f8k11082012.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported)November 8, 2012
 
Lifetime Brands, Inc.
(Exact Name of Registrant as Specified in Its Charter)

 
Delaware
(State or Other Jurisdiction of Incorporation)
 
0-19254
11-2682486
(Commission File Number)
(IRS Employer Identification No.)
 
 
 
1000 Stewart Avenue, Garden City, New York, 11530
(Address of Principal Executive Offices)(Zip Code)
 
 (Registrant’s Telephone Number, Including Area Code) 516-683-6000
 
 
(Former Name or Former Address, if Changed Since Last Report) N/A
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
   
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
 
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
 
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
 
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 

 
 

 
 
Item 2.02.  Results of Operations and Financial Condition.

On November 8, 2012, Lifetime Brands, Inc. (the “Company”) issued a press release announcing the Company’s results for the third quarter ended September 30, 2012.  A copy of the Company’s press release is attached as Exhibit 99.1.
 
The press release attached as Exhibit 99.1 contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles. To supplement the Company’s results of operations presented in accordance with GAAP, the Company is presenting non-GAAP information regarding net income, adjusted to exclude undistributed earnings of investments, an extraordinary item, income taxes, interest, depreciation and amortization, restructuring expenses, stock compensation expense, acquisition related expenses, intangible asset impairment and loss on early retirement of debt. The Company is also presenting non-GAAP information regarding adjusted net income and adjusted diluted income per share regarding net income, adjusted to exclude intangible asset impairment, loss on early retirement of debt, an expense related to retirement benefit obligations, acquisition related expenses and the equity earnings from an entity that discontinued the sale of products in late 2011 and include adjustments to reflect a normalized annual tax rate.
 
These non-GAAP measures are provided to enhance the user’s overall understanding of the Company’s current financial performance. Specifically, the Company believes the non-GAAP results provide useful information to both management and investors by excluding certain items that may not be indicative of the Company’s core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but are not a substitute for or superior to GAAP results. The non-GAAP measures included in the attached press release have been reconciled to the equivalent GAAP measure.

 
Item  9.01   Financial Statements and Exhibits.
 
 
 
(d)
Exhibits
     
    99.1 
 
 
 
 
 
 
 
 
 
2

 
 
Signature
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
Lifetime Brands, Inc.
   
   
 
By:
/s/ Laurence Winoker
 
   
Laurence Winoker
   
Senior Vice President – Finance, Treasurer and Chief Financial Officer
 
 
 
Date:  November 8, 2012
 
 
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ex99_1-f8k11082012.htm

                      Exhibit 99.1
 
 
 
Lifetime Brands, Inc. Reports Third Quarter 2012 Results
 
Declares Quarterly Dividend of $0.025 per Share
 
GARDEN CITY, NY, November 8, 2012 – Lifetime Brands, Inc. (NasdaqGS: LCUT), a global provider of branded products used to prepare, serve and consume foods in the home, today reported its financial results for the quarter ended September 30, 2012.
 
Net sales for the three and nine months ended September 30, 2012 were $128.1 million and $332.0 million, respectively. Net sales grew by 2.7% and 8.2% compared to the corresponding periods in 2011. Net sales increased as a result of the inclusion of the net sales of Creative Tops, acquired in November 2011, and a strong increase in sales of Kitchenware products, offset by a decrease in demand for Tabletop and Home Solutions products.
 
Gross margin percentage for the three months ended September 30, 2012 was 35.1%, as compared to 35.5%, in the corresponding period in 2011. Gross margin for the nine months ended September 30, 2012 and for the corresponding period in 2011 was 36.4%.
 
Net income for the three months ended September 30, 2012 decreased to $3.9 million, or $0.30 per diluted share, from $7.5 million, or $0.60 per diluted share, in the corresponding 2011 period. For the nine months ended September 30, 2012, net income decreased to $5.8 million, or $0.45 per diluted share, from $8.6 million, or $0.69 per diluted share, in the corresponding 2011 period.
 
Adjusted net income for the quarter was $5.1 million, or $0.40 per diluted share, as compared to $6.6 million, or $0.52 per diluted share, in 2011.   Adjusted net income for the nine month period was $7.6 million, or $0.60 per diluted share, as compared to $7.7 million, or $0.62 per diluted share, in 2011. Adjusted net income in each of the 2012 periods excludes intangible asset impairment, a loss on early retirement of debt related to the repayment of the Company’s Term Loan, an expense related to retirement benefit obligations and acquisition related expenses.  Adjusted net income in the 2011 periods excludes the equity earnings from an entity that discontinued the sale of products in late 2011 and acquisition related expenses and includes adjustments to reflect a normalized annual tax rate.
 
Jeffrey Siegel, Chairman, President and Chief Executive Officer said,
 
 
“I am pleased to report that our core Kitchenware products category performed well during the quarter, as it has all year; reflecting increases in our Kitchen Tools & Gadgets and Kitchen Cutlery & Cutting Board product lines, and strong gains in Cookware, driven by the introduction our new Guy Fieri® cookware line.
 
 
“These gains were offset by declines in our Tabletop and Home Solutions product categories. Sales of tabletop products were negatively impacted by several factors, including a decision to restrict sales of Mikasa-branded dinnerware to customers that maintain and primarily sell through brick and mortar facilities and the well-publicized problems at a major retailer that traditionally had been a significant customer of our tabletop products.
 

 
1

 
 
 
 
 
“As previously noted, we are transitioning some of our home décor business to higher quality branded products sold under our Mikasa® and Pfaltzgraff® brands.
 
 
“I am pleased to report that Hurricane Sandy and its aftermath had little impact on our operations.
 
 
“Our holiday season is shaping up well.  Based on our current bookings and orders, we expect consolidated net sales for the fourth quarter to be approximately 5% greater than net sales in the fourth quarter of 2011.”
 
On November 2, 2012, the Board of Directors declared a quarterly dividend of $0.025 per share payable on February 15, 2013 to shareholders of record on February 1, 2013.
 
Conference Call
 
The Company has scheduled a conference call for Thursday, November 8, 2012 at 11:00 a.m. ET. The dial-in number for the conference call is (800) 291-9234 or (617) 614-3923, passcode #56998213.  A replay of the call will also be available through November 15, 2012 and can be accessed by dialing (888) 286-8010 or (617) 801-6888, conference ID #23693174.  A live webcast of the conference call will be broadcast in the Investor Relations section of the Company’s web site, www.lifetimebrands.com. For those who cannot listen to the live broadcast, an audio replay of the call will also be available on the site.
 
Non-GAAP Financial Measures
 
This earnings release contains non-GAAP financial measures. For purposes of Regulation G, 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. Pursuant to the requirements of Regulation G, 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. Management uses this non-GAAP information as an indicator of business performance.
 
EBITDA is a non-GAAP measure that the Company defines as net income, adjusted to exclude undistributed equity earnings, an extraordinary item, income taxes, interest, depreciation and amortization, restructuring expenses, stock compensation expense, acquisition related expenses, intangible asset impairment and loss on early retirement of debt, as shown in the table below.   Adjusted net income and adjusted diluted income per share are non-GAAP measures that the Company defines as net income, adjusted to exclude intangible asset impairment, loss on early retirement of debt, an expense related to retirement benefit obligations, acquisition related expenses and equity earnings from an entity that discontinued the sale of products in late 2011 and include income tax adjustments to reflect a normalized annual tax rate.
 

 
2

 

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, tabletop and other products used in the home. The Company markets its products under such well-known kitchenware brands as Farberware®, KitchenAid®, CasaMōda®, Cuisinart®, Cuisine de France®, Guy Fieri®, Hoffritz®, Kizmos™, Misto®, Pedrini®, Roshco®, Sabatier®, Savora™ and Vasconia®; respected tabletop brands such as Mikasa®, Pfaltzgraff®, Creative Tops®, Gorham®, International® Silver, Kirk Stieff®, Sasaki®, Towle® Silversmiths, Tuttle®, Wallace®, V&A® and Royal Botanic Gardens Kew®; and home solutions brands, including Elements®, Melannco®, Kamenstein® and Design for Living™.  The Company also provides exclusive private label products to leading retailers worldwide.
 
The Company’s 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



 
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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,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Net sales
  $ 128,050     $ 124,663     $ 332,030     $ 306,807  
                                 
Cost of sales
    83,141       80,424       211,287       195,132  
                                 
Gross margin
    44,909       44,239       120,743       111,675  
                                 
Distribution expenses
    10,536       10,352       31,943       30,598  
Selling, general and administrative expenses
    25,893       23,589       74,935       66,451  
Intangible asset impairment
    1,069       -       1,069       -  
                                 
Income from operations
    7,411       10,298       12,796       14,626  
                                 
Interest expense
    (1,271 )     (1,789 )     (4,644 )     (5,807 )
Loss on early retirement of debt
    (1,015 )     -       (1,363 )     -  
                                 
Income before income taxes and equity in earnings
    5,125       8,509       6,789       8,819  
                                 
Income tax provision
    (1,930 )     (2,089 )     (2,612 )     (2,609 )
Equity in earnings, net of taxes
    695       1,113       1,616       2,437  
                                 
NET INCOME
  $ 3,890     $ 7,533     $ 5,793     $ 8,647  
                                 
BASIC INCOME PER COMMON SHARE
  $ 0.31     $ 0.62     $ 0.46     $ 0.72  
                                 
DILUTED INCOME PER COMMON SHARE
  $ 0.30     $ 0.60     $ 0.45     $ 0.69  
                                 
Cash dividends declared per common share
  $ 0.025     $ -     $ 0.10     $ 0.05  
                                 

 
4

 

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

 
   
September 30,
   
December 31,
 
   
2012
   
2011
 
   
(unaudited)
       
ASSETS
           
CURRENT ASSETS
           
Cash and cash equivalents
  $ 1,749     $ 2,972  
Accounts receivable, less allowances of $3,381 at September 30, 2012
  and $4,602 at December 31, 2011
    91,269       77,749  
Inventory
    128,954       110,337  
Prepaid expenses and other current assets   
    6,052       5,264  
Deferred income taxes
    3,441       2,475  
TOTAL CURRENT ASSETS
    231,465       198,797  
                 
PROPERTY AND EQUIPMENT, net
    32,002       34,324  
INVESTMENTS
    36,228       34,515  
INTANGIBLE ASSETS, net
    44,668       46,937  
OTHER ASSETS
    2,904       4,172  
TOTAL ASSETS
  $ 347,267     $ 318,745  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
CURRENT LIABILITIES
               
Revolving Credit Facility
  $ 37,826     $ 15,000  
Current portion of Senior Secured Term Loan       3,500        -  
Accounts payable
    27,133       18,985  
Accrued expenses
    35,349       33,877  
Income taxes payable
    1,342       2,100  
TOTAL CURRENT LIABILITIES
    105,150       69,962  
                 
DEFERRED RENT & OTHER LONG-TERM LIABILITIES
    16,207       14,598  
DEFERRED INCOME TAXES
    4,821       5,385  
REVOLVING CREDIT FACILITY
    35,838       42,625  
SENIOR SECURED TERM LOAN
    31,500       -  
TERM LOAN
    -       40,000  
                 
STOCKHOLDERS’ EQUITY
               
Preferred stock, $.01 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: 25,000,000; shares
  issued and outstanding: 12,570,899 at September 30, 2012 and
  12,430,893 at December 31, 2011
    126       124  
Paid-in capital
    139,975       137,467  
Retained earnings
    19,013       14,465  
Accumulated other comprehensive loss
    (5,363 )     (5,881 )
TOTAL STOCKHOLDERS’ EQUITY
    153,751       146,175  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 347,267     $ 318,745  
 
 
5

 
 
 
LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
   
Nine Months Ended
 
   
September 30,
 
   
2012
   
2011
 
OPERATING ACTIVITIES
           
      Net income
  $ 5,793     $ 8,647  
        Adjustments to reconcile net income to net cash provided by (used in) operating activities:
         
        Depreciation and amortization
    6,878       6,061  
        Amortization of debt discount
    -       543  
        Deferred rent
    (421 )     (41 )
        Deferred income taxes
    (687 )     573  
        Stock compensation expense
    2,131       2,105  
        Undistributed equity earnings
    (1,201 )     (1,971 )
        Loss on early retirement of debt
    1,363       -  
        Intangible asset impairment
    1,069       -  
Changes in operating assets and liabilities (excluding the effects of business
 acquisitions)
         
        Accounts receivable
    (13,170 )     (23,367 )
        Inventory
    (18,617 )     (23,223 )
        Prepaid expenses, other current assets and other assets
    (883 )     1,040  
        Accounts payable, accrued expenses and other liabilities
    10,642       8,601  
        Income taxes payable
    (758 )     (6,094 )
 NET CASH USED IN OPERATING ACTIVITIES         
    (7,861 )     (27,126 )
                 
INVESTING ACTIVITIES
               
      Purchases of property and equipment
    (3,371 )     (3,366 )
      Net proceeds from sale of property
    15       -  
NET CASH USED IN INVESTING ACTIVITIES
    (3,356 )     (3,366 )
                 
FINANCING ACTIVITIES
               
      Proceeds from Revolving Credit Facility, net of repayments
    16,039       52,645  
      Proceeds from Senior Secured Term Loan
    35,000       -  
      Repayment of Term Loan
    (40,000 )     -  
      Repurchase of 4.75% convertible senior notes
    -       (24,100 )
      Proceeds from exercise of stock options
    380       26  
      Excess tax benefits from exercise of stock options
    -       8  
      Payment of capital lease obligations
    -       (74 )
      Cash dividend paid
    (935 )     (604 )
NET CASH PROVIDED BY FINANCING ACTIVITIES                     
    10,484       27,901  
                 
Effect of foreign exchange on cash
    (490 )     -  
                 
DECREASE IN CASH AND CASH EQUIVALENTS
    (1,223 )     (2,591 )
Cash and cash equivalents at beginning of period
    2,972       3,351  
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 1,749     $ 760  
 
 
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LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)
 
Consolidated EBITDA for the four quarters ended
 
September 30, 2012
 
Three months ended September 30, 2012
  $ 11,568  
Three months ended June 30, 2012
    5,584  
Three months ended March 31, 2012
    6,222  
Three months ended December 31, 2011
    14,342  
Total for the four quarters
  $ 37,716  
         
         
Consolidated EBITDA for the four quarters ended
 
September 30, 2011
 
Three months ended September 30, 2011
  $ 13,524  
Three months ended June 30, 2011
    7,512  
Three months ended March 31, 2011
    2,720  
Three months ended December 31, 2010
    17,544  
Total for the four quarters
  $ 41,300  
 
 
Reconciliation of GAAP to Non-GAAP Operating Results

Consolidated EBITDA:
 
   
Three Months Ended
 
   
September 30,
2012
 
June 30,
2012
   
March 31,
2012
   
December 31,
2011
Net income as reported
  $ 3,890     $ 559     $ 1,344     $ 5,419  
Subtract out:
                               
Undistributed equity earnings
    (695 )     (108 )     (398 )     (925 )
Add back:
                               
Income tax provision (benefit)
    1,930       94       588       3,513  
Interest expense
    1,271       1,675       1,698       1,951  
Loss on early retirement of debt
    1,015       348       -       -  
Intangible asset impairment
    1,069        -        -        -  
Depreciation and amortization
    2,409       2,262       2,207       2,336  
Stock compensation expense
    679       754       698       690  
Permitted acquisition related expenses
    -       -       85       1,358  
Consolidated EBITDA
  $ 11,568     $ 5,584     $ 6,222     $ 14,342  
 
 
 
7

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

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

Consolidated EBITDA:
 
   
Three Months Ended
 
   
September 30,
2011
 
June 30,
2011
   
March 31,
2011
   
December 31,
2010
Net income as reported
  $ 7,533     $ 2,063     $ (949 )   $ 13,928  
Subtract out:
                               
Undistributed equity earnings
    (1,113 )     (393 )     (465 )     (733 )
Extraordinary item, net of taxes
    -       -       -       (2,477 )
Add back:
                               
Income tax provision (benefit)
    2,089       1,108       (588 )     1,600  
Interest expense
    1,789       2,039       1,979       2,188  
Depreciation and amortization
    2,046       2,020       1,995       2,292  
Stock compensation expense
    682       675       748       746  
Loss on early retirement of debt
    498       -       -       -  
Consolidated EBITDA
  $ 13,524     $ 7,512     $ 2,720     $ 17,544  
 
 
Adjusted Net Income and Adjusted Diluted Income Per Share:
 
   
Three Months Ended
   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Net income as reported
  $ 3,890     $ 7,533     $ 5,793     $ 8,647  
   Adjustments:
                               
Intangible asset impairment, net of tax
    645       -       645       -  
Loss on early retirement of debt, net of tax
    612       -       822       -  
Retirement benefit obligation expense, net of tax
    -       -       268       -  
Acquisition related expenses, net of tax
    -       311       85       306  
Equity in earnings of World Alliance
  Enterprises Limited
    -       (133 )     -       (448 )
Normalized tax provision on reported income
    -       (1,115 )     -       (784 )
Adjusted net income
  $ 5,147     $ 6,596     $ 7,613     $ 7,721  
Adjusted diluted income per share
  $ 0.40     $ 0.52     $ 0.60     $ 0.62  
 
 
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