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Lifetime Brands, Inc. Reports Second Quarter Financial Results
Declares Regular Quarterly Dividend

GARDEN CITY, N.Y., Aug. 08, 2017 (GLOBE NEWSWIRE) -- Lifetime Brands, Inc. (NasdaqGS:LCUT), a leading global provider of branded kitchenware, tableware and other products used in the home, today reported its financial results for the second quarter ended June 30, 2017.

Second Quarter Financial Highlights:

Consolidated net sales were $117.4 million, as compared to consolidated net sales of $118.1 million in the corresponding period in 2016. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased 1.5%, as compared to consolidated net sales in the corresponding period in 2016.

Gross margin was $42.8 million, or 36.5%, as compared to $43.0 million, or 36.4%, for the corresponding period in 2016.

Loss from operations was $3.1 million, as compared to a loss of $0.3 million for the corresponding period in 2016.

Net loss was $2.1 million, or $0.14 per diluted share, as compared to a net loss of $1.2 million, or $0.08 per diluted share, in the corresponding period in 2016.  

Adjusted net loss was $0.8 million, or $0.05 per diluted share, as compared to adjusted net loss of $80 thousand, or $0.01 per diluted share, in the corresponding period in 2016.

Consolidated EBITDA was $1.4 million, as compared to $5.2 million for the corresponding 2016 period.

Equity in earnings, net of taxes, was $0.5 million, as compared to $18 thousand in the corresponding 2016 period.

Six Months Financial Highlights:

Consolidated net sales were $230.7 million, as compared to consolidated net sales of $229.0 million for the corresponding period in 2016.  In constant currency, consolidated net sales increased 3.3%.

Gross margin was $86.7 million, or 37.6%, as compared to $83.5 million, or 36.5%, for the corresponding period in 2016.

Loss from operations was $5.0 million, as compared to a loss of $5.5 million, for the corresponding period in 2016.

Net loss was $3.4 million, or $0.24 per diluted share, as compared to a loss of $5.5 million, or $0.39 per diluted share, in the 2016 period. 

Adjusted net loss was $2.0 million, or $0.14 per diluted share, as compared to a loss of $3.6 million, or $0.26 per diluted share, in the 2016 period. 

Consolidated EBITDA was $3.6 million, as compared to $5.5 million for the corresponding 2016 period.

Equity in earnings, net of taxes, was $1.0 million, as compared to equity in losses, net of taxes, of $132 thousand in the corresponding 2016 period.

Jeffrey Siegel, Lifetime's Chairman and Chief Executive Officer, commented,

“We are pleased with the Company’s results for the second quarter, which generally matched our expectations, despite a difficult retail environment.

“Net sales in constant dollars increased 1.5% and gross margin increased to 36.5%. We believe the net sales growth in the period, albeit modest, reflects increases in our market share, as many of our large brick and mortar customers reported negative retail sales growth for the period.

“The second quarter 2017 financial results include an unrealized foreign currency loss of $1.5 million, compared to a gain of $0.2 million in the 2016 quarter. These amounts represent mark-to-market adjustments on GBP/USD forward currency contracts related to purchases of inventory. The adjustments will reverse as the forward contracts are settled in the ordinary course of business and, therefore, are not expected to have a permanent economic impact.

“We are especially pleased with the growth in our global e-commerce business, which includes sales both to pure-play e-commerce retailers and to omnichannel retailers. While most omnichannel retailers do not provide information as to the percentages of their sales of our products sold through their e-commerce websites, we believe e-commerce sales currently represent approximately 15% of our total sales, a percentage significantly greater than the estimate for e-commerce sales as a percentage of overall U.S. retail sales, and are increasing at a double-digit annual rate. As e-commerce sales continue to grow in importance, we believe the significant investments we have made in the infrastructure, staffing and data resources necessary to compete effectively in this arena, have uniquely positioned Lifetime to become an important strategic partner to global e-commerce retailers.

“Lifetime Next™, our strategic growth and profitability enhancement initiative, is proceeding apace. We expect to see the benefits of this program reflected in the Company’s financial results beginning later this year and, in a more meaningful way, in 2018 and 2019.

“We continue to make good progress in the integration of our UK businesses. Earlier this summer, we took several important actions, including consolidating national account managers, sales teams, and warehouse management; and, this month, we successfully transitioned KitchenCraft to our SAP platform, which will enable KitchenCraft and Creative Tops to function more easily as an integrated business. Also, in the quarter, management eliminated certain low margin product lines, resulting in a substantial inventory reserve adjustment.  The final step in the integration process will be the consolidation of several legacy distribution centers into a new, purpose-built distribution center. Plans now are underway for this new facility, which is expected to open in early 2019.

“Our new West Coast distribution center rapidly is nearing completion. We plan to begin shipping from this new location early next year.

“While we continue to be optimistic about the Company’s performance in the second half of the year, we are increasingly mindful of the difficult retail environment in North America and Europe and therefore are adjusting our guidance to reflect full year consolidated net sales growth of approximately 1.5% (excluding foreign currency impact) and gross margin improvement of approximately 50 basis points. Based upon this sales volume; distribution and SG&A expenses as a percentage of sales should be slightly higher than in 2016.”

Dividend        

On Friday, August 4, 2017, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on November 15, 2017 to shareholders of record on November 1, 2017.

Conference Call

The Company has scheduled a conference call for Tuesday, August 8, 2017 at 11:00 a.m. ET. The dial-in number for the conference call is call is (844) 787-0801 or (661) 378-9632, passcode # 56005964. A live webcast of the conference call will be accessible through http://edge.media-server.com/m/p/dr78pkhq/lan/en.  For those who cannot listen to the live broadcast, an audio replay of the webcast will be available.

Non-GAAP Financial Measures

This earnings release contains non-GAAP financial measures, including consolidated net sales in constant currency, adjusted net loss, adjusted diluted loss per common share, and consolidated adjusted EBITDA. A non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets, or statements of cash flows of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. As required by SEC rules, the Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. These non-GAAP measures are provided because management of the Company uses these financial measures in evaluating the Company's on-going financial results and trends, and management believes that exclusion of certain items allows for more accurate comparison of the Company’s operating performance. Management uses this non-GAAP information as an indicator of business performance.  These non-GAAP measures should be viewed as a supplement to, and not a substitute for, GAAP measures of performance.

Forward-Looking Statements

In this press release, the use of the words “believe,” "could," "expect," "may," "positioned," "project," "projected," "should," "will," "would" or similar expressions is intended to identify forward-looking statements that represent the Company’s current judgment about possible future events. The Company believes these judgments are reasonable, but these statements are not guarantees of any events or financial results, and actual results may differ materially due to a variety of important factors. Such factors might include, among others, the Company’s ability to comply with the requirements of its credit agreements; the availability of funding under such credit agreements; the Company’s ability to maintain adequate liquidity and financing sources and an appropriate level of debt; changes in general economic conditions which could affect customer payment practices or consumer spending; the impact of changes in general economic conditions on the Company’s customers; changes in demand for the Company’s products; shortages of and price volatility for certain commodities; significant changes in the competitive environment and the effect of competition on the Company’s markets, including on the Company’s pricing policies, financing sources and an appropriate level of debt.

Lifetime Brands, Inc.  

Lifetime Brands is a leading global provider of kitchenware, tableware and other products used in the home. The Company markets its products under well-known kitchenware brands, including Farberware®, KitchenAid®, Sabatier®, Amco Houseworks®, Chicago™ Metallic, Copco®, Fred® & Friends, Kitchen Craft®, Kamenstein®, Kizmos™, La Cafetière®, MasterClass®, Misto®, Mossy Oak®, Swing-A-Way® and Vasconia®; respected tableware and giftware brands, including Mikasa®, Pfaltzgraff®, Creative Tops®, Empire Silver™, Gorham®, International® Silver, Kirk Stieff®, Towle® Silversmiths, Tuttle®, Wallace®, Wilton Armetale®, V&A® and Royal Botanic Gardens Kew®; and valued home solutions brands, including Bombay®, BUILT NY® and Debbie Meyer® . The Company also provides exclusive private label products to leading retailers worldwide.

The Company’s corporate website is www.lifetimebrands.com.

Contacts:
               
Lifetime Brands, Inc.              Lippert/Heilshorn & Assoc.
Laurence Winoker, Chief Financial Officer              Harriet Fried, SVP
516-203-3590               212-838-3777
investor.relations@lifetimebrands.com             hfried@lhai.com



LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share data)
(unaudited)
 
    Three Months Ended   Six Months Ended  
    June 30,   June 30,  
      2017       2016       2017       2016    
                   
Net sales $ 117,393     $ 118,050     $ 230,749     $ 228,975    
                   
Cost of sales   74,596       75,056       144,011       145,430    
                   
Gross margin   42,797       42,994       86,738       83,545    
                   
Distribution expenses   12,582       12,377       26,015       25,694    
Selling, general and administrative expenses   33,102       29,845       65,484       61,653    
Restructuring expenses   254       1,060       254       1,701    
                   
Loss from operations   (3,141 )     (288 )     (5,015 )     (5,503 )  
                   
Interest expense   (1,001 )     (1,122 )     (1,942 )     (2,315 )  
Loss on early retirement of debt   (110 )     (272 )     (110 )     (272 )  
                   
Loss before income taxes and equity in earnings   (4,252 )     (1,682 )     (7,067 )     (8,090 )  
                   
Income tax benefit   1,698       473       2,642       2,743    
Equity in earnings (losses), net of taxes   458       18       998       (132 )  
                   
NET LOSS $ (2,096 )   $ (1,191 )   $ (3,427 )   $ (5,479 )  
                   
Weighted-average shares outstanding - basic   14,456       14,155       14,426       14,059    
                   
BASIC LOSS PER COMMON SHARE  $ (0.14 )   $ (0.08 )   $ (0.24 )   $ (0.39 )  
                   
Weighted-average shares outstanding - diluted   14,456       14,155       14,426       14,059    
                   
DILUTED LOSS PER COMMON SHARE  $ (0.14 )   $ (0.08 )   $ (0.24 )   $ (0.39 )  
                   
Cash dividends declared per common share $ 0.0425     $ 0.0425     $ 0.085     $ 0.085    
                   
                   


LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands - except share data)
 
        June 30,   December 31,
          2017       2016  
        (unaudited)    
ASSETS      
CURRENT ASSETS      
  Cash and cash equivalents $ 4,122     $ 7,883  
  Accounts receivable, less allowances of $4,349 at June 30, 2017 and
  $5,725 at December 31, 2016
  67,509       104,556  
  Inventory   167,428       135,212  
  Prepaid expenses and other current assets   8,088       8,796  
  Income tax receivable   4,279       -  
    TOTAL CURRENT ASSETS   251,426       256,447  
             
PROPERTY AND EQUIPMENT, net   20,650       21,131  
INVESTMENTS   25,170       22,712  
INTANGIBLE ASSETS, net   88,129       89,219  
DEFERRED INCOME TAXES   8,467       8,459  
OTHER ASSETS   1,340       1,886  
      TOTAL ASSETS $ 395,182     $ 399,854  
             
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Current maturity of Credit Agreement Term Loan $ -     $ 9,343  
  Short term loan   121       113  
  Accounts payable   33,977       29,698  
  Accrued expenses   37,159       45,212  
  Income taxes payable   -       6,920  
    TOTAL CURRENT LIABILITIES   71,257       91,286  
             
DEFERRED RENT & OTHER LONG-TERM LIABILITIES   17,610       18,973  
DEFERRED INCOME TAXES   6,161       5,666  
REVOLVING CREDIT FACILITY   98,974       86,201  
             
STOCKHOLDERS’ EQUITY      
  Preferred stock, $1.00 par value, shares authorized: 100 shares of Series A
  and 2,000,000 shares of Series B; none issued and outstanding
  -       -  
  Common stock, $.01 par value, shares authorized: 50,000,000 at
  June 30, 2017 and December 31, 2016; shares issued and outstanding:
 14,797,690 at June 30, 2017 and 14,555,936 at December 31, 2016
  148       146  
  Paid-in capital   176,488       173,600  
  Retained earnings   56,210       60,981  
  Accumulated other comprehensive loss   (31,666 )     (36,999 )
    TOTAL STOCKHOLDERS’ EQUITY   201,180       197,728  
      TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 395,182     $ 399,854  
             


LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
        Six Months Ended  
        June 30,  
          2017       2016    
OPERATING ACTIVITIES        
  Net loss $ (3,427 )   $ (5,479 )  
  Adjustments to reconcile net loss to net cash used in operating activities:        
    Depreciation and amortization   6,634       7,062    
    Amortization of financing costs   282       333    
    Deferred rent   (304 )     (37 )  
    Deferred income taxes   -       113    
    Stock compensation expense   1,530       1,290    
    Undistributed equity in (earnings) losses, net   (970 )     132    
    Gain on disposal of fixed assets   -       (17 )  
    Loss on early retirement of debt   110       272    
  Changes in operating assets and liabilities (excluding the effects of business
  acquisitions)
       
    Accounts receivable   37,950       7,562    
    Inventory   (30,769 )     (16,357 )  
    Prepaid expenses, other current assets and other assets   1,107       (1,359 )  
    Accounts payable, accrued expenses and other liabilities   (5,291 )     (3,748 )  
    Income taxes receivable   (4,279 )     (4,311 )  
    Income taxes payable   (6,858 )     (5,031 )  
      NET CASH USED IN OPERATING ACTIVITIES    (4,285 )     (19,575 )  
               
INVESTING ACTIVITIES        
  Purchases of property and equipment   (2,710 )     (1,091 )  
  Proceeds from disposition of GSI   -       567    
  Acquisitions   -       (614 )  
      NET CASH USED IN INVESTING ACTIVITIES   (2,710 )     (1,138 )  
               
FINANCING ACTIVITIES        
  Proceeds from Revolving Credit Facility   123,534       120,334    
  Repayments of Revolving Credit Facility   (110,937 )     (79,206 )  
  Repayment of Credit Agreement Term Loan   (9,500 )     (20,500 )  
  Proceeds from Short Term Loan   119       -    
  Payments on Short Term Loan   (114 )     (117 )  
  Payment of financing costs   (30 )     -    
  Payment for capital leases   (49 )     (32 )  
  Payments of tax withholding for stock based compensation   (176 )     (65 )  
  Proceeds from exercise of stock options   1,425       1,191    
  Cash dividends paid   (1,235 )     (1,198 )  
      NET CASH PROVIDED BY FINANCING ACTIVITIES    3,037       20,407    
               
Effect of foreign exchange on cash   197       (176 )  
               
DECREASE IN CASH AND CASH EQUIVALENTS   (3,761 )     (482 )  
Cash and cash equivalents at beginning of period   7,883       7,131    
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,122     $ 6,649    
               


LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)
 
    Consolidated adjusted
EBITDA for the Four
Quarters Ended

June 30, 2017
Three months ended June 30, 2017 $ 1,361
Three months ended March 31, 2017   2,251
Three months ended December 31, 2016   25,100
Three months ended September 30, 2016   16,652
  Total for the four quarters $ 45,364
     
    Consolidated adjusted
EBITDA for the Four
Quarters Ended

June 30, 2016
Three months ended June 30, 2016 $ 5,206
Three months ended March 31, 2016   268
Three months ended December 31, 2015   23,889
Three months ended September 30, 2015   14,089
  Total for the four quarters $ 43,452
     


Reconciliation of GAAP to Non-GAAP Operating Results
 
Consolidated adjusted EBITDA:
      Three Months Ended  
      June 30, 
2017
  March 31,
2017
  December 31,
2016
  September 30,
2016
 
Net income (loss) as reported $ (2,096 )   $ (1,331 )   $ 14,747     $ 6,452  
  Subtract out:                
    Undistributed equity in (earnings) losses, net   (430 )     (540 )     (814 )     138  
  Add back:                
    Income tax provision (benefit)   (1,698 )     (944 )     6,812       2,961  
    Interest expense   1,001       941       1,257       1,231  
    Loss on early retirement of debt   110       -       -       -  
    Depreciation and amortization   3,348       3,286       2,404       4,682  
    Stock compensation expense   726       804       827       825  
    Permitted acquisition related expenses, net of acquisitions not completed   (9 )     35       (852 )     363  
    Restructuring expenses   254       -       719       -  
    Severance expense   155       -       -       -  
Consolidated adjusted EBITDA $ 1,361     $ 2,251     $ 25,100     $ 16,652  
                     
 
Reconciliation of GAAP to Non-GAAP Operating Results (continued)
 
Consolidated adjusted EBITDA:
      Three Months Ended  
      June 30, 
2016
  March 31,
2016
  December 31,
2015
  September 30,
2015
 
Net income (loss) as reported $ (1,191 )   $ (4,288 )   $ 11,006     $ 5,104  
  Subtract out:                
    Undistributed equity in (earnings) losses, net   (18 )     150       (517 )     459  
  Add back:                
    Income tax provision (benefit)   (473 )     (2,270 )     5,962       2,745  
    Interest expense   1,122       1,193       1,402       1,454  
    Loss on early retirement of debt   272       -       -       -  
    Depreciation and amortization   3,578       3,484       3,500       3,510  
    Stock compensation expense   487       803       2,972       791  
    Contingent consideration   -       -       (876 )     -  
    Permitted acquisition related expenses   369       555       3       26  
    Restructuring expenses   1,060       641       437       -  
Consolidated adjusted EBITDA $ 5,206     $ 268     $ 23,889     $ 14,089  
                     

Consolidated adjusted EBITDA is a non-GAAP measure that the Company defines as net income (loss), adjusted to exclude undistributed equity in earnings (losses), income taxes, interest, losses on early retirement of debt, depreciation and amortization, stock compensation expense, contingent consideration, certain acquisition related expenses, restructuring expenses and non-restructuring severance expense, as shown in the tables above.

Reconciliation of GAAP to Non-GAAP Operating Results (continued)
 
Adjusted net loss and adjusted diluted loss per common share:
 
    Three Months Ended   Six Months Ended  
    June 30,   June 30,  
      2017       2016       2017       2016    
                   
Net loss as reported $ (2,096 )   $ (1,191 )     (3,427 )   $ (5,479 )  
Adjustments:                
  Acquisition related expenses (adjustments), net   (9 )     369       26       924    
  Loss on early retirement of debt   110       272       110       272    
  Restructuring expenses   254       1,060       254       1,701    
  Severance expenses   69       -       155       -    
  Unrealized loss (gain) on foreign currency contracts   1,456       (212 )     1,751       (411 )  
  Deferred tax for foreign currency translation for Grupo
  Vasconia
  (140 )     261       (365 )     455    
  Income tax effect on adjustments   (397 )     (639 )     (502 )     (1,077 )  
Adjusted net loss $ (753 )   $ (80 )   $ (1,998 )   $ (3,615 )  
Adjusted diluted loss per common share $ (0.05 )   $ (0.01 )   $ (0.14 )   $ (0.26 )  
                   

Adjusted net loss in the three and six months ended June 30, 2017 excludes acquisition related expenses, loss on early retirement of debt, restructuring expenses, non-restructuring severance expense, the unrealized loss on foreign currency contracts and deferred tax benefit related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation gains through other comprehensive income (loss). Adjusted loss in the three and six months ended June 30, 2016 excludes acquisition related expenses, loss on early retirement of debt, restructuring expenses, unrealized gain on foreign currency contracts and deferred tax expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation losses through other comprehensive income (loss).

 

Reconciliation of GAAP to Non-GAAP Operating Results (continued)
 
     As Reported   Constant Currency (1)                      
    Three Months Ended    Three Months Ended        Year-Over-Year 
    June 30,   June 30,       Increase (Decrease)
  Net sales   2017     2016   Increase
(Decrease)
    2017     2016   Increase
(Decrease)
  Currency
Impact
  Excluding
Currency
    Including
Currency
    Currency
Impact
 
  U.S. Wholesale $ 94,770   $ 92,738   $ 2,032     $ 94,770   $ 92,725   $ 2,045     $ (13 )   2.2   %   2.2   %   -   %
  International   19,365     21,560     (2,195 )     19,365     19,217     148       (2,343 )   0.8   %   (10.2 ) %   (11.0 ) %
  Retail Direct   3,258     3,752     (494 )     3,258     3,752     (494 )     -     (13.2 ) %   (13.2 ) %   -   %
  Total net sales $ 117,393   $ 118,050   $ (657 )   $ 117,393   $ 115,694   $ 1,699     $ (2,356 )   1.5   %   (0.6 ) %   (2.0 ) %
                                               
                                               
                                               
     As Reported   Constant Currency (1)                      
    Six Months Ended    Six Months Ended        Year-Over-Year 
    June 30,   June 30,       Increase (Decrease)
  Net sales   2017     2016   Increase
(Decrease)
    2017     2016   Increase
(Decrease)
  Currency
Impact
  Excluding
Currency
    Including
Currency
    Currency
Impact
 
  U.S. Wholesale $ 182,162   $ 175,006   $ 7,156     $ 182,162   $ 175,012   $ 7,150     $ 6     4.1   %   4.1   %   0.0   %
  International   40,593     45,233     (4,640 )     40,593     39,729     864       (5,504 )   2.2   %   (10.3 ) %   (12.4 ) %
  Retail Direct   7,994     8,736     (742 )     7,994     8,736     (742 )     -     (8.5 ) %   (8.5 ) %   -   %
  Total net sales $ 230,749   $ 228,975   $ 1,774     $ 230,749   $ 223,477   $ 7,272     $ (5,498 )   3.3   %   0.8   %   (2.5 ) %
                                               
  (1) Constant Currency" is determined by applying the 2017 average exchange rates to the prior year local currency sales amounts, with the difference between the change in "As Reported" net sales and "Constant Currency" net sales, reported in the table as "Currency Impact". Constant currency sales growth excludes the impact of currency.

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Lifetime Brands, Inc.