LEASES

The Company has operating leases for corporate offices, distribution facilities, manufacturing plants, and certain vehicles. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets. The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as increases in lease payments that do not depend on changes in index rates or payments based on usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense.

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

The components of lease costs for the year ended December 31, 2024, 2023 and 2022 were as follows (in thousands):


	Year Ended December 31,
	2024		2023		2022
Operating lease costs (1):
Fixed lease expense	$	17,063	$	16,911	$	17,855
Variable lease expense	6,202		5,432		4,698
Total	$	23,265	$	22,343	$	22,553

(1)Expenses are recorded within distribution expenses and selling, general and administrative expenses.

Supplemental cash flow information for the year ended December 31, 2024, 2023 and 2022 were as follows (in thousands):


	Year Ended December 31,
	2024		2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	19,073	$	18,800	$	19,338
Total	$	19,073	$	18,800	$	19,338


	Year Ended December 31,
	2024		2023		2022
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	2,177	$	5,718	$	2,540
Total	$	2,177	$	5,718	$	2,540

Included in machinery, furniture and equipment as of December 31, 2024 and 2023 is $0.3 million and $0.2 million, respectively, related to assets recorded under finance leases. Included in accumulated depreciation and amortization at December 31, 2024 and December 31, 2023 were less than $0.1 million, related to assets recorded under finance leases.

The aggregate future lease payments for operating leases as of December 31, 2024 were as follows (in thousands):


	Operating
2025	$	19,198
2026	18,840
2027	14,606
2028	12,819
2029	6,661
Thereafter	13,572
Total lease payments	85,696
Less: Interest	(13,811)
Present value of lease payments	$	71,885

Average lease terms and discount rates were as follows:


	December 31, 2024		December 31, 2023
Weighted-average remaining lease term (years)
Operating leases	5.2		5.9
Weighted-average discount rate
Operating leases	6.6	%	6.4	%

On January 23, 2025, the Company entered into a lease agreement for a new distribution center in Hagerstown, Maryland (“Hagerstown Facility”). The term of the lease is 180 months following the rent commencement date, which will occur in the first quarter of 2026. Base rent for the first year of the lease is $7.3 million, escalating by 3% annually. A portion of the base rent will be abated for the first 36 months at the annual prevailing rate for a total rent abatement of $7.2 million. The lease agreement also includes a total tenant improvement allowance of $5.1 million.

About Leases Disclosures

Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.

Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.

LIFETIME BRANDS, INC Leases Disclosure

About Leases Disclosures

Other Available Disclosures