LIFETIME BRANDS, INCLCUT
LIFETIME BRANDS, INC Income Taxes Disclosure
INCOME TAXES
The components of (loss) income before income taxes and equity in losses are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Domestic | $ | 16,509 | $ | 22,134 | $ | 20,796 | |||||||||||
| Foreign | (12,099) | (11,659) | (11,767) | ||||||||||||||
Foreign - loss on equity securities | (14,152) | — | — | ||||||||||||||
Total (loss) income before income taxes and equity in earnings | $ | (9,742) | $ | 10,475 | $ | 9,029 | |||||||||||
The provision for income taxes (before equity in losses) consists of:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 4,254 | $ | 6,326 | $ | 6,890 | |||||||||||
| State and local | 913 | 1,447 | 1,888 | ||||||||||||||
| Foreign | 203 | 579 | 775 | ||||||||||||||
| Deferred | (2,039) | (2,130) | (3,825) | ||||||||||||||
Income tax provision | $ | 3,331 | $ | 6,222 | $ | 5,728 | |||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company’s deferred income tax assets and (liabilities) are as follows:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in thousands) | |||||||||||
| Deferred income tax assets: | |||||||||||
| Operating lease liabilities | $ | 17,257 | $ | 20,571 | |||||||
| Stock options | 819 | 1,454 | |||||||||
| Inventory | 2,573 | 3,323 | |||||||||
| Operating loss carryforwards | 23,262 | 21,036 | |||||||||
| Accounts receivable allowances | 2,473 | 2,343 | |||||||||
| Accrued compensation | 979 | 913 | |||||||||
| Deferred compensation | 448 | 668 | |||||||||
| Environmental remediation accrual | 1,331 | 1,379 | |||||||||
| Capitalized research and experimental expenditures | 3,881 | 3,109 | |||||||||
Section 163j interest carryforward | 2,458 | 904 | |||||||||
| Other | 1,971 | 1,536 | |||||||||
| Total deferred income tax assets | $ | 57,452 | $ | 57,236 | |||||||
| Deferred income tax liabilities: | |||||||||||
| Operating lease right-of-use assets | $ | (14,243) | $ | (17,060) | |||||||
| Fixed assets | (304) | (1,248) | |||||||||
| Intangibles | (26,814) | (26,207) | |||||||||
| Total deferred income tax liabilities | (41,361) | (44,515) | |||||||||
Net deferred income tax asset | 16,091 | 12,721 | |||||||||
| Valuation allowance | (21,692) | (20,159) | |||||||||
Net deferred income tax liability | $ | (5,601) | $ | (7,438) | |||||||
The Company has capital loss carryforwards of $7.1 million in foreign jurisdictions at December 31, 2024 that are offset entirely by a valuation allowance.
At December 31, 2024, the Company has net operating losses in foreign jurisdictions of $81.1 million and $11.6 million in state jurisdictions that are fully offset by valuation allowance, and $5.4 million of net operating losses in foreign jurisdictions that are not offset by valuation allowance. Approximately $85.8 million of foreign net operating losses can be carried forward indefinitely. The remaining definite-lived foreign net operating losses, if not utilized, will expire beginning in 2026 through 2034. The state net operating losses begin to expire in 2026.
The provision for income taxes (before equity in losses) differs from the amounts computed by applying the applicable federal statutory rates as follows:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Federal income taxes at the statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Increases (decreases): | |||||||||||||||||
| State and local income taxes, net of Federal income tax benefit | (3.5) | 5.7 | 13.9 | ||||||||||||||
| Foreign rate differences | 14.2 | (19.7) | 6.9 | ||||||||||||||
| Foreign withholding tax | (1.7) | 5.0 | 6.1 | ||||||||||||||
| Non-deductible expenses | (5.7) | 3.4 | 2.9 | ||||||||||||||
Non-deductible compensation | (6.7) | 4.5 | 4.2 | ||||||||||||||
Loss on equity securities | (43.6) | — | — | ||||||||||||||
| Uncertain tax positions | 7.7 | (0.9) | 1.2 | ||||||||||||||
| Research and development credit | 3.0 | (2.5) | (5.4) | ||||||||||||||
| Federal return to provision | 1.0 | 0.7 | (3.4) | ||||||||||||||
| Equity-based compensation | (4.7) | 5.0 | 0.1 | ||||||||||||||
| Valuation Allowance | (15.2) | 37.2 | 15.9 | ||||||||||||||
| Provision for income taxes | (34.2) | % | 59.4 | % | 63.4 | % | |||||||||||
The estimated values of the Company’s gross uncertain tax positions at December 31, 2024, 2023 and 2022 consist of the following:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Balance at January 1 | $ | (990) | $ | (1,130) | $ | (1,071) | |||||||||||
| Additions based on tax positions related to the current year | (27) | (27) | (79) | ||||||||||||||
| Reductions for tax position of prior years | 560 | 167 | 20 | ||||||||||||||
| Balance at December 31 | $ | (457) | $ | (990) | $ | (1,130) | |||||||||||
The Company had approximately $0.2 million and $0.4 million, net of federal and state tax benefit, accrued at December 31, 2024 and 2023, respectively, for the payment of interest and penalties. The Company’s policy for recording interest and penalties is to record such items as a component of the provision for income taxes.
If the Company’s tax positions are ultimately sustained, the Company’s liability, including interest, would be reduced by $0.7 million, all of which would impact the Company’s tax provision. On a quarterly basis, the Company evaluates its tax positions and revises its estimates accordingly. The Company believes that it is reasonably possible that an immaterial amount of its tax positions will be resolved within the next 12 months.
The Company is no longer subject to U.S. Federal income tax examinations for the years prior to 2021. The Company has identified the following jurisdictions as “major” tax jurisdictions: U.S. Federal, California, Massachusetts, New Jersey, New York, and the United Kingdom. At December 31, 2024, the periods subject to examination by the Company’s major state jurisdictions are generally for the years ended 2020 through 2023. In certain jurisdictions, Filament, an acquired entity, may have additional periods subject to examination. As of December 31, 2024, there are no material assessments in any given year.
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.