Lifetime Brands, Inc. Reports Fourth Quarter 2018 Financial Results

Declares Regular Quarterly Dividend

GARDEN CITY, N.Y., March 14, 2019 (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 fourth quarter and year ended December 31, 2018.

Fourth Quarter Financial Highlights:

Consolidated net sales were $228.3 million in the quarter ended December 31, 2018; an increase of $45.5 million, or 24.9%, as compared to consolidated net sales of $182.8 million for the corresponding period in 2017. In constant currency, which excludes the impact of foreign currency fluctuations, consolidated net sales increased $46.4 million, or 25.5%, as compared to consolidated net sales in the corresponding period in 2017.

Gross margin was $84.8 million, or 37.2%, as compared to $71.2 million, or 39.0%, for the corresponding period in 2017.

Income from operations was $22.9 million, as compared to $10.9 million in the prior year’s quarter.

Net income was $10.0 million, or $0.49 per diluted share, in the quarter ended December 31, 2018, as compared to net income of $1.3 million, or $0.08 per diluted share, in the corresponding period in 2017.

Adjusted net income was $11.2 million, or $0.55 per diluted share, in the quarter ended December 31, 2018, as compared to adjusted net income of $7.1 million, or $0.47 per diluted share, in the corresponding period in 2017.

Full Year Financial Highlights:

Consolidated net sales were $704.5 million in the year ended December 31, 2018; an increase of $125.0 million, or 21.6%, as compared to consolidated net sales of $579.5 million for the corresponding period in 2017. In constant currency, which excludes the impact of foreign currency fluctuations, consolidated net sales increased $122.3 million, or 21.0%, as compared to consolidated net sales in the corresponding period in 2017.

Gross margin was $255.8 million, or 36.3%, in the year ended December 31, 2018 as compared to $215.2 million, or 37.1%, for the corresponding period in 2017.

Income from operations was $18.6 million, as compared to $15.2 million in the prior year.

Net loss was $1.7 million, or $0.09 per diluted share, in the year ended December 31, 2018, as compared to net income of $2.2 million, or $0.14 per diluted share, in the corresponding period in 2017.

Adjusted net income was $5.5 million, or $0.28 per diluted share, in the year ended December 31, 2018, as compared to adjusted net income of $10.6 million, or $0.71 per diluted share, in the corresponding period in 2017.

Consolidated adjusted EBITDA was $65.5 million in the year ended December 31, 2018. After giving effect to the non-recurring charge limitation permitted under our debt agreements, consolidated adjusted EBITDA was $64.9 million. A table which reconciles this non-GAAP measure to net income (loss), as reported, is included below.

Robert Kay, Lifetime's Chief Executive Officer, commented, “Our fourth quarter performance is not what we expect to deliver to our shareholders. We believe these results were in part due to significant macroeconomic events, including European softness primarily due to Brexit, and the inconsistent implementation of a new U.S. tariff program that prevented us from passing along timely price increases. Additionally, certain of our North American distribution channels delivered disappointing sales due to stocking levels and inventory management decisions by customers, including our largest e-commerce customer. While these events had an adverse impact on our results, we are optimistic that they are predominantly singular in nature.”

Mr. Kay continued, “Importantly and encouragingly, the early results we are seeing in 2019 are positive, reflecting both a normalization of customer ordering behavior and promising performance of some of our newer products. We are confident that the strategic accomplishments achieved in 2018 - which include the completion of the Filament integration, a reorganization of our European operations, and meaningful cost reduction across the organization - will be critical to improving Lifetime Brands’ results and profitability as we move forward.”

Dividend

On Tuesday, March 12, 2019, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on May 15, 2019 to shareholders of record on May 1, 2019.

Conference Call

The Company has scheduled a conference call for Thursday, March 14, 2019 at 11:00 a.m. The dial-in number for the conference call is (866) 610-1072 or (973) 935-2840, passcode #6882627. A live webcast of the conference call will be accessible through https://event.on24.com/wcc/r/1953891-1/284F9F3F3909B4659A3B83565589FAB9. 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 a 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 these non-GAAP financial measurers as indicators 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, results, and profitability and all guidance related thereto, as well as our future plans and intentions regarding the Company and its consolidated subsidiaries. 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; customer ordering behavior; the performance of our newer products; 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; uncertainty regarding the U.K.’s exit from the European Union (Brexit); 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 ability to maintain 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

or
Joele Frank, Wilkinson Brimmer Katcher
Ed Trissel / Andrew Squire / Sophie Throsby
212-355-4449

LIFETIME BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share data)
	Three Months Ended December 31,								Year Ended December 31,
		2018				2017				2018				2017
Net sales	$	228,274			$	182,770			$	704,542			$	579,476
Cost of sales		143,467				111,539				448,785				364,319
Gross margin		84,807				71,231				255,757				215,157
Distribution expenses		20,340				18,540				69,716				58,050
Selling, general and administrative expenses		40,603				41,331				162,933				140,903
Impairment of goodwill		-				-				2,205				-
Restructuring expenses		971				498				2,324				1,024
Income from operations		22,893				10,862				18,579				15,180
Interest expense		(5,591	)			(1,177	)			(18,004	)			(4,291	)
Loss on early retirement of debt		-				-				(66	)			(110	)
Income before income taxes and equity in earnings		17,302				9,685				509				10,779
Income tax provision		(7,558	)			(8,169	)			(2,889	)			(9,032	)
Equity in earnings (losses), net of taxes		243				(265	)			660				407
NET INCOME (LOSS)	$	9,987			$	1,251			$	(1,720	)		$	2,154
Weighted-average shares outstanding- basic		20,376				14,592				19,452				14,505
BASIC INCOME (LOSS) PER COMMON SHARE	$	0.49			$	0.09			$	(0.09	)		$	0.15
Weighted-average shares outstanding- diluted		20,454				14,960				19,452				14,955
DILUTED INCOME (LOSS) PER COMMON SHARE	$	0.49			$	0.08			$	(0.09	)		$	0.14

LIFETIME BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands - except share data)
	December 31,
		2018				2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	7,647			$	7,600
Accounts receivable, less allowances of $7,855 at December 31, 2018 and $6,190 at December 31, 2017		125,292				108,033
Inventory		173,601				132,436
Prepaid expenses and other current assets		10,822				10,354
Income taxes receivable		1,442				-
TOTAL CURRENT ASSETS		318,804				258,423
PROPERTY AND EQUIPMENT, net		25,762				23,065
INVESTMENTS		22,582				23,978
INTANGIBLE ASSETS, net		338,847				88,479
DEFERRED INCOME TAXES		733				5,826
OTHER ASSETS		1,844				1,750
TOTAL ASSETS	$	708,572			$	401,521
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturity of term loan	$	1,253			$	-
Short term loan		-				69
Accounts payable		38,167				25,461
Accrued expenses		45,456				44,121
Income taxes payable		-				1,864
TOTAL CURRENT LIABILITIES		84,876				71,515
DEFERRED RENT & OTHER LONG-TERM LIABILITIES		23,339				20,249
DEFERRED INCOME TAXES		15,141				4,423
INCOME TAXES PAYABLE, LONG-TERM		949				311
REVOLVING CREDIT FACILITY		42,080				94,744
TERM LOAN		262,694				-
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 December 31, 2018 and 2017; shares issued and outstanding: 20,764,143 at December 31, 2018 and 14,902,527 at December 31, 2017		208				149
Paid-in capital		258,637				178,909
Retained earnings		55,264				60,546
Accumulated other comprehensive loss		(34,616	)			(29,325	)
TOTAL STOCKHOLDERS’ EQUITY		279,493				210,279
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	708,572			$	401,521

LIFETIME BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
	Year ended December 31,
		2018				2017
OPERATING ACTIVITIES
Net (loss) income	$	(1,720	)		$	2,154
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		23,329				14,189
Impairment of goodwill		2,205				-
Amortization of financing costs		1,543				519
Deferred rent		57				(642	)
Deferred income taxes		2,086				1,030
Stock compensation expense		4,135				3,390
Undistributed equity earnings		(545	)			(379	)
Loss on early retirement of debt		66				110
Contingent consideration fair value adjustment		(1,774	)			-
Changes in operating assets and liabilities (excluding the effects of business acquisitions)
Accounts receivable		8,020				1,481
Inventory		(13,819	)			10,818
Prepaid expenses, other current assets and other assets		540				(951	)
Accounts payable, accrued expenses and other liabilities		(3,153	)			(9,778	)
Income taxes receivable		(1,442	)			-
Income taxes payable		(353	)			(4,935	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		19,175				17,006
INVESTING ACTIVITIES
Purchases of property and equipment		(7,902	)			(6,311	)
Filament acquisition, net of cash acquired		(216,527	)			-
Acquisitions, net of cash acquired		-				(9,072	)
Net proceeds from sale of property		249				15
NET CASH USED IN INVESTING ACTIVITIES		(224,180	)			(15,368	)
FINANCING ACTIVITIES
Proceeds from revolving credit facility		268,912				237,658
Repayments of revolving credit facility		(320,767	)			(229,696	)
Proceeds from Term Loan		275,000				-
Repayments of Term Loan		(2,063	)			-
Repayments of Credit Agreement term loan		-				(9,500	)
Proceeds from short term loan		216				187
Repayments of short term loan		(278	)			(239	)
Payment of financing costs		(11,171	)			(31	)
Payment of equity issuance costs		(936	)			-
Cash dividends paid		(3,273	)			(2,475	)
Payment of capital lease obligations		(77	)			(94	)
Proceeds from the exercise of stock options		286				2,537
Payments of tax withholding for stock based compensation		(561	)			(644	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		205,288				(2,297	)
Effect of foreign exchange on cash		(236	)			376
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		47				(283	)
Cash and cash equivalents at beginning of year		7,600				7,883
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	7,647			$	7,600

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)
Reconciliation of GAAP to Non-GAAP Operating Results
Consolidated adjusted EBITDA for the year ended December 31, 2018:
		Three Months Ended																Year Ended
		March 31, 2018				June 30, 2018				September 30, 2018				December 31, 2018				December 31, 2018
		(in thousands)
Net (loss) income as reported		$	(11,598	)		$	(6,057	)			5,948			$	9,987			$	(1,720	)
Subtract out:
Undistributed equity (earnings) losses, net			(77	)			(155	)			(185	)			(128	)			(545	)
Add back:
Income tax provision (benefit)			(3,810	)			(1,765	)			906				7,558				2,889
Interest expense			2,103				4,676				5,634				5,591				18,004
Loss on early retirement of debt			66				-				-				-				66
Depreciation and amortization			4,309				6,422				6,076				6,522				23,329
Impairment of goodwill			-				-				2,205				-				2,205
Stock compensation expense			838				921				1,268				1,108				4,135
Contingent consideration fair value adjustment			-				-				-				(1,774	)			(1,774	)
Unrealized loss (gain) on foreign currency contracts			393				(2,112	)			(190	)			(33	)			(1,942	)
Other permitted non-cash charges			287				916				307				-				1,510
Acquisition related expenses			809				391				43				523				1,766
Restructuring expenses			406				395				552				971				2,324
Integration charges			35				110				103				433				681
Warehouse relocation			2,384				168				55				118				2,725
Pro forma Filament adjustment			3,326				-				-				-				3,326
Projected synergies			-				-				-				-				8,546
Consolidated adjusted EBITDA, before limitation		$	(529	)		$	3,910			$	22,722			$	30,876			$	65,525
Permitted non-recurring charge limitation																			(605	)
Consolidated adjusted EBITDA																		$	64,920
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 tax provision (benefit), 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 warehouse relocation costs, transition expenses and restructuring expenses, and a non-cash charges such as a fair value adjustment on contingent consideration and 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 December 31, 2018 or expected to be taken as of December 31, 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 and adjusted diluted income per common share:
		Three Months Ended December 31,								Year Ended December 31,
			2018				2017				2018				2017
		(in thousands)
Net income (loss), as reported		$	9,987			$	1,251			$	(1,720	)		$	2,154
Adjustments:
Acquisition related expenses			523				2,424				1,766				2,616
Restructuring expenses			971				498				2,324				1,024
Severance expenses			-				166				-				321
Integration charges			433				-				681				-
Warehouse relocation			118				667				2,725				667
Loss on early retirement of debt			-				-				66				110
Other permitted non-cash charges			-				-				1,510				-
Unrealized loss (gain) on foreign currency contracts			(33	)			169				(1,942	)			2,817
Impairment of goodwill			-				-				2,205				-
Contingent consideration fair value adjustment			(1,774	)			-				(1,774	)			-
Deferred tax for foreign currency translation for Grupo Vasconia			275				(1	)			-				(239	)
Transition tax on non-U.S. subsidiaries' earnings			675				338				675				338
Re-measurement of U.S. deferred tax assets and liabilities			-				2,981				-				2,981
Income tax effect on adjustments			69				(1,432	)			(1,009	)			(2,224	)
Adjusted net income		$	11,244			$	7,061			$	5,507			$	10,565
Adjusted diluted income per common share		$	0.55			$	0.47			$	0.28			$	0.71
Adjusted net income and adjusted diluted income per common share in the three months and year ended December 31, 2018 excludes restructuring expenses, acquisition related expenses, loss on early retirement of debt, integration charges, warehouse relocation costs, other permitted non-cash charges, the fair value adjustment on contingent consideration, the unrealized loss (gain) on foreign currency contracts, impairment of goodwill and deferred tax (benefit) expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation gains through other comprehensive income (loss). Adjusted net income and adjusted diluted income per common share in the three months and year ended December 31, 2018 also excludes the impact of the transition tax on non-U.S. subsidiaries’ earnings. The income tax effect on adjustments reflects the statutory tax rates applied on the adjustments.
Adjusted net income and adjusted diluted income per common share in the three months and year ended December 31, 2017 excludes restructuring expenses, acquisition related expenses, loss on early retirement of debt, non-restructuring severance expense, warehouse relocation costs, the unrealized loss on foreign currency contracts and deferred tax (benefit) expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation gains through other comprehensive income (loss). Adjusted net income and adjusted diluted income per common share in the three months and year ended December 31, 2017 also excludes the impact of the transition tax on non-U.S. subsidiaries’ earnings and re-measurement of U.S. deferred tax assets and liabilities included in the income tax provision as a result of the U.S. tax reform. The income tax effect on adjustments reflects the statutory tax rates applied on the adjustments.

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands- except per share data)
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
	December 31,										December 31,														Increase (Decrease)
Net sales	2018			2017			Increase (Decrease)				2018			2017			Increase (Decrease)				Currency Impact				Excluding Currency				Including Currency				Currency Impact
U.S.	$	199,094		$	150,936		$	48,158			$	199,094		$	150,859		$	48,235			$	(77	)		32.0		%		31.9		%		(0.1	)	%
International		29,180			31,834			(2,654	)			29,180			31,020			(1,840	)			(814	)		(5.9	)	%		(8.3	)	%		(2.4	)	%
Total net sales	$	228,274		$	182,770		$	45,504			$	228,274		$	181,879		$	46,395			$	(891	)		25.5		%		24.9		%		(0.6	)	%
	As Reported										Constant Currency (1)
	Year Ended										Year Ended														Year-Over-Year
	December 31,										December 31,														Increase (Decrease)
Net sales	2018			2017			Increase (Decrease)				2018			2017			Increase (Decrease)				Currency Impact				Excluding Currency				Including Currency				Currency Impact
U.S.	$	611,973		$	481,719		$	130,254			$	611,973		$	481,699		$	130,274			$	(20	)		27.0		%		27.0		%		(0.0	)	%
International		92,569			97,757			(5,188	)			92,569			100,547			(7,978	)			2,790			(7.9	)	%		(5.3	)	%		2.6		%
Total net sales	$	704,542		$	579,476		$	125,066			$	704,542		$	582,246		$	122,296			$	2,770			21.0		%		21.6		%		0.6		%
(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 is intended to exclude the impact of currency.

Source: Lifetime Brands, Inc.