Lifetime Brands, Inc. Reports Third Quarter Financial Results

Company Reports Record Third Quarter Revenues, Net Income Increased 26% over Third Quarter 2015 and Record Third Quarter EBITDA

Declares Regular Quarterly Dividend

GARDEN CITY, N.Y., Nov. 08, 2016 (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, 2016.

Third Quarter Financial Highlights:

Consolidated net sales were $170.1 million, as compared to consolidated net sales of $163.2 million in the corresponding period in 2015. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased 6.4%, as compared to consolidated net sales in the corresponding period in 2015.

Gross margin was $58.3 million, or 34.3%, as compared to $57.0 million, or 34.9%, for the corresponding period in 2015.

Income from operations was $10.8 million, as compared to $9.8 million for the corresponding period in 2015.

Net income was $6.5 million, or $0.44 per diluted share, as compared to net income of $5.1 million, or $0.36 per diluted share, in the corresponding period in 2015.  

Adjusted net income was $7.5 million, or $0.51 per diluted share, as compared to adjusted net income of $5.9 million, or $0.41 per diluted share, in the corresponding period in 2015.

Consolidated EBITDA was $16.7 million, as compared to $14.1 million for the corresponding 2015 period.

Equity in losses, net of taxes, was $138,000, as compared to equity in losses, net of taxes, of $0.5 million in the corresponding 2015 period.

Nine Months Financial Highlights:

Consolidated net sales were $399.1 million, as compared to consolidated net sales of $401.8 million for the corresponding period in 2015.  In constant currency, consolidated net sales increased 0.8%.

Gross margin was $141.9 million, or 35.5%, as compared to $145.4 million, or 36.2%, for the corresponding period in 2015.

Income from operations was $5.3 million, as compared to $6.6 million, for the corresponding period in 2015.

Net income was $1.0 million, or $0.07 per diluted share, as compared to net income of $1.3 million, or $0.09 per diluted share, in the 2015 period. 

Adjusted net income was $4.2 million, or $0.29 per diluted share, as compared to $3.4 million, or $0.24 per diluted share, in the 2015 period. 

Consolidated EBITDA was $22.1 million, as compared to $21.0 million for the corresponding 2015 period.

Equity in losses, net of taxes, was $0.3 million, as compared to equity in losses, net of taxes, of $0.2 million in the corresponding 2015 period.

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

“For the three months ended September 30, 2016, net income increased 26% over the three months ended September 30, 2015 and Lifetime achieved record revenue, record adjusted net income and record EBITDA, demonstrating the Company’s ability to deliver organic growth and solid financial results in the face of an uncertain economic climate in the United States and despite unfavorable exchange rate fluctuations that affected the results of our U.K. subsidiaries and our partner companies in Canada and Mexico.

“In September, we completed the acquisition of the Amco Houseworks® and Swing-A-Way® kitchenware and the Chicago™ Metallic bakeware brands. In early October, we acquired the Copco® lines of thermal and hydration beverageware, tea kettles and kitchen organization products. These acquisitions, together with the Wilton Armetale® serveware and grillware lines that we acquired earlier in the year -- all in categories where Lifetime is already well established -- should be accretive beginning in the fourth quarter.

“Lifetime Next™, the Company’s initiative to simplify and strengthen the organization for growth, begun in late 2015 in cooperation with a major international consulting firm, is well underway. We now are in the implementation phase and expect to achieve process improvement savings beginning mid-year 2017, with full completion by year-end.

“We look forward to a healthy fourth quarter, reflecting both organic growth and contributions from our recently acquired brands, offset somewhat by continued foreign exchange weakness in the U.K., Canada and Mexico.”

Dividend

On Thursday, November 3, 2016, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on February 15, 2017 to shareholders of record on February 1, 2017.

Conference Call

The Company has scheduled a conference call for Tuesday, November 8, 2016 at 11:00 a.m. The dial-in number for the conference call is (844) 787-0801 or (661) 378-9632, passcode #3118093. A live webcast of the conference call will be accessible through http://edge.media-server.com/m/p/qqzw776u. 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. 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 well-known kitchenware brands, including Farberware®, KitchenAid®, Sabatier®, Amco Houseworks®, Chicago™ Metallic, Copco®, Fred® & Friends, Kitchen Craft®, Kamenstein®, Kizmos™, La Cafetière®, Misto®, Mossy Oak®, Reo®, Savora™, Swing-A-Way® and Vasconia®; respected tableware and giftware brands, including Mikasa®, Pfaltzgraff®, Creative Tops®, Empire Silver™, Gorham®, International® Silver, Kirk Stieff®, Towle® Silversmiths, Tuttle®, Wallace®, Wilton Armetale®, V&A® and Royal Botanic Gardens Kew®; and valued home solutions brands, including Bombay®, BUILT NY®, 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.

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

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,
			2016				2015				2016				2015
Net sales		$	170,124			$	163,198			$	399,099			$	401,790
Cost of sales			111,802				106,246				257,232				256,419
Gross margin			58,322				56,952				141,867				145,371
Distribution expenses			14,531				13,348				40,225				39,378
Selling, general and administrative expenses			33,009				33,842				94,662				99,389
Restructuring expenses			-				-				1,701				-
Income from operations			10,782				9,762				5,279				6,604
Interest expense			(1,231	)			(1,454	)			(3,546	)			(4,344	)
Financing expense			-				-				-				(154	)
Loss on early retirement of debt			-				-				(272	)			-
Income before income taxes and equity in earnings			9,551				8,308				1,461				2,106
Income tax provision			(2,961	)			(2,745	)			(218	)			(665	)
Equity in losses, net of taxes			(138	)			(459	)			(270	)			(169	)
NET INCOME		$	6,452			$	5,104			$	973			$	1,272
Weighted-average shares outstanding - basic			14,266				13,912				14,129				13,824
BASIC INCOME PER COMMON SHARE		$	0.45			$	0.37			$	0.07			$	0.09
Weighted-average shares outstanding - diluted			14,631				14,307				14,494				14,242
DILUTED INCOME PER COMMON SHARE		$	0.44			$	0.36			$	0.07			$	0.09
Cash dividends declared per common share		$	0.0425			$	0.0425			$	0.1275			$	0.1175

 

LIFETIME BRANDS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands - except share data)
				September 30,				December 31,
					2016				2015
				(unaudited)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents			$	5,831			$	7,131
	Accounts receivable, less allowances of $5,174 at September 30, 2016 and $5,300 at December 31, 2015				130,112				90,576
	Inventory				171,337				136,890
	Prepaid expenses and other current assets				8,323				8,783
	Deferred income taxes				2,172				-
		TOTAL CURRENT ASSETS			317,775				243,380
PROPERTY AND EQUIPMENT, net					21,402				24,877
INVESTMENTS					22,536				24,973
INTANGIBLE ASSETS, net					96,923				96,593
DEFERRED INCOME TAXES					7,164				6,486
OTHER ASSETS					2,104				2,022
			TOTAL ASSETS	$	467,904			$	398,331
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Current maturity of Credit Agreement Term Loan			$	9,851			$	19,646
	Short term loan				118				252
	Accounts payable				49,228				27,245
	Accrued expenses				52,350				40,154
	Income taxes payable				-				4,064
		TOTAL CURRENT LIABILITIES			111,547				91,361
DEFERRED RENT & OTHER LONG-TERM LIABILITIES					19,257				18,556
DEFERRED INCOME TAXES					9,143				8,596
REVOLVING CREDIT FACILITY					128,686				65,617
CREDIT AGREEMENT TERM LOAN					1,970				14,733
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, 2016 and 25,000,000 at December 31, 2015; shares issued and outstanding: 14,431,027 at September 30, 2016 and 14,030,221 at December 31, 2015				144				140
	Paid-in capital				171,217				165,780
	Retained earnings				46,860				47,733
	Accumulated other comprehensive loss				(20,920	)			(14,185	)
		TOTAL STOCKHOLDERS’ EQUITY			197,301				199,468
			TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	467,904			$	398,331

 

LIFETIME BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited)
				Nine Months Ended
				September 30,
					2016				2015
OPERATING ACTIVITIES
	Net income			$	973			$	1,272
	Adjustments to reconcile net income to net cash used in operating activities:
		Depreciation and amortization			11,744				10,703
		Amortization of financing costs			513				477
		Deferred rent			(125	)			511
		Deferred income taxes			-				699
		Stock compensation expense			2,115				2,314
		Undistributed equity in (earnings) losses, net			270				169
		Gain on disposal of fixed assets			(23	)			-
		Loss on early retirement of debt			272				-
	Changes in operating assets and liabilities (excluding the effects of business acquisitions)
		Accounts receivable			(42,360	)			(2,576	)
		Inventory			(34,552	)			(36,422	)
		Prepaid expenses, other current assets and other assets			(412	)			(642	)
		Accounts payable, accrued expenses and other liabilities			38,410				17,886
		Income taxes receivable			(1,967	)			-
		Income taxes payable			(5,246	)			(5,822	)
			NET CASH USED IN OPERATING ACTIVITIES		(30,388	)			(11,431	)
INVESTING ACTIVITIES
	Purchases of property and equipment				(1,982	)			(4,190	)
	Proceeds from disposition of GSI				567				-
	Acquisitions				(9,382	)			-
			NET CASH USED IN INVESTING ACTIVITIES		(10,797	)			(4,190	)
FINANCING ACTIVITIES
	Proceeds from Revolving Credit Facility				200,144				213,625
	Repayments of Revolving Credit Facility				(136,175	)			(187,267	)
	Repayment of Credit Agreement Term Loan				(23,000	)			(7,500	)
	Proceeds from Short Term Loan				118				37
	Payments on Short Term Loan				(248	)			(803	)
	Payment of financing costs				(13	)			-
	Payment for capital leases				(55	)			-
	Payments of tax withholding for stock based compensation				(74	)			-
	Proceeds from exercise of stock options				1,217				843
	Cash dividends paid				(1,804	)			(1,557	)
			NET CASH PROVIDED BY FINANCING ACTIVITIES		40,110				17,378
Effect of foreign exchange on cash					(225	)			(546	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(1,300	)			1,211
Cash and cash equivalents at beginning of period					7,131				5,068
CASH AND CASH EQUIVALENTS AT END OF PERIOD				$	5,831			$	6,279

 

LIFETIME BRANDS, INC. Supplemental Information (In thousands)
		Consolidated EBITDA for the Four Quarters Ended September 30, 2016
Three months ended September 30, 2016		$	16,652
Three months ended June 30, 2016			5,206
Three months ended March 31, 2016			268
Three months ended December 31, 2015			23,889
	Total for the four quarters	$	46,015
		Consolidated EBITDA for the Four Quarters Ended September 30, 2015
Three months ended September 30, 2015		$	14,089
Three months ended June 30, 2015			4,388
Three months ended March 31, 2015			2,519
Three months ended December 31, 2014			20,918
	Total for the four quarters	$	41,914

 

Reconciliation of GAAP to Non-GAAP Operating Results
Consolidated EBITDA:
			Three Months Ended
			September 30,  2016				June 30,  2016				March 31, 2016				December 31, 2015
Net income (loss) as reported			$	6,452			$	(1,191	)		$	(4,288	)		$	11,006
	Subtract out:
		Undistributed equity in (earnings) losses, net		138				(18	)			150				(517	)
	Add back:
		Income tax provision (benefit)		2,961				(473	)			(2,270	)			5,962
		Interest expense		1,231				1,122				1,193				1,402
		Loss on early retirement of debt		-				272				-				-
		Depreciation and amortization		4,682				3,578				3,484				3,500
		Stock compensation expense		825				487				803				2,972
		Contingent consideration		-				-				-				(876	)
		Permitted acquisition related expenses		363				369				555				3
		Restructuring expenses		-				1,060				641				437
Consolidated EBITDA			$	16,652			$	5,206			$	268			$	23,889
LIFETIME BRANDS, INC.  Supplemental Information  (In thousands) Reconciliation of GAAP to Non-GAAP Operating Results (continued)
Consolidated EBITDA:
			Three Months Ended
			September 30,  2015				June 30,  2015				March 31, 2015				December 31, 2014
Net income (loss) as reported			$	5,104			$	(1,727	)		$	(2,105	)		$	9,261
	Subtract out:
		Undistributed equity in (earnings) losses, net		459				(2	)			(288	)			1,364
	Add back:
		Income tax provision (benefit)		2,745				(717	)			(1,363	)			5,473
		Interest expense		1,454				1,459				1,431				1,658
		Loss on early retirement of debt		-				-				-				27
		Financing expense		-				-				154				758
		Depreciation and amortization		3,510				3,638				3,555				3,572
		Stock compensation expense		791				773				750				2,360
		Contingent consideration		-				1,545				147				(4,115	)
		Permitted acquisition related expenses, net of recovery		26				(581	)			238				560
Consolidated EBITDA			$	14,089			$	4,388			$	2,519			$	20,918

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 income and adjusted diluted income per common share:
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2016				2015				2016				2015
Net income as reported		$	6,452			$	5,104			$	973			$	1,272
Adjustments:
	Contingent consideration		-				-				-				1,545
	Acquisition related expenses (recoveries), net		363				26				1,287				(385	)
	Depreciation expense adjustment		1,327				-				1,327				-
	Financing expenses		-				-				-				154
	Loss on early retirement of debt		-				-				272				-
	Restructuring expenses		-				-				1,701				-
	Deferred tax for foreign currency translation for Grupo Vasconia		62				756				517				1,331
	Income tax effect on adjustments		(676	)			(10	)			(1,835	)			(526	)
Adjusted net income		$	7,528			$	5,876			$	4,242			$	3,391
Adjusted diluted income per common share		$	0.51			$	0.41			$	0.29			$	0.24

Adjusted net income in the three and nine months ended September 30, 2016 excludes acquisition related expenses, a charge to correct accumulated depreciation balance relating to certain leasehold improvements at one of the Company’s U.S. warehouses, loss on early retirement of debt, restructuring 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 income in the three and nine months ended September 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.

LIFETIME BRANDS, INC.  Supplemental Information  (In thousands) Reconciliation of GAAP to Non-GAAP Operating Results (continued)
		As Reported												Constant Currency (1)
		Three Months Ended												Three Months Ended																Year-Over-Year
		September 30,												September 30,																Increase (Decrease)
	Net sales		2016				2015			Increase (Decrease)					2016				2015			Increase (Decrease)				Currency Impact				Excluding Currency				Including Currency				Currency Impact
	U.S. Wholesale	$	139,607			$	130,588			$	9,019			$	139,607			$	130,594			$	9,013			$	6				6.9	%			6.9	%			-	%
	International		26,736				28,812				(2,076	)			26,736				25,513				1,223				(3,299	)			4.8	%			(7.2	)%			(12.0	)%
	Retail Direct		3,781				3,798				(17	)			3,781				3,798				(17	)			-				(0.4	)%			(0.4	)%			-	%
	Total net sales	$	170,124			$	163,198			$	6,926			$	170,124			$	159,905			$	10,219			$	(3,293	)			6.4	%			4.2	%			(2.2	)%
		As Reported												Constant Currency (1)
		Nine Months Ended												Nine Months Ended																Year-Over-Year
		September 30,												September 30,																Increase (Decrease)
	Net sales		2016				2015			Increase (Decrease)					2016				2015			Increase (Decrease)				Currency Impact				Excluding Currency				Including Currency				Currency Impact
	U.S. Wholesale	$	314,613			$	311,710			$	2,903			$	314,613			$	311,615			$	2,998			$	(95	)			1.0	%			0.9	%			(0.1	)%
	International		71,969				76,641				(4,672	)			71,969				70,985				984				(5,656	)			1.4	%			(6.1	)%			(7.5	)%
	Retail Direct		12,517				13,439				(922	)			12,517				13,439				(922	)			-				(6.9	)%			(6.9	)%			-	%
	Total net sales	$	399,099			$	401,790			$	(2,691	)		$	399,099			$	396,039			$	3,060			$	(5,751	)			0.8	%			(0.7	)%			(1.5	)%

⁽¹⁾  Constant Currency" is determined by applying the 2016 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.

Lifetime Brands, Inc.