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Lifetime Brands, Inc. Reports Second Quarter Financial Results

Reaffirms Financial Guidance for 2018

Declares Regular Quarterly Dividend

GARDEN CITY, N.Y., Aug. 06, 2018 (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, 2018.

Second Quarter Financial Highlights:

Consolidated net sales were $148.7 million, as compared to consolidated net sales of $117.4 million for the corresponding period in 2017. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased $30.1 million, or 25.3%, as compared to consolidated net sales in the corresponding period in 2017.

Gross margin was $52.1 million, or 35.0%, as compared to $42.8 million, or 36.5%, for the corresponding period in 2017.

Loss from operations was $3.3 million, as compared to a loss of $3.1 million for the corresponding period in 2017.

Net loss was $6.1 million, or $0.30 per diluted share, as compared to a net loss of $2.1 million, or $0.14 per diluted share, in the corresponding period in 2017.  

Adjusted net loss was $5.7 million, or $0.28 per diluted share, as compared to a loss of $0.8 million, or $0.05 per diluted share, in the corresponding period in 2017.

Equity in earnings, net of taxes, was $155 thousand, as compared to $458 thousand in the corresponding 2017 period.

Six Months Financial Highlights:

Consolidated net sales were $266.8 million, as compared to consolidated net sales of $230.7 million for the corresponding period in 2017. In constant currency, consolidated net sales increased 13.8%.

Gross margin was $97.2 million, or 36.4%, as compared to $86.7 million, or 37.6%, for the corresponding period in 2017.

Loss from operations was $16.6 million, as compared to a loss of $5.0 million for the corresponding period in 2017.

Net loss was $17.7 million, or $0.96 per diluted share, as compared to a net loss of $3.4 million, or $0.24 per diluted share, in the corresponding period in 2017.  

Adjusted net loss was $14.0 million, or $0.76 per diluted share, as compared to a loss of $2.0 million, or $0.14 per diluted share, in the corresponding period in 2017.

Equity in earnings, net of taxes, was $232 thousand, as compared to $998 thousand in the corresponding 2017 period.

Consolidated adjusted EBITDA was $69.2 million for the twelve months ended June 30, 2018, after giving effect to the pro forma adjustments, permitted under our debt agreements, for the acquisition of Filament and projected synergies.

Chief Executive Officer Rob Kay commented, “The integration of Filament Brands has been proceeding smoothly and we are ahead of schedule both in terms of identified cost savings and implementation timing. The meaningful steps we have taken to optimize the Company’s combined business structure have enabled us to surpass our original goal of realizing $8.1 million in annualized synergy savings. We are now on track to realize $10.0 million in savings annually.  2018 is expected to benefit by the realization of in excess of $2.0 million in savings, and we expect to realize the full amount of the $10.0 million in annual savings in 2019. This timing is consistent with our previously announced plan.

“We continue to expect the combination of Lifetime and Filament to be transformational, with progress becoming evident in the second half of this year and becoming more meaningful in 2019.  While to date, our first priority has been to achieve substantial operational efficiencies, we are also working hard to evaluate and reposition our product portfolio as well as enter growth categories and lay the groundwork for realizing increased profit opportunities worldwide.  Recognizing that today’s retail environment is challenging, we believe Lifetime’s expanded capabilities, customer base and ability to evolve will help us achieve these goals.

“Lifetime Brands is executing our plan for 2018, including the shipment of the largest single order Lifetime has ever received in the third quarter combined with various other new programs and promotions. We expect these to have a positive impact on our financial results in the year’s second half. Accordingly, we are reaffirming the Company’s financial guidance for 2018, provided on May 8, 2018.”

Dividend

On Tuesday, July 31, 2018, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on November 15, 2018 to shareholders of record on November 1, 2018.

Conference Call

The Company has scheduled a conference call for August 6, 2018 at 11:00 a.m. ET. The dial-in number for the conference call is (844) 787-0801 or (661) 378-9632, passcode #3477586. A live webcast of the conference call will be accessible through https://edge.media-server.com/m6/p/wzu2m5ei. 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 income, adjusted diluted income 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 financial 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 financial 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. Such statements include all statements regarding our current and projected financial and operating performance and all guidance related thereto, our future plans and intentions regarding the Company and its consolidated subsidiaries, and the expected results of the combination of Lifetime and Filament. Such statements 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 or operational 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; the possibility of impairments to the Company’s goodwill; changes in U.S. or foreign trade or tax law and policy; 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; expenses and other challenges relating to the integration of the Filament Brands business and future acquisitions; changes in demand for the Company’s products; changes in the Company’s management team; the significant influence of the Company’s largest stockholder; fluctuations in foreign exchange rates; changes in U.S. trade policy or the trade policies of nations in which we or our suppliers do business; 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. The Company undertakes no obligation to update these forward-looking statements other than as required by law.

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®, Chef'n® Chicago™ Metallic, Copco®, Fred® & Friends, Houdini™, KitchenCraft®, Kamenstein®, Kizmos™, La Cafetière®, MasterClass®, Misto®, Mossy Oak®, Swing-A-Way® Taylor® Kitchen and Vasconia®; respected tableware and giftware brands, including Mikasa®, Pfaltzgraff®, Fitz and Floyd®, Creative Tops®, Empire Silver™, Gorham®, International® Silver, Kirk Stieff®, Rabbit® Towle® Silversmiths, Tuttle®, Wallace®, Wilton Armetale®, V&A® and Royal Botanic Gardens Kew®; and valued home solutions brands, including Bombay®, BUILT NY®, Taylor® Bath and Taylor® Weather. 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.  
Laurence Winoker, Chief Financial Officer   
516-203-3590 
investor.relations@lifetimebrands.com 

Lippert/Heilshorn& Assoc.
Harriet Fried, SVP
212-838-3777
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,
      2018       2017         2018       2017  
                   
Net sales $ 148,651     $ 117,393       $ 266,820     $ 230,749  
                   
Cost of sales   96,573       74,596         169,655       144,011  
                   
Gross margin   52,078       42,797         97,165       86,738  
                   
Distribution expenses   14,942       12,582         32,764       26,015  
Selling, general and administrative expenses   40,042       33,102         80,217       65,484  
Restructuring expenses   395       254         801       254  
                   
Loss from operations   (3,301 )     (3,141 )       (16,617 )     (5,015 )
                   
Interest expense   (4,676 )     (1,001 )       (6,779 )     (1,942 )
Loss on early retirement of debt   -       (110 )       (66 )     (110 )
                   
Loss before income taxes and equity in earnings   (7,977 )     (4,252 )       (23,462 )     (7,067 )
                   
Income tax benefit   1,765       1,698         5,575       2,642  
Equity in earnings, net of taxes   155       458         232       998  
                   
NET LOSS $ (6,057 )   $ (2,096 )     $ (17,655 )   $ (3,427 )
                   
Weighted-average shares outstanding - basic   20,327       14,456         18,474       14,426  
                   
BASIC LOSS PER COMMON SHARE  $ (0.30 )   $ (0.14 )     $ (0.96 )   $ (0.24 )
                   
Weighted-average shares outstanding - diluted   20,327       14,456         18,474       14,426  
                   
DILUTED LOSS PER COMMON SHARE  $ (0.30 )   $ (0.14 )     $ (0.96 )   $ (0.24 )
                   
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,
          2018       2017  
        (unaudited)    
ASSETS      
CURRENT ASSETS      
  Cash and cash equivalents $ 5,999     $ 7,600  
  Accounts receivable, less allowances of $6,037 at June 30, 2018 and $6,190 at December 31, 2017   93,100       108,033  
  Inventory   197,879       132,436  
  Prepaid expenses and other current assets   14,712       10,354  
  Income taxes receivable   4,095       -  
    TOTAL CURRENT ASSETS   315,785       258,423  
             
PROPERTY AND EQUIPMENT, net   25,643       23,065  
INVESTMENTS   23,501       23,978  
INTANGIBLE ASSETS, net   366,198       88,479  
DEFERRED INCOME TAXES   8,957       5,826  
OTHER ASSETS   1,962       1,750  
      TOTAL ASSETS $ 742,046     $ 401,521  
             
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Current maturity of term loan $ 1,247     $ -  
  Short term loan   76       69  
  Accounts payable   43,915       25,461  
  Accrued expenses   52,937       44,121  
  Income taxes payable   -       1,864  
    TOTAL CURRENT LIABILITIES   98,175       71,515  
             
DEFERRED RENT & OTHER LONG-TERM LIABILITIES   20,847       20,249  
DEFERRED INCOME TAXES   33,968       4,423  
INCOME TAXES PAYABLE, LONG-TERM   311       311  
REVOLVING CREDIT FACILITY   59,577       94,744  
TERM LOAN   263,329       -  
             
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, 2018 and December 31, 2017; shares issued and outstanding: 20,740,997 at June 30, 2018 and 14,902,527 at December 31, 2017   207       149  
  Paid-in capital   256,182       178,909  
  Retained earnings   41,126       60,546  
  Accumulated other comprehensive loss   (31,676 )     (29,325 )
    TOTAL STOCKHOLDERS’ EQUITY   265,839       210,279  
      TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 742,046     $ 401,521  
             

 

LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
        Six Months Ended  
        June 30,   
          2018       2017    
OPERATING ACTIVITIES        
  Net loss $ (17,655 )   $ (3,427 )  
  Adjustments to reconcile net loss to net cash provided by operating activities:        
    Depreciation and amortization   10,731       6,634    
    Amortization of financing costs   663       282    
    Deferred rent   368       (304 )  
    Stock compensation expense   1,759       1,530    
    Undistributed equity in earnings, net   (232 )     (970 )  
    Loss on early retirement of debt   66       110    
  Changes in operating assets and liabilities (excluding the effects of business acquisitions)        
    Accounts receivable   41,441       37,950    
    Inventory   (39,555 )     (30,769 )  
    Prepaid expenses, other current assets and other assets   (185 )     1,107    
    Accounts payable, accrued expenses and other liabilities   5,170       (5,291 )  
    Income taxes receivable   (4,095 )     (4,279 )  
    Income taxes payable   (4,242 )     (6,858 )  
      NET CASH USED IN OPERATING ACTIVITIES    (5,766 )     (4,285 )  
               
INVESTING ACTIVITIES        
  Purchases of property and equipment   (3,168 )     (2,710 )  
  Filament acquisition, net of cash acquired   (217,932 )     -    
      NET CASH USED IN INVESTING ACTIVITIES   (221,100 )     (2,710 )  
               
FINANCING ACTIVITIES        
  Proceeds from revolving credit facility   126,283       123,534    
  Repayments of revolving credit facility   (161,173 )     (110,937 )  
  Proceeds from Term Loan   275,000       -    
  Repayment of Term Loan   (688 )     -    
  Repayment of Credit Agreement term loan   -       (9,500 )  
  Proceeds from short term loan   79       119    
  Payments on short term loan   (71 )     (114 )  
  Payment of financing costs   (11,154 )     (30 )  
  Payment of equity issuance costs   (936 )     -    
  Payments for capital leases   (24 )     (49 )  
  Payments of tax withholding for stock based compensation   (398 )     (176 )  
  Proceeds from exercise of stock options   -       1,425    
  Cash dividends paid   (1,535 )     (1,235 )  
      NET CASH PROVIDED BY FINANCING ACTIVITIES    225,383       3,037    
               
Effect of foreign exchange on cash   (118 )     197    
               
DECREASE IN CASH AND CASH EQUIVALENTS   (1,601 )     (3,761 )  
Cash and cash equivalents at beginning of period   7,600       7,883    
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,999     $ 4,122    
               


LIFETIME BRANDS, INC.

Supplemental Information
(In thousands)

Reconciliation of GAAP to Non-GAAP Operating Results

Consolidated adjusted EBITDA for the twelve months ended June 30, 2018:

    Consolidated adjusted
EBITDA for the Four
Quarters Ended

June 30, 2018
Three months ended June 30, 2018 $ 3,910  
Three months ended March 31, 2018   (529 )
Three months ended December 31, 2017   29,767  
Three months ended September 30, 2017   26,500  
Pro forma projected synergies   9,595  
  Total for the four quarters $ 69,243  
     


             
        June 30, 
2018
  March 31,
2018
  December 31,
2017
  September 30, 
2017
  Twelve
months ended
June 30, 2018
Net income (loss) as reported   $ (6,057 )   $ (11,598 )   $ 1,251   $ 4,330   $ (12,074 )
  Subtract out:                    
    Undistributed equity in (earnings) losses, net     (155 )     (77 )     265     326     359  
  Add back:                    
    Income tax expense (benefit)     (1,765 )     (3,810 )     8,169     3,505     6,099  
    Interest expense     4,676       2,103       1,177     1,172     9,128  
    Loss on early retirement of debt     -       66       -     -     66  
    Depreciation and amortization     6,422       4,309       3,468     4,063     18,262  
    Stock compensation expense     921       838       908     952     3,619  
    Unrealized (gain) loss on foreign currency contracts     (2,112 )     393       169     897     (653 )
    Other permitted non-cash charges     916       287       -     -     1,203  
    Permitted acquisition related expenses     391       809       2,424     166     3,790  
    Permitted non-recurring charges     673       2,825       1,331     272     5,101  
    Pro forma Filament adjustment     -       3,326       10,605     10,817     24,748  
    Twelve Months ended June 30, 2018, Pro forma projected synergies     -       -       -     -     9,595  
  Consolidated adjusted EBITDA   $ 3,910     $ (529 )   $ 29,767   $ 26,500   $ 69,243  
                         

Consolidated adjusted EBITDA is a non-GAAP financial measure which is defined in the Company’s debt agreements. Adjusted EBITDA is defined 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, unrealized (gain) loss on foreign currency contracts, permitted non-recurring charges such as severance expense, warehouse relocation costs, transition expenses and restructuring expenses, and a non-cash purchase accounting adjustment to step-up the fair value of acquired inventory. Consolidated adjusted EBITDA includes pro forma adjustments, permitted under the debt agreements, for the acquisition of Filament and projected cost savings, operating expense reductions, restructuring charges and expenses and cost saving synergies projected by the Company as a result of actions taken through June 30, 2018 or expected to be taken as of June 30, 2018, net of the benefits realized. 

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands- except per share data)

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, 2018,   June 30, 2018,
      2018       2017       2018       2017  
                 
Net loss as reported $   (6,057 )   $   (2,096 )   $   (17,655 )   $   (3,427 )
  Adjustments:              
  Acquisition related expenses (adjustments), net     391         (9 )       1,200         26  
  Restructuring expenses     395         254         801         254  
  Severance expense     -          69         -          155  
  Integration charges     110         -          145         -   
  Warehouse relocation     168         -          2,552         -   
  Loss on early retirement of debt     -          110         66         110  
  Non-cash purchase accounting charges     916         -          1,203         -   
  Unrealized (gain) loss on foreign currency contracts     (2,112 )       1,456         (1,719 )       1,751  
  Deferred tax for foreign currency translation for Grupo Vasconia     501         (140 )       306         (365 )
  Income tax effect on adjustments     9         (397 )       (861 )       (502 )
Adjusted net loss $   (5,679 )   $   (753 )   $   (13,962 )   $   (1,998 )
Adjusted diluted loss per common share $   (0.28 )   $   (0.05 )   $   (0.76 )   $   (0.14 )
                 

Adjusted net loss in the three and six months ended June 30, 2018 excludes acquisition related expenses, restructuring expenses, integration charges, warehouse relocation expenses, loss on retirement of debt, non-cash purchase accounting charges, the unrealized gain on foreign currency contracts and the deferred tax for foreign currency translation for Grupo Vasconia.  Adjusted net loss in the three and six months ended June 30, 2017 excludes acquisition related expenses, restructuring expenses, severance expense, the unrealized loss on foreign currency contracts and the deferred tax for foreign currency translation for Grupo Vasconia.

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)

Reconciliation of GAAP to Non-GAAP Operating Results (continued)

Constant Currency:

                                               
     As Reported   Constant Currency (1)                      
    Three Months Ended    Three Months Ended        Year-Over-Year 
    June 30,   June 30,       Increase (Decrease)
  Net sales   2018     2017   Increase
(Decrease)
    2018     2017   Increase
(Decrease)
  Currency
Impact
  Excluding
Currency
    Including
Currency
    Currency
Impact
 
  U.S. Wholesale $ 124,348   $ 94,770   $ 29,578     $ 124,348   $ 94,784   $ 29,564     $ 14   31.2   %   31.2   %   - %
  International   19,083     19,365     (282 )     19,083     20,559     (1,476 )     1,194   (7.2 ) %   (1.5 ) %   5.7 %
  Retail Direct   5,220     3,258     1,962       5,220     3,258     1,962       -   60.2   %   60.2   %   - %
  Total net sales $ 148,651   $ 117,393   $ 31,258     $ 148,651   $ 118,601   $ 30,050     $ 1,208   25.3   %   26.6   %   1.3 %
                                               
                                               
     As Reported   Constant Currency (1)                      
    Six Months Ended    Six Months Ended        Year-Over-Year 
    June 30,   June 30,       Increase (Decrease)
  Net sales   2018     2017   Increase
(Decrease)
    2018     2017   Increase
(Decrease)
  Currency
Impact
  Excluding
Currency
    Including
Currency
    Currency
Impact
 
  U.S. Wholesale $ 215,143   $ 182,162   $ 32,981     $ 215,143   $ 182,188   $ 32,955     $ 26   18.1   %   18.1   %   - %
  International   40,929     40,593     336       40,929     44,367     (3,438 )     3,774   (7.7 ) %   0.8   %   8.5 %
  Retail Direct   10,748     7,994     2,754       10,748     7,994     2,754       -   34.5   %   34.5   %   - %
  Total net sales $ 266,820   $ 230,749   $ 36,071     $ 266,820   $ 234,549   $ 32,271     $ 3,800   13.8   %   15.6   %   1.8 %
                                               

(1)"Constant Currency" is determined by applying the 2018 average exchange rates to the prior year local currency net 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 net sales growth excludes the impact of currency.

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Source: Lifetime Brands, Inc.