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Lifetime Brands, Inc. Reports Third Quarter Financial Results

Results Demonstrate that Benefits of Filament Merger Are on Track
Initiatives Successfully Positioning Lifetime for Long Term Profitability
Declares Regular Quarterly Dividend

GARDEN CITY, N.Y., Nov. 08, 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 third quarter ended September 30, 2018.

Third Quarter Financial Highlights:

Consolidated net sales were $209.4 million, as compared to consolidated net sales of $166.0 million for the corresponding period in 2017. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased $43.7 million, or 26.3%, as compared to consolidated net sales in the corresponding period in 2017. 

 

Gross margin was $73.8 million, or 35.2%, as compared to $57.2 million, or 34.5%, for the corresponding period in 2017.

 

Income from operations was $12.3 million, as compared to $9.3 million for the corresponding period in 2017.

 

Net income was $5.9 million, or $0.29 per diluted share, as compared to $4.3 million, or $0.29 per diluted share, in the corresponding period in 2017.  

 

Adjusted net income was $8.2 million, or $0.40 per diluted share, as compared to $5.5 million, or $0.37 per diluted share, in the corresponding period in 2017.

Nine Months Financial Highlights:

Consolidated net sales were $476.3 million, as compared to consolidated net sales of $396.7 million for the corresponding period in 2017. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased $75.8 million, or 18.9%, as compared to consolidated net sales in the corresponding period in 2017.

 

Gross margin was $171.0 million, or 35.9%, as compared to $143.9 million, or 36.3%, for the corresponding period in 2017.

 

Loss from operations was $4.3 million, as compared to income from operations of $4.3 million for the corresponding period in 2017.

 

Net loss was $11.7 million, or $0.61 per diluted share, as compared to net income of $0.9 million, or $0.06 per diluted share, in the corresponding period in 2017.  

 

Adjusted net loss was $5.7 million, or $0.30 per diluted share, as compared adjusted net income of $3.5 million, or $0.24 per diluted share, in the corresponding period in 2017.

 

Consolidated adjusted EBITDA was $64.8 million for the twelve months ended September 30, 2018, after giving effect to the pro forma adjustments, permitted under our debt agreements, for the acquisition of Filament and projected synergies. A table which reconciles this non-GAAP measure to net income (loss), as reported, is included below. 

 

Chief Executive Officer Rob Kay commented, “Our business generated solid results in the third quarter as we began to show the strength of the Lifetime-Filament combination, consistent with our original expectations for both the third and fourth quarters. These results were driven by the progress we have been achieving in integrating our two organizations and accelerating our portfolio realignment to create a more profitable business with enhanced focus on margin and growth. In the third quarter, our expanded and more diversified business generated a 26% increase in net sales, a 10% increase in adjusted diluted EPS and a 45% increase in EBITDA (excluding the limitation on non-recurring charges under our bank agreement). This is a strong indication that the plan we developed to re-position Lifetime with improved profitability is producing meaningful results.” 

 

Mr. Kay continued, “Over the past eight months, we have been approaching the integration of Lifetime and Filament in a systematic and disciplined fashion and, in the process, have continued to increase the cost synergies that we will generate. We now expect to realize almost $11 million in annualized savings with the full impact being realized in 2019 – an increase of more than one-third from our original target. Additionally, we have reorganized our e-commerce and digital assets to optimize this fast-growing part of our business and finalized our previously announced integration plans to consolidate our European operations in order to create a single, more profitable business.”

 

“We continue to monitor the tariffs imposed by the U.S. on imports from China. Fortunately, we believe we are well equipped to mitigate their financial impact as we began preparing for this possibility well in advance of their enactment. Through a series of actions and initiatives, we expect that, except for a short adjustment period after each tariff implementation date, we will mitigate their impact on our net income and EBITDA.”

 

Mr. Kay concluded, “As planned, we began shipping in the third quarter several large customer orders that are part of ongoing business awards and will contribute to a strong fourth quarter performance and drive growth across several product categories. We also remain on track for the ‘go live’ date for our ERP systems integration in January 2019.”

Outlook

Due in part to foreign exchange assumptions, the acceleration of its portfolio realignment, and the potential shift of a large food service customer order from December 2018 to January 2019, the Company now expects full-year net sales in a range of $728 million - $735 million. Despite the short-term negative impact of tariffs, the Company expects full-year net income in a range of $4 million - $7 million and full-year consolidated adjusted EBITDA in a range of $75 million - $78 million. The Company notes that, should the large food service order ship in December 2018, the Company would produce results at the higher end of its estimated range.

Dividend

On Wednesday, November 7, 2018, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on February 15, 2019 to shareholders of record on February 1, 2019.

Conference Call

The Company has scheduled a conference call for November 8, 2018 at 11:00 a.m. ET. The dial-in number for the conference call is (844) 787-0801 or (661) 378-9632, passcode #5795347. A live webcast of the conference call will be accessible through https://edge.media-server.com/m6/p/2ovdzd4m. 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; the impact of tariffs on imported goods and materials; 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.    LHA
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     Nine Months Ended
    September 30,     September 30,
      2018       2017         2018       2017  
                   
Net sales $   209,448     $   165,957       $   476,268     $   396,706  
                   
Cost of sales     135,663         108,769           305,318         252,780  
                   
Gross margin     73,785         57,188           170,950         143,926  
                   
Distribution expenses     16,612         13,495           49,376         39,510  
Selling, general and administrative expenses     42,113         34,088           122,330         99,572  
Restructuring expenses      552         272           1,353         526  
Impairment of goodwill     2,205         -            2,205         -   
                   
Income (loss) from operations     12,303         9,333           (4,314 )       4,318  
                   
Interest expense     (5,634 )       (1,172 )         (12,413 )       (3,114 )
Loss on early retirement of debt     -          -            (66 )       (110 )
                   
Income (loss) before income taxes and equity in earnings     6,669         8,161           (16,793 )       1,094  
                   
Income tax (provision) benefit      (906 )       (3,505 )         4,669         (863 )
Equity in earnings (losses), net of taxes     185         (326 )         417         672  
                   
NET INCOME (LOSS) $   5,948     $   4,330       $   (11,707 )   $   903  
                   
Weighted-average shares outstanding - basic     20,357         14,572           19,123         14,422  
                   
BASIC INCOME (LOSS) PER COMMON SHARE $   0.29     $   0.30       $   (0.61 )   $   0.06  
                   
Weighted-average shares outstanding - diluted     20,481         15,043           19,123         14,900  
                   
DILUTED INCOME (LOSS) PER COMMON SHARE  $   0.29     $   0.29       $   (0.61 )   $   0.06  
                   


LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands - except share data)
 

        September 30,   December 31,
        2018   2017
        (unaudited)    
ASSETS      
CURRENT ASSETS      
  Cash and cash equivalents $ 5,763     $ 7,600  
  Accounts receivable, less allowances of $6,546 at September 30, 2018 and
  $6,190 at December 31, 2017
  147,520       108,033  
  Inventory   209,203       132,436  
  Prepaid expenses and other current assets   13,290       10,354  
  Income taxes receivable   2,952       -  
    TOTAL CURRENT ASSETS   378,728       258,423  
             
PROPERTY AND EQUIPMENT, net   26,455       23,065  
INVESTMENTS   24,987       23,978  
INTANGIBLE ASSETS, net   359,369       88,479  
DEFERRED INCOME TAXES   9,070       5,826  
OTHER ASSETS   1,825       1,750  
      TOTAL ASSETS $ 800,434     $ 401,521  
             
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Current maturity of term loan $ 1,249     $ -  
  Short term loan   73       69  
  Accounts payable   60,026       25,461  
  Accrued expenses   61,293       44,121  
  Income taxes payable   -       1,864  
    TOTAL CURRENT LIABILITIES   122,641       71,515  
             
DEFERRED RENT & OTHER LONG-TERM LIABILITIES   21,166       20,249  
DEFERRED INCOME TAXES   34,070       4,423  
INCOME TAXES PAYABLE, LONG-TERM   311       311  
REVOLVING CREDIT FACILITY   87,227       94,744  
TERM LOAN   263,009       -  
             
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 September 30, 2018 
  and December 31, 2017; shares issued and outstanding: 20,762,149 at
 September 30, 2018 and 14,902,527 at December 31, 2017
  208       149  
  Paid-in capital   257,547       178,909  
  Retained earnings   46,169       60,546  
  Accumulated other comprehensive loss   (31,914 )     (29,325 )
    TOTAL STOCKHOLDERS’ EQUITY   272,010       210,279  
      TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 800,434     $ 401,521  
             


LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 

        Nine Months Ended
        September 30,
        2018   2017
OPERATING ACTIVITIES      
  Net income (loss) $ (11,707 )   $ 903  
  Adjustments to reconcile net income (loss) to net cash used in operating
  activities:
     
    Depreciation and amortization   16,807       10,697  
    Impairment of goodwill   2,205       -  
    Amortization of financing costs   1,103       401  
    Deferred rent   357       (469 )
    Stock compensation expense   3,027       2,482  
    Undistributed equity in earnings, net of taxes   (417 )     (644 )
    Loss on early retirement of debt   66       110  
  Changes in operating assets and liabilities (excluding the effects of business
  acquisitions)
     
    Accounts receivable   (13,245 )     (10,524 )
    Inventory   (51,392 )     (32,508 )
    Prepaid expenses, other current assets and other assets   905       1,901  
    Accounts payable, accrued expenses and other liabilities   29,059       14,539  
    Income taxes receivable   (2,952 )     (862 )
    Income taxes payable   (4,245 )     (6,949 )
      NET CASH USED IN OPERATING ACTIVITIES    (30,429 )     (20,923 )
             
INVESTING ACTIVITIES      
  Purchases of property and equipment   (5,420 )     (4,269 )
  Filament acquisition, net of cash acquired   (217,521 )     -  
  Other acquisition, net of cash acquired   -       (9,072 )
      NET CASH USED IN INVESTING ACTIVITIES   (222,941 )     (13,341 )
             
FINANCING ACTIVITIES      
  Proceeds from revolving credit facility   203,237       191,087  
  Repayments of revolving credit facility   (210,271 )     (149,289 )
  Proceeds from Term Loan   275,000       -  
  Repayment of Term Loan   (1,375 )     -  
  Repayment of Credit Agreement term loan   -       (9,500 )
  Proceeds from short term loan   216       119  
  Payments on short term loan   (206 )     (114 )
  Payment of financing costs   (11,171 )     (39 )
  Payment of equity issuance costs   (936 )     -  
  Payments for capital leases   (67 )     (72 )
  Payments of tax withholding for stock based compensation   (442 )     (188 )
  Proceeds from exercise of stock options   143       1,453  
  Cash dividends paid   (2,405 )     (1,855 )
      NET CASH PROVIDED BY FINANCING ACTIVITIES    251,723       31,602  
             
Effect of foreign exchange on cash   (190 )     312  
             
DECREASE IN CASH AND CASH EQUIVALENTS   (1,837 )     (2,350 )
Cash and cash equivalents at beginning of period   7,600       7,883  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,763     $ 5,533  
             


LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)

Reconciliation of GAAP to Non-GAAP Operating Results

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

             
        September 30,
2018
  June 30,
2018
  March 31,
2018
  December 31,
2017
  Twelve Months
ended
September 30,
2018
Net income (loss) as reported   $   5,948     $   (6,057 )   $   (11,598 )   $   1,251   $   (10,456 )
  Subtract out:                    
    Undistributed equity in (earnings) losses, net       (185 )       (155 )       (77 )       265       (152 )
  Add back:                     
    Income tax expense (benefit)       906         (1,765 )       (3,810 )       8,169       3,500  
    Interest expense        5,634         4,676         2,103         1,177       13,590  
    Loss on early retirement of debt       -          -          66         -        66  
    Depreciation and amortization       6,076         6,422         4,309         3,468       20,275  
    Stock compensation expense       1,268         921         838         908       3,935  
    Impairment of goodwill       2,205         -          -          -        2,205  
    Unrealized (gain) loss on foreign currency contracts       (190 )       (2,112 )       393         169       (1,740 )
    Other permitted non-cash charges       307         916         287         -        1,510  
    Permitted acquisition related expenses       43         391         809         2,424       3,667  
    Permitted non-recurring charges        710         673         2,825         1,331       5,539  
    Pro forma Filament adjustment       -          -          3,326         10,605       13,931  
    Twelve Months ended September 30, 2018, Pro forma projected synergies       -          -          -          -        9,423  
  Consolidated adjusted EBITDA, before limitations   $   22,722     $   3,910     $   (529 )   $   29,767   $   65,293  
    Permitted non-recurring charge limitation                       (508 )
  Consolidated adjusted EBITDA                   $   64,785  
                         

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, impairment of goodwill, 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 September 30, 2018 or expected to be taken as of September 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 income (loss) and adjusted diluted income (loss) per common share:

    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2018   2017   2018   2017
                 
Net income (loss) as reported $   5,948     $   4,330     $   (11,707 )   $   903  
  Adjustments:              
  Acquisition related expenses      43         166         1,243         192  
  Restructuring expenses     552         272         1,353         526  
  Severance expense     -          -          -          155  
  Integration charges     103         -          248         -   
  Warehouse relocation     55         -          2,607         -   
  Loss on early retirement of debt     -          -          66         110  
  Non-cash purchase accounting charges     307         -          1,510         -   
  Unrealized (gain) loss on foreign currency contracts     (190 )       897         (1,909 )       2,648  
  Impairment of goodwill     2,205         -          2,205         -   
  Deferred tax for foreign currency translation for Grupo Vasconia     (581 )       127         (275 )       (238 )
  Income tax effect on adjustments     (218 )       (291 )       (1,080 )       (794 )
Adjusted net income (loss) $   8,224     $   5,501     $   (5,739 )   $   3,502  
Adjusted diluted income (loss) per common share $   0.40     $   0.37     $   (0.30 )   $   0.24  
                 

Adjusted net income (loss) in the three and nine months ended September 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, impairment and the deferred tax for foreign currency translation for Grupo Vasconia.  Adjusted net income in the three and nine months ended September 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 
    September 30,   September 30,       Increase (Decrease)
  Net sales   2018     2017   Increase (Decrease)     2018     2017   Increase (Decrease)   Currency Impact   Excluding Currency     Including Currency     Currency Impact  
  U.S. Wholesale $   178,518   $   137,096   $   41,422     $   178,518   $   137,079   $   41,439     $   (17 )     30.2    %      30.2    %      -     % 
  International     22,460       25,330       (2,870 )       22,460       25,162       (2,702 )       (168 )     (10.7 )  %      (11.3 )  %      (0.6 )  % 
  Retail Direct     8,470       3,531       4,939         8,470       3,531       4,939         -        139.9    %      139.9    %      -     % 
  Total net sales $   209,448   $   165,957   $   43,491     $   209,448   $   165,772   $   43,676     $   (185 )     26.3    %      26.2    %      (0.1 )  % 
                                               
                                               
     As Reported   Constant Currency (1)                      
    Nine Months Ended    Nine Months Ended        Year-Over-Year 
    September 30,   September 30,       Increase (Decrease)
  Net sales   2018     2017   Increase (Decrease)     2018     2017   Increase (Decrease)   Currency Impact   Excluding Currency     Including Currency     Currency Impact  
  U.S. Wholesale $   393,661   $   319,258   $   74,403     $   393,661   $   319,294   $   74,367     $   36       23.3    %      23.3    %      -     % 
  International     63,389       65,923       (2,534 )       63,389       69,612       (6,223 )       3,689       (8.9 )  %      (3.8 )  %      5.1    % 
  Retail Direct     19,218       11,525       7,693         19,218       11,525       7,693         -        66.8    %      66.8    %      -     % 
  Total net sales $   476,268   $   396,706   $   79,562     $   476,268   $   400,431   $   75,837     $   3,725       18.9    %      20.1    %      1.2    % 
                                               
  (1)"Constant Currency" is determined by applying the 2018 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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Source: Lifetime Brands, Inc.