Lifetime Brands, Inc. Reports Third Quarter Financial Results

GARDEN CITY, N.Y.--(BUSINESS WIRE)--Nov. 5, 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 third quarter ended September 30, 2015.

Third Quarter Financial Highlights:

• Consolidated net sales were $163.2 million in the quarter ended September 30, 2015; an increase of $1.0 million, or 0.6%, as compared to consolidated net sales of $162.2 million in the corresponding period in 2014. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased 2.9%, as compared to consolidated net sales in the corresponding period in 2014.
• Gross margin was $57.0 million, or 34.9%, in the quarter ended September 30, 2015, as compared to $57.9 million, or 35.7%, for the corresponding period in 2014. The decrease in consolidated gross margin was primarily due to the unfavorable impact of foreign currency fluctuations and a lower margin product and channel sales mix.
• Income from operations was $9.8 million in the quarter ended September 30, 2015, as compared to $8.4 million in the corresponding period in 2014.
• Net income (loss) was $5.1 million, or $0.36 per diluted share, in the quarter ended September 30, 2015, as compared to net income (loss) of $(1.6) million, or $(0.12) per diluted share, in the corresponding period in 2014.
• Adjusted net income was $5.9 million, or $0.41 per diluted share, in the quarter ended September 30, 2015, as compared to $5.7 million, or $0.41 per diluted share, in the corresponding period in 2014.
• Consolidated EBITDA was $14.1 million, in the quarter ended September 30, 2015, as compared to $16.5 million for the corresponding 2014 period.
• Equity in earnings (losses), net of taxes, was $(0.5) million in the quarter ended September 30, 2015, as compared to $(5.2) million in the corresponding 2014 period. Excluding the impact of a $(0.8) million deferred tax expense related to foreign currency translation, equity in earnings (losses), net of taxes, was $0.3 million. The 2014 period includes a charge of $(5.2) million, net of tax, for the reduction in the fair value of the Company’s investment in GS Internacional S/A.

Nine Months Financial Highlights:

• Consolidated net sales were $401.8 million in the nine months ended September 30, 2015; an increase of $5.8 million, or 1.5%, as compared to net sales of $396.0 million for the corresponding period in 2014. In constant currency, consolidated net sales increased 4.0%.
• Gross margin was $145.4 million, or 36.2%, in the nine months ended September 30, 2015 as compared to $143.1 million, or 36.1%, for the corresponding period in 2014.
• Income from operations was $6.6 million in the nine months ended September 30, 2015, as compared to $3.1 million, for the corresponding period in 2014.
• Net income (loss) was $1.3 million, or $0.09 per diluted share, in the nine months ended September 30, 2015, as compared to net income (loss) of $(7.7) million, or $(0.57) per diluted share, in the 2014 period.
• Adjusted net income was $3.4 million, or $0.24 per diluted share, in the nine months ended September 30, 2015, as compared to $0.9 million, or $0.06 per diluted share, in the 2014 period.
• Consolidated EBITDA was $21.0 million in the nine months ended September 30, 2015, as compared to $21.6 million for the corresponding 2014 period.
• Equity in earnings (losses), net of taxes, was $(0.2) million, in the nine months ended September 30, 2015, as compared to equity in earnings (losses), net of taxes, of $(5.4) million in the corresponding 2014 period. Excluding the impact of a $(1.3) million deferred tax expense related to foreign currency translation, equity in earnings (losses) for the nine months ended September 30, 2015 was $1.2 million. The 2014 period includes a charge of $(5.2) million, net of tax, for the reduction in the fair value of the Company’s investment in GS Internacional S/A.

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

“The strong performance of Lifetime’s U.S. wholesale business in the third quarter was partially offset by the impact of foreign currency exchange rate fluctuations, which reduced reported net sales by approximately $3.6 million or 2.3% year-over-year.

“The depreciation of the British pound, the Canadian dollar, the Mexican peso and the Brazilian real against the U.S. dollar decreased gross margins at our U.K. subsidiaries and our Partner Companies in Canada, Mexico and Brazil by increasing their costs of goods imported from Asia, where purchases are denominated in U.S. dollars, and hurt sales due to higher prices being passed along to customers and consumers. Moreover, these exchange rate fluctuations produce unfavorable comparisons when the results of our non-U.S. business are translated into U.S. dollars.

“Our U.S. business remains strong and we continue to expect growth in both sales and margins in the fourth quarter, which should benefit from strong holiday shipments.

“As a result, we are revising our guidance for full-year 2015 results. We now foresee reported net sales to increase 2% to 3% year-over-year. We expect our operating margin to be in the range of 4.0 to 4.5%.”

Dividend

On Tuesday, November 3, 2015, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on February 15, 2016 to shareholders of record on February 1, 2016.

Conference Call

The Company has scheduled a conference call for Thursday, November 5, 2015 at 11:00 a.m. ET. The dial-in number for the conference call is (877) 415-3185 or (857) 244-7328 passcode #37648519. A replay of the call will also be available through Friday, November 6, 2015 and can be accessed by dialing (888) 286-8010 or (617) 801-6888, conference ID #24424431. 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 foreign exchange fluctuations; 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											Nine Months Ended
				September 30,											September 30,
					2015					2014						2015					2014
Net sales				$	163,198				$	162,244					$	401,790				$	395,976
Cost of sales					106,246					104,321						256,419					252,869
Gross margin					56,952					57,923						145,371					143,107
Distribution expenses					13,348					13,262						39,378					38,068
Selling, general and administrative expenses					33,842					32,849						99,389					98,456
Intangible asset impairment					-					3,384						-					3,384
Restructuring expenses					-					-						-					125
Income from operations					9,762					8,428						6,604					3,074
Interest expense					(1,454	)				(1,698	)					(4,344	)				(4,760	)
Financing expense					-					-						(154	)				-
Loss on early retirement of debt					-					-						-					(319	)
Income (loss) before income taxes and equity in earnings					8,308					6,730						2,106					(2,005	)
Income tax provision					(2,745	)				(3,123	)					(665	)				(352	)
Equity in losses, net of taxes					(459	)				(5,193	)					(169	)				(5,360	)
NET INCOME (LOSS)				$	5,104				$	(1,586	)				$	1,272				$	(7,717	)
Weighted-average shares outstanding - basic					13,912					13,619						13,824					13,460
BASIC INCOME (LOSS) PER COMMON SHARE				$	0.37				$	(0.12	)				$	0.09				$	(0.57	)
Weighted-average shares outstanding - diluted					14,307					13,619						14,242					13,460
DILUTED INCOME (LOSS) PER COMMON SHARE				$	0.36				$	(0.12	)				$	0.09				$	(0.57	)
Cash dividends declared per common share				$	0.0425				$	0.0375					$	0.1175				$	0.1125

LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands - except share data)
						September 30,					December 31,
						2015					2014
						(unaudited)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents					$	6,279				$	5,068
	Accounts receivable, less allowances of $5,706 at September 30, 2015 and   $6,663 at December 31, 2014						109,184					107,211
	Inventory						173,612					137,924
	Prepaid expenses and other current assets						9,893					7,914
		TOTAL CURRENT ASSETS					298,968					258,117
PROPERTY AND EQUIPMENT, net							25,501					26,801
INVESTMENTS							24,360					28,155
INTANGIBLE ASSETS, net							98,343					103,597
OTHER ASSETS							2,792					4,732
			TOTAL ASSETS			$	449,964				$	421,402
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Current maturity of Credit Agreement Term Loan					$	20,000				$	10,000
	Short term loan						-					765
	Accounts payable						35,663					28,694
	Accrued expenses						45,922					36,961
	Deferred income taxes						2,065					2,293
	Income taxes payable						-					5,156
		TOTAL CURRENT LIABILITIES					103,650					83,869
DEFERRED RENT & OTHER LONG-TERM LIABILITIES							20,087					20,160
DEFERRED INCOME TAXES							1,951					1,485
REVOLVING CREDIT FACILITY							118,798					92,655
CREDIT AGREEMENT TERM LOAN							17,500					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: 14,025,721 at September 30, 2015 and 13,712,081 at  December 31, 2014						140					137
	Paid-in capital						165,126					160,315
	Retained earnings						37,326					37,703
	Accumulated other comprehensive loss						(14,614	)				(9,922	)
		TOTAL STOCKHOLDERS’ EQUITY					187,978					188,233
			TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	449,964				$	421,402

LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
						Nine Months Ended
						September 30,
							2015						2014
OPERATING ACTIVITIES
	Net income (loss)					$	1,272					$	(7,717	)
	Adjustments to reconcile net income (loss) to net cash used in operating   activities:
		Provision for doubtful accounts					229						133
		Depreciation and amortization					10,703						10,628
		Amortization of financing costs					477						465
		Deferred rent					511						(623	)
		Deferred income taxes					699						(212	)
		Stock compensation expense					2,314						2,133
		Undistributed equity in losses, net					169						5,360
		Intangible asset impairment					-						3,384
		Loss on early retirement of debt					-						319
	Changes in operating assets and liabilities (excluding the effects of business   acquisitions)
		Accounts receivable					(2,805	)					587
		Inventory					(36,422	)					(37,479	)
		Prepaid expenses, other current assets and other assets					(642	)					(1,889	)
		Accounts payable, accrued expenses and other liabilities					17,886						10,985
		Income taxes payable					(5,822	)					(7,535	)
			NET CASH USED IN OPERATING ACTIVITIES				(11,431	)					(21,461	)
INVESTING ACTIVITIES
	Purchases of property and equipment						(4,190	)					(4,340	)
	Kitchen Craft acquisition, net of cash acquired						-						(59,977	)
	Other acquisitions, net of cash acquired						-						(5,280	)
			NET CASH USED IN INVESTING ACTIVITIES				(4,190	)					(69,597	)
FINANCING ACTIVITIES
	Proceeds from Revolving Credit Facility						213,625						206,193
	Repayments of Revolving Credit Facility						(187,267	)					(142,114	)
	Repayments of Senior Secured Term Loan						-						(20,625	)
	Proceeds from Credit Agreement Term Loan						-						50,000
	Repayment of Credit Agreement Term Loan						(7,500	)					(2,500	)
	Proceeds from Short Term Loan						37						1,168
	Payments on Short Term Loan						(803	)					(217	)
	Payment of financing costs						-						(1,375	)
	Proceeds from exercise of stock options						843						2,192
	Cash dividends paid						(1,557	)					(1,517	)
			NET CASH PROVIDED BY FINANCING ACTIVITIES				17,378						91,205
Effect of foreign exchange on cash							(546	)					(117	)
INCREASE IN CASH AND CASH EQUIVALENTS							1,211						30
Cash and cash equivalents at beginning of period							5,068						4,947
CASH AND CASH EQUIVALENTS AT END OF PERIOD						$	6,279					$	4,977

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)
					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
					Consolidated EBITDA for the Four Quarters Ended September 30, 2014 (1)
Three months ended September 30, 2014					$	16,470
Three months ended June 30, 2014						1,494
Three months ended March 31, 2014						3,660
Three months ended December 31, 2013						21,011
	Total for the four quarters				$	42,635

(1) Consolidated EBITDA for the four quarters ended September 30, 2014 excludes the effect of a pro forma acquisition adjustment of $3.0 million.

Reconciliation of GAAP to Non-GAAP Operating Results
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

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)
Reconciliation of GAAP to Non-GAAP Operating Results (continued)
Consolidated EBITDA:
					Three Months Ended
					September 30, 2014					June 30, 2014					March 31, 2014					December 31, 2013
Net income (loss) as reported					$	(1,586	)			$	(3,202	)			$	(2,929	)			$	9,388
	Subtract out:
		Undistributed equity in (earnings) losses, net				5,193					(41	)				208					(332	)
	Add back:
		Income tax provision (benefit)				3,123					(1,586	)				(1,185	)				6,182
		Interest expense				1,698					1,672					1,390					1,256
		Loss on early retirement of debt				-					-					319					102
		Intangible asset impairment				3,384					-					-					-
		Depreciation and amortization				3,299					3,716					3,613					2,708
		Stock compensation expense				694					713					726					750
		Contingent consideration				665					-					-					-
		Permitted acquisition related expenses				-					97					1,518					957
		Restructuring expenses				-					125					-					-
Consolidated EBITDA					$	16,470				$	1,494				$	3,660				$	21,011

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,
				2015					2014					2015					2014
Net income (loss) as reported				$	5,104				$	(1,586	)			$	1,272				$	(7,717	)
Adjustments:
	Contingent consideration				-					-					1,545					-
	Acquisition related expenses (recoveries), net				26					-					(385	)				1,615
	Financing expenses				-					-					154					-
	Loss on early retirement of debt				-					-					-					319
	Restructuring expenses				-					-					-					125
	Intangible asset impairment				-					3,384					-					3,384
	Impairment of GS International S/A				-					5,248					-					5,248
	Deferred tax for foreign currency translation for Grupo   Vasconia				756					-					1,331					-
	Income tax effect on adjustments				(10	)				(1,354	)				(526	)				(2,089	)
Adjusted net income				$	5,876				$	5,692				$	3,391				$	885
Adjusted diluted income per common share				$	0.41				$	0.41				$	0.24				$	0.06

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. Adjusted net income in the three and nine months ended September 30, 2014 excludes certain acquisition related expenses, the loss on retirement of debt, restructuring expenses, intangible asset impairment and the impairment of the Company’s investment in GS Internacional S/A.

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
				September 30,													September 30,																		Increase (Decrease)
	Net sales				2015				2014			Increase (Decrease)						2015				2014			Increase (Decrease)					Currency Impact					Excluding Currency						Including Currency						Currency Impact
	U.S. Wholesale			$	130,588			$	125,341			$	5,247				$	130,588			$	125,200			$	5,388				$	(141	)			4.3		%				4.2		%				(0.1	)	%
	International				28,812				33,247				(4,435	)				28,812				29,762				(950	)				(3,485	)			(3.2	)	%				(13.3	)	%				(10.1	)	%
	Retail Direct				3,798				3,656				142					3,798				3,656				142					-				3.9		%				3.9		%				-		%
	Total net sales			$	163,198			$	162,244			$	954				$	163,198			$	158,618			$	4,580				$	(3,626	)			2.9		%				0.6		%				(2.3	)	%
				As Reported													Constant Currency (1)
				Nine Months Ended													Nine Months Ended																		Year-Over-Year
				September 30,													September 30,																		Increase (Decrease)
	Net sales				2015				2014			Increase (Decrease)						2015				2014			Increase (Decrease)					Currency Impact					Excluding Currency						Including Currency						Currency Impact
	U.S. Wholesale			$	311,710			$	296,155			$	15,555				$	311,710			$	295,910			$	15,800				$	(245	)			5.3		%				5.3		%				(0.1	)	%
	International				76,641				87,969				(11,328	)				76,641				78,668				(2,027	)				(9,301	)			(2.6	)	%				(12.9	)	%				(10.3	)	%
	Retail Direct				13,439				11,852				1,587					13,439				11,852				1,587					-				13.4		%				13.4		%				-		%
	Total net sales			$	401,790			$	395,976			$	5,814				$	401,790			$	386,430			$	15,360				$	(9,546	)			4.0		%				1.5		%				(2.5	)	%

⁽¹⁾ "Constant Currency" is determined by applying the 2015 average exchange rates to the prior year local currency net 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 net sales growth excludes the impact of currency.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151105005404/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