Lifetime Brands, Inc. Reports Second Quarter Financial Results

August 6, 2015 at 7:00 AM EDT

Consolidated Net Sales Increase 7.2% in Constant Currency

Consolidated EBITDA Increases to $4.4 Million from $1.5 Million

Board of Directors Increases Annual Cash Dividend by 13.3% to $0.17 per Share

GARDEN CITY, N.Y.--(BUSINESS WIRE)--Aug. 6, 2015-- 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, 2015.

Second Quarter Financial Highlights:

Consolidated net sales were $120.9 million in the quarter ended June 30, 2015; an increase of $5.6 million, or 4.9%, as compared to consolidated net sales of $115.3 million in the corresponding period in 2014. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased 7.2%, as compared to consolidated net sales in the corresponding period in 2014.
Gross margin was $43.5 million, or 36.0%, in the quarter ended June 30, 2015, as compared to $40.9 million, or 35.4%, for the corresponding period in 2014.
Loss from operations was $1.0 million in the quarter ended June 30, 2015, as compared to a loss of $3.2 million in the corresponding period in 2014.
Net loss was $1.7 million, or $0.12 per diluted share, in the quarter ended June 30, 2015, as compared to a loss of $3.2 million, or $0.24 per diluted share, in the corresponding period in 2014.
Adjusted net loss was $0.6 million, or $0.04 per diluted share, in the quarter ended June 30, 2015, as compared to a loss of $3.1 million, or $0.23 per diluted share, in the corresponding period in 2014.
Consolidated EBITDA was $4.4 million, in the quarter ended June 30, 2015, as compared to $1.5 million for the corresponding 2014 period.
Equity in earnings, net of taxes, was $577,000, excluding the impact of a $575,000 deferred tax expense related to foreign currency translation, in the quarter ended June 30, 2015, as compared to $41,000 in the corresponding 2014 period.

Six Months Financial Highlights:

Consolidated net sales were $238.6 million in the six months ended June 30, 2015; an increase of $4.9 million, or 2.1%, as compared to net sales of $233.7 million for the corresponding period in 2014. In constant currency, consolidated net sales increased 4.4%.
Gross margin was $88.4 million, or 37.1%, in the six months ended June 30, 2015 as compared to $85.2 million, or 36.4%, for the corresponding period in 2014.
Loss from operations was $3.2 million in the six months ended June 30, 2015, as compared to a loss of $5.4 million, for the corresponding period in 2014.
Net loss was $3.8 million, or $0.28 per diluted share, in the six months ended June 30, 2015, as compared to a loss of $6.1 million, or $0.46 per diluted share, in the 2014 period.
Adjusted net loss was $2.5 million, or $0.18 per diluted share, in the six months ended June 30, 2015, as compared to a loss of $4.8 million, or $0.36 per diluted share, in the 2014 period.
Consolidated EBITDA was $6.9 million in the six months ended June 30, 2015, as compared to $5.2 million for the corresponding 2014 period.
Equity in earnings, net of taxes, was $0.3 million in the six months ended June 30, 2015 as compared to equity in losses, net of taxes, of $0.2 million in the corresponding 2014 period.

Jeffrey Siegel, Lifetime's Chairman and Chief Executive Officer, commented,

“Lifetime’s financial results for the quarter were in line with our expectations. Our growth in sales and improved operating performance is attributable to our increased emphasis on product innovation and our continuing pursuit of productivity gains.

“Net sales for the U.S. Wholesale segment were $94.6 million, an increase of $9.5 million, or 11.2%, as compared to net sales of $85.1 million for the corresponding period in 2014. Net sales for the segment’s Kitchenware and Tableware product categories increased, offset by a decrease in net sales of the segment’s Home Solutions product category.

“Net sales for the International segment were $22.5 million, a decrease of $4.1 million, as compared to net sales of $26.6 million for the corresponding period in 2014. In local currencies, net sales for the segment decreased approximately 4%.

"Our retailer partners continue to foresee a strong Holiday selling season, which is reflected in strong bookings and placements for products to be delivered later this year. As a result, we continue to have a high level of confidence in our ability to achieve our consolidated full year 2015 financial goals. In constant currency, we expect to achieve near 6% net sales growth for the year, the high end of our guidance; however, we expect the strong U.S. dollar to continue to dampen foreign operating results during the second half of the year. Hence, on a reported basis, we currently forecast full year 2015 net sales to increase by 3% to 6%, reaffirming the guidance we provided on our first quarter conference call. Also, we continue to expect our operating margin to be in the range of 4.5 to 5.5%.

“Consistent with our expectations for the full year, on August 4, 2015, our Board of Directors declared a quarterly cash dividend of $0.0425 per share, payable on November 13, 2015 to shareholders of record on October 30, 2015, representing an increase of 13.3%.”

Conference Call

The Company has scheduled a conference call for Thursday, August 6, 2015 at 11:00 a.m. ET. The dial-in number for the conference call is (800) 510-0146 or (617) 614-3449 passcode #96133808. A replay of the call will also be available through Friday, August 7, 2015 and can be accessed by dialing (888) 286-8010 or (617) 801-6888, conference ID #18155748. 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. A non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets, or statements of cash flows of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. As required by SEC rules, the Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. These non-GAAP measures are provided because management of the Company uses these financial measures in evaluating the Company's on-going financial results and trends, and management believes that exclusion of certain items allows for more accurate comparison of the Company’s operating performance. Management uses this non-GAAP information as an indicator of business performance. These non-GAAP measures should be viewed as a supplement to, and not a substitute for, GAAP measures of performance.

Forward-Looking Statements

In this press release, the use of the words “believe,” "could," "expect," "may," "positioned," "project," "projected," "should," "will," "would" or similar expressions is intended to identify forward-looking statements that represent the Company’s current judgment about possible future events. The Company believes these judgments are reasonable, but these statements are not guarantees of any events or financial results, and actual results may differ materially due to a variety of important factors. Such factors might include, among others, the Company’s ability to comply with the requirements of its credit agreements; the availability of funding under such credit agreements; the Company’s ability to maintain adequate liquidity and financing sources and an appropriate level of debt; changes in general economic conditions which could affect customer payment practices or consumer spending; the impact of changes in general economic conditions on the Company’s customers; changes in demand for the Company’s products; shortages of and price volatility for certain commodities; significant changes in the competitive environment and the effect of competition on the Company’s markets, including on the Company’s pricing policies, financing sources and an appropriate level of debt.

Lifetime Brands, Inc.

Lifetime Brands is a leading global provider of kitchenware, tableware and other products used in the home. The Company markets its products under such well-known kitchenware brands as Farberware^®, KitchenAid^®, Cuisine de France^®, Fred^®& Friends, Guy Fieri^®, Kitchen Craft^®, Kizmos^™, La Cafetière^®, Misto^®, Mossy Oak^®, Pedrini^®, Sabatier^®, Savora^™ and Vasconia^®; respected tableware 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 Kamenstein^®, Bombay^®, BUILT^®, Debbie Meyer^®and Design for Living^™. The Company also provides exclusive private label products to leading retailers worldwide.

The Company’s corporate website is www.lifetimebrands.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,
		2015			2014			2015			2014

Net sales	$	120,935		$	115,321		$	238,592		$	233,732

Cost of sales		77,424			74,469			150,173			148,548

Gross margin		43,511			40,852			88,419			85,184

Distribution expenses		12,547			12,460			26,030			24,806
Selling, general and administrative expenses		31,951			31,424			65,547			65,607
Restructuring expenses		-			125			-			125

Loss from operations		(987	)		(3,157	)		(3,158	)		(5,354	)

Interest expense		(1,459	)		(1,672	)		(2,890	)		(3,062	)
Financing expense		-			-			(154	)		-
Loss on early retirement of debt		-			-			-			(319	)

Loss before income taxes and equity in earnings		(2,446	)		(4,829	)		(6,202	)		(8,735	)

Income tax benefit		717			1,586			2,080			2,771
Equity in earnings (losses), net of taxes		2			41			290			(167	)

NET LOSS	$	(1,727	)	$	(3,202	)	$	(3,832	)	$	(6,131	)

Weighted-average shares outstanding - basic		13,845			13,483			13,779			13,379

BASIC LOSS PER COMMON SHARE	$	(0.12	)	$	(0.24	)	$	(0.28	)	$	(0.46	)

Weighted-average shares outstanding - diluted		13,845			13,483			13,779			13,379

DILUTED LOSS PER COMMON SHARE	$	(0.12	)	$	(0.24	)	$	(0.28	)	$	(0.46	)

Cash dividends declared per common share	$	0.0375		$	0.0375		$	0.075		$	0.075


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

				June 30,			December 31,
				2015			2014
				(unaudited)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents			$	4,956		$	5,068
	Accounts receivable, less allowances of $6,313 at June 30, 2015 and $6,663 at December 31, 2014				77,530			107,211
	Inventory				154,244			137,924
	Prepaid expenses and other current assets				12,719			7,914
	Deferred income taxes				171			-
		TOTAL CURRENT ASSETS			249,620			258,117

PROPERTY AND EQUIPMENT, net					25,999			26,801
INVESTMENTS					26,697			28,155
INTANGIBLE ASSETS, net					100,104			103,597
OTHER ASSETS					2,947			4,732
			TOTAL ASSETS	$	405,367		$	421,402

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Current maturity of Credit Agreement Term Loan			$	20,000		$	10,000
	Short term loan				115			765
	Accounts payable				32,691			28,694
	Accrued expenses				31,174			36,961
	Deferred income taxes				3,219			2,293
	Income taxes payable				-			5,156
		TOTAL CURRENT LIABILITIES			87,199			83,869

DEFERRED RENT & OTHER LONG-TERM LIABILITIES					19,812			20,160
DEFERRED INCOME TAXES					1,474			1,485
REVOLVING CREDIT FACILITY					91,308			92,655
CREDIT AGREEMENT TERM LOAN					20,000			35,000

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: 14,000,171 at June 30, 2015 and 13,712,081 at December 31, 2014				140			137
	Paid-in capital				164,034			160,315
	Retained earnings				32,826			37,703
	Accumulated other comprehensive loss				(11,426	)		(9,922	)
		TOTAL STOCKHOLDERS’ EQUITY			185,574			188,233
			TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	405,367		$	421,402


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

				Six Months Ended
				June 30,
				2015			2014
OPERATING ACTIVITIES
	Net loss			$	(3,832	)	$	(6,131	)
	Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
		Provision for doubtful accounts			191			156
		Depreciation and amortization			7,193			7,329
		Amortization of financing costs			313			311
		Deferred rent			503			(530	)
		Stock compensation expense			1,523			1,439
		Undistributed equity in (earnings) losses, net			(290	)		167
		Loss on early retirement of debt			-			319
	Changes in operating assets and liabilities (excluding the effects of business acquisitions)
		Accounts receivable			29,561			33,180
		Inventory			(16,011	)		(18,960	)
		Prepaid expenses, other current assets and other assets			(2,351	)		(4,050	)
		Accounts payable, accrued expenses and other liabilities			(663	)		(17,356	)
		Income taxes payable			(5,513	)		(3,277	)
			NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		10,624			(7,403	)

INVESTING ACTIVITIES
	Purchases of property and equipment				(2,881	)		(2,713	)
	Kitchen Craft acquisition, net of cash acquired				-			(61,676	)
	Other acquisitions, net of cash acquired				-			(5,280	)
			NET CASH USED IN INVESTING ACTIVITIES		(2,881	)		(69,669	)

FINANCING ACTIVITIES
	Proceeds from Revolving Credit Facility				129,229			138,869
	Repayments of Revolving Credit Facility				(130,571	)		(90,853	)
	Repayments of Senior Secured Term Loan				-			(20,625	)
	Proceeds from Credit Agreement Term Loan				-			50,000
	Repayment of Credit Agreement Term Loan				(5,000	)		-
	Proceeds from Short Term Loan				37			868
	Payments on Short Term Loan				(688	)		-
	Payment of financing costs				-			(1,375	)
	Proceeds from exercise of stock options				541			1,460
	Cash dividends paid				(1,033	)		(1,007	)
			NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(7,485	)		77,337

Effect of foreign exchange on cash					(370	)		17

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(112	)		282
Cash and cash equivalents at beginning of period					5,068			4,947
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	4,956		$	5,229


LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)

		Consolidated EBITDA for the Four Quarters Ended June 30, 2015
Three months ended June 30, 2015		$	4,388
Three months ended March 31, 2015			2,519
Three months ended December 31, 2014			20,918
Three months ended September 30, 2014			16,470
	Total for the four quarters	$	44,295

		Consolidated EBITDA for the Four Quarters Ended June 30, 2014 ⁽¹⁾
Three months ended June 30, 2014		$	1,494
Three months ended March 31, 2014			3,660
Three months ended December 31, 2013			21,011
Three months ended September 30, 2013			15,067
	Total for the four quarters	$	41,232

⁽¹⁾	Consolidated EBITDA for the four quarters ended June 30, 2014 excludes the effect of a pro forma acquisition adjustment of $4.5 million.


Reconciliation of GAAP to Non-GAAP Operating Results

Consolidated EBITDA:

			Three Months Ended
			June 30, 2015			March 31, 2015			December 31, 2014			September 30, 2014
Net income (loss) as reported			$	(1,727	)	$	(2,105	)	$	9,261		$	(1,586	)
	Subtract out:
		Undistributed equity in (earnings) losses, net		(2	)		(288	)		1,364			5,193
	Add back:
		Income tax provision (benefit)		(717	)		(1,363	)		5,473			3,123
		Interest expense		1,459			1,431			1,658			1,698
		Loss on early retirement of debt		-			-			27			-
		Financing expense		-			154			758			-
		Intangible asset impairment		-			-			-			3,384
		Depreciation and amortization		3,638			3,555			3,572			3,299
		Stock compensation expense		773			750			2,360			694
		Contingent consideration		1,545			147			(4,115	)		665
		Permitted acquisition related expenses, net of recovery		(581	)		238			560			-
Consolidated EBITDA			$	4,388		$	2,519		$	20,918		$	16,470



LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)

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

Consolidated EBITDA:

			Three Months Ended
			June 30, 2014			March 31, 2014			December 31, 2013			September 30, 2013
Net income (loss) as reported			$	(3,202	)	$	(2,929	)	$	9,388		$	1,093
	Subtract out:
		Undistributed equity in (earnings) losses, net		(41	)		208			(332	)		5,452
	Add back:
		Income tax provision (benefit)		(1,586	)		(1,185	)		6,182			3,869
		Interest expense		1,672			1,390			1,256			1,280
		Loss on early retirement of debt		-			319			102			-
		Depreciation and amortization		3,716			3,613			2,708			2,517
		Stock compensation expense		713			726			750			738
		Permitted acquisition related expenses		97			1,518			957			39
		Restructuring expenses		125			-			-			79
Consolidated EBITDA			$	1,494		$	3,660		$	21,011		$	15,067

Consolidated EBITDA is a non-GAAP measure that the Company defines as net income (loss), adjusted to exclude undistributed equity in earnings (losses), income taxes, interest, losses on early retirement of debt, depreciation and amortization, stock compensation expense, intangible asset impairment, contingent consideration, certain acquisition related expenses and restructuring expenses, as shown in the tables above.



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,						June 30,
		2015			2014			2015			2014

Net loss as reported		$	(1,727	)	$	(3,202	)	$	(3,832	)	$	(6,131	)
Adjustments:
	Contingent consideration		1,545			-			1,545			-
	Acquisition related expenses (recoveries), net		(649	)		97			(411	)		1,615
	Financing expenses		-			-			154			-
	Loss on early retirement of debt		-			-			-			319
	Restructuring expenses		-			125			-			125
	Deferred tax for foreign currency translation for Grupo Vasconia		575			-			575			-
	Income tax effect on adjustments		(358	)		(79	)		(515	)		(736	)
Adjusted net loss		$	(614	)	$	(3,059	)	$	(2,484	)	$	(4,808	)
Adjusted diluted loss per common share		$	(0.04	)	$	(0.23	)	$	(0.18	)	$	(0.36	)

Adjusted net loss in the three and six months ended June 30, 2015 excludes the fair value adjustment of certain contingent consideration, acquisition related expenses, the recovery of acquisition related expenses for an acquisition not completed, financing expenses and deferred tax expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation losses through other comprehensive income. Adjusted net loss in the three and six months ended June 30, 2014 excludes certain acquisition related expenses, the loss on retirement of debt and restructuring expenses.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150806005353/en/

Source: Lifetime Brands, Inc.

Lifetime Brands, Inc.
Laurence Winoker, 516-203-3590
Chief Financial Officer
investor.relations@lifetimebrands.com
or
Lippert/Heilshorn & Assoc.
Harriet Fried, 212-838-3777
SVP
hfried@lhai.com

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