 0 1 2 9 0 0 2 0 7 0 0 0 2 1 2 0 0 7 0 1 0 0 9 2 0 0 2 0 9 0 2 7 1 2 0 0 0 0 2 0 8 0 0 2 7 2 2 1 8 0 0 0 0 0 1 0 2 0 7 0 2 8 2 0 0 0 0 9 0 2 8 2 9 0 0 0 0 2 8 2 9 0 2 0 1 0 0 0 1 2 9 0 2 0 0 0 1 0 9 2 0 1 0 2 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 NET SALES IN MILLIONS 1 1 0 0 1 0 1 0 0 0 0 0 0 1 0 0 0 0 1 0 0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 1 0 0 1 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 1 0 0 $ 0 0 8 0 0 0 $ 8 0 2 2 0 0 2 0 2 0 0 0 0 0 0 2 0 0 0 0 2 0 0 0 0 0 0 0 2 0 0 0 2 0 0 0 0 0 2 0 0 2 0 0 0 0 0 0 0 2 0 0 0 0 0 0 0 0 0 2 0 0 0 0 0 2 0 0 2 0 0 0 0 0 0 0 0 . . . . . . . . . . . . . . . . . . . . . . . . $ 3 $ 3 $ 3 $ 3 $ 3 $ 3 $ 3 2 0 2 0 0 0 0 2 0 0 0 0 0 2 0 0 0 0 2 0 0 0 0 0 0 0 5 0 5 0 5 0 0 5 5 0 5 0 5 0 0 5 5 1 0 1 0 1 0 1 1 0 0 1 0 1 0 1 1 0 0 1 5 1 5 1 5 1 1 5 5 1 5 1 5 1 1 5 5 0 0 ( $ $ 8 4 1 ( 8 $ $ ) 0 0 1 4 8 0 $ . 0 8 ( 0 0 8 $ ) 0 0 1 4 0 0 0 . $ 0 0 8 ( 8 0 0 0 $ ) 0 1 ( 4 0 . $ $ 0 0 8 0 0 8 4 0 ) 0 1 ( 8 0 $ . $ ) 0 NET INCOME (LOSS) 0 0 4 0 0 8 0 $ . 8 ( 0 IN MILLIONS 8 0 $ ) 0 4 0 0 . 8 0 ( $ ) 0 ( 4 . $ 0 8 4 ) 0 8 . ) 0 0 0 ( $ 3 ( ( . $ 9 $ ( 4 9 3 $ 8 ) . 4 ( 9 ) $ 0 0 ( 8 9 3 $ ) . ) 0 0 . 4 ( 9 0 . $ 8 0 ( 9 ( 3 ) $ 0 ) $ . 4 9 . DILUTED INCOME (LOSS) 3 0 0 8 ( 9 . ( 9 ) $ $ 0 ) PER COMMON SHARE 9 4 3 . 0 ) 0 8 . ( 9 ) $ 0 0 9 3 . ) 0 . ( 9 0 $ 9 ( 3 ) $ . 9 3 0 9 9 ) 9 0 ) 0 5 0 0 5 0 0 0 1 0 5 0 1 0 0 0 0 0 5 1 0 0 5 0 0 0 0 1 0 0 5 0 0 0 0 0 1 0 5 0 0 0 0 0 5 0 0 5 0 0 0 0 0 0 0 0 $ 0 5 $ $ 7 0 8 $ 5 8 $ 7 0 $ 8 5 $ 7 0 $ $ 5 8 0 7 5 $ $ 7 0 8 5 $ 7 0 5 $ 7 0 $ 5 0 7 5 7 0 0 5 5 0 5 0 5 0 5 1 1 5 5 1 5 1 5 1 5 $ 0 2 $ $ 2 0 3 $ 2 3 $ 2 0 $ 2 3 $ 2 0 $ $ 2 0 3 2 2 $ 2 3 $ 3 $ 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0 $ 0 5 7 5 $ 7 0 5 $ 7 0 5 $ 7 0 5 7 . . $ 0 2 $ 2 0 $ 2 0 2 2 2 . . . . ( $ ( 3 $ 9 3 9 . ( 9 $ ) 9 3 0 ) . $ DEBT ( 9 0 $ 0 9 $ 3 IN MILLIONS ) 0 2 . ( 9 2 0 $ 2 $ 9 3 2 0 ) . 9 0 2 $ 9 2 0 ) 0 2 $ 2 0 2 2 . . . . 5 0 5 0 0 0 0 5 0 0 0 0 0 5 0 0 0 0 5 0 0 0 0 0 0 3 3 0 0 3 0 3 0 0 0 0 0 0 3 0 0 0 0 3 0 0 0 0 0 0 0 3 0 0 0 3 0 0 0 0 0 3 0 0 3 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 3 0 0 3 0 0 0 0 0 0 0 0 3 0 3 0 0 0 0 3 0 0 0 0 0 3 0 0 0 0 3 0 0 0 0 0 0 . . . . 2 5 2 5 2 5 2 2 5 5 2 5 2 5 2 2 5 5 . . . . . . . . 2 2 5 5 2 5 2 5 2 5 . . . . . . . . . . . 2 0 2 0 2 0 2 2 0 0 2 0 2 0 2 2 0 0 1 0 0 1 0 0 0 0 1 0 2 0 0 0 2 0 0 1 0 0 0 0 1 2 0 0 0 0 0 0 0 1 2 0 0 0 0 0 0 0 1 0 2 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 . . . . . 1 0 1 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 $ 9 5 $ 9 5 $ 9 5 $ 9 $ 5 9 5 $ 9 5 $ 9 5 $ 9 $ 5 9 5 $ 2 0 $ 2 0 $ 2 0 $ 2 $ 0 2 0 $ 2 0 $ 2 0 $ 2 $ 0 2 0 $ 1 . 6 $ $ 4 2 1 $ 0 . 6 2 $ 0 4 $ 1 . 2 6 0 $ 4 $ 1 $ . 2 6 1 0 4 . 6 $ $ 4 2 1 0 . 6 $ 4 1 . 6 $ 4 1 $ . 6 1 4 . 6 4 $ 1 $ . 6 1 4 . 6 $ 4 1 . 6 $ 4 1 . 6 $ 4 1 . 6 4 $ 7 8 $ 7 8 $ 7 8 $ 7 $ 8 7 8 $ 7 8 $ 7 8 $ 7 $ 8 7 8 $ 7 $ 8 7 8 $ 7 8 $ 7 8 $ 7 8 5 0 0 5 0 0 0 0 5 0 0 0 0 0 5 0 0 0 5 0 0 0 0 0 0 5 0 0 0 0 0 0 5 0 0 0 0 0 5 0 0 0 5 0 0 0 0 0 0 0 0 0 0 0 $ 4 9 $ 4 4 9 $ 4 4 9 $ 4 4 $ 9 4 4 9 $ 4 4 9 $ 4 4 9 $ 4 4 $ 9 4 4 9 4 $ 4 8 $ 8 4 8 $ 8 4 8 $ 8 4 $ 8 4 8 8 $ 8 4 8 $ 8 4 8 $ 8 4 $ 8 4 8 8 8 5 5 0 0 5 0 5 0 0 0 0 0 0 5 0 0 0 0 5 0 0 0 0 0 0 0 5 0 0 0 5 0 0 0 0 0 5 0 0 5 0 0 0 0 0 0 0 5 0 0 0 0 0 0 0 0 0 5 0 0 0 0 0 5 0 0 5 0 0 0 0 0 0 0 0 $ 4 $ 9 4 4 9 $ 4 4 9 4 $ 4 9 $ 4 4 9 4 $ 4 $ 8 4 8 8 $ 8 4 8 8 $ 4 8 8 $ 4 8 8 . . . . . . . . . 5 0 4 5 0 0 0 0 0 4 5 0 0 0 0 0 0 4 5 0 0 0 0 0 4 5 0 0 4 0 0 0 0 0 4 0 0 4 0 4 4 0 0 2 0 0 2 0 0 0 0 2 0 4 0 0 0 4 0 0 2 0 0 0 0 2 4 0 0 0 0 0 0 0 2 4 0 0 0 0 0 0 0 2 0 4 0 0 0 0 0 2 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 . . . . . 2 0 2 0 0 0 0 2 0 0 0 0 0 0 2 0 0 0 0 0 0 2 0 0 0 0 0 0 0 0 $ 4 1 $ 5 4 1 5 $ 4 1 5 $ 4 $ 1 4 5 1 $ 5 4 1 5 $ 4 1 5 $ 4 $ 1 4 5 1 5 . . 3 5 3 5 $ 4 3 $ 1 . 4 5 5 1 5 $ 3 4 . 3 5 1 5 . $ 5 4 3 1 . 5 5 $ 4 3 1 . 5 5 3 3 5 5 . . $ 4 4 $ 3 4 4 $ 3 4 4 $ 3 4 $ 4 4 3 4 $ 3 4 4 $ 3 4 4 $ 3 4 $ 4 4 3 4 3 $ 4 $ 4 4 3 4 $ 3 4 4 $ 3 4 4 $ 3 4 4 3 . . . 3 3 5 5 3 5 3 5 3 5 . . 4 0 0 4 0 0 0 0 4 0 0 0 0 0 4 0 0 0 4 0 0 0 0 0 0 4 0 0 0 0 0 0 4 0 0 0 0 0 4 0 0 0 4 0 0 0 0 0 0 0 0 0 0 0 4 4 0 0 4 0 4 0 0 0 0 0 0 4 0 0 0 0 4 0 0 0 0 0 0 0 4 0 0 0 4 0 0 0 0 0 4 0 0 4 0 0 0 0 0 0 0 4 0 0 0 0 0 0 0 0 0 4 0 0 0 0 0 4 0 0 4 0 0 0 0 0 0 0 0 4 0 4 0 0 0 0 4 0 0 0 0 0 4 0 0 0 0 4 0 0 0 0 0 0 $ 1 5 7 $ 1 5 7 $ 1 5 7 $ 1 $ 5 7 1 5 7 $ 1 5 7 $ 1 5 7 $ 1 $ 5 7 1 5 7 $ 1 $ 5 1 7 5 7 $ 1 5 7 $ 1 5 7 $ 1 5 7 Officers and Directors Offices JEFFREY SIEGEL Chairman of the Board of Directors Chief Executive Officer and President RONALD SHIFTAN Vice Chairman of the Board of Directors Chief Operating Officer CRAIG PHILLIPS Senior Vice President – Distribution Executive Officer and Director LAURENCE WINOKER Senior Vice President – Finance Treasurer and Chief Financial Officer DANIEL SIEGEL Executive Vice President SARA SHINDEL General Counsel and Secretary DAVID E. R. DANGOOR Director MICHAEL JEARY Director JOHN KOEGEL Director CHERRIE NANNINGA Director WILLIAM U. WESTERFIELD Director CORPORATE HEADQUARTERS 1000 Stewart Avenue Garden City, NY 11530 (516) 683-6000 Corporate Information CORPORATE COUNSEL Samuel B. Fortenbaugh III New York, NY 10111 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Jericho, NY 11753 TRANSFER AGENT & REGISTRAR The Bank of New York Mellon 480 Washington Boulevard Jersey City, NJ 07310 FORM 10-K Shareholders may obtain, without charge, a copy of the Company’s annual report on Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission. Requests should be sent to: INVESTOR RELATIONS Lifetime Brands, Inc. 1000 Stewart Avenue Garden City, NY 11530 ANNUAL MEETING The Annual Meeting of Shareholders will be held at 10:30 a.m. on Thursday, June 16, 2011, at the Corporate Headquarters. . . . . . . . . . 3 0 3 0 3 0 3 3 0 0 3 0 3 0 3 3 0 0 1 5 0 1 0 5 0 0 1 0 3 0 5 0 3 0 0 1 0 0 0 5 1 3 0 0 5 0 0 0 0 1 3 0 0 5 0 0 0 0 1 0 3 0 5 0 0 0 1 0 0 5 1 0 0 5 0 0 0 0 0 0 0 0 . . . . . 1 5 1 0 5 0 0 1 0 0 5 0 0 0 1 0 0 5 0 0 0 1 0 5 0 0 0 0 0 0 $ 1 3 $ 4 1 3 4 $ 1 3 4 $ 1 $ 3 4 1 3 4 $ 1 3 4 $ 1 3 4 $ 1 $ 3 1 4 3 4 $ 1 $ 3 1 4 3 4 $ 1 3 4 $ 1 3 4 $ 1 3 4 $ 9 $ 5 9 5 $ 9 5 $ 9 5 $ 9 Year Ended December 31, 5 (in thousands, except per share data) 2007 2008 2009 2010 NET SALES $493,725 $487,935 $415,040 $443,171 NET INCOME (LOSS) $7,529 ($47,755) $2,715 $20,261 DILUTED INCOME (LOSS) PER COMMON SHARE $0.57 ($3.99) $0.22 $1.64 DEBT $134,128 $157,164 $95,128 $77,657 LTB 10 AnnualReport Cover NEW ALT.indd 3-4 4/25/11 3:12 PM SCAN THIS QR CODE TO VISIT THE LIFETIME BRANDS WEBSITE SCAN THIS QR CODE TO VISIT THE LIFETIME BRANDS WEBSITE Lifetime Brands Annual Report 2010 S N O I T C E N N O C G N I K A M 0 3 5 1 1 k r o Y w e N y, Cit n e d r a G e, u n e v A d n t a r a r B w e e t tim S 0 e 0 Lif 0 1 s, In c. LTB 10 AnnualReport Cover NEW ALT.indd 1-2 4/25/11 3:12 PM
Continue reading text version or see original annual report in PDF format above