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.

Lifetime Brands, Inc.