Lifetime Brands Reports 2012 Financial Results

Announces a 25% Increase in its Quarterly Dividend

GARDEN CITY, N.Y.--(BUSINESS WIRE)--Mar. 14, 2013-- 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 fourth quarter and year ended December 31, 2012.

Fourth Quarter Highlights:

• Consolidated net sales were $154.8 million, an increase of 12.5%, as compared to consolidated net sales of $137.6 million in the fourth quarter of 2011.
• Net income was $15.2 million, or $1.19 per diluted share, in the 2012 period, as compared to $5.4 million, or $0.43 per diluted share, in the prior-year period.
• Adjusted net income was $8.7 million, or $0.67 per diluted share, in the 2012 period, as compared to $6.5 million, or $0.52 per diluted share, in the 2011 period.
• Consolidated EBITDA for the three-month period ended December 31, 2012 was $17.9 million, as compared to $14.3 million for the corresponding 2011 period.

Full Year Highlights:

• Consolidated net sales were $486.8 million, an increase of 9.5%, as compared to consolidated net sales of $444.4 million for 2011.
• Net income was $20.9 million, or $1.64 per diluted share, in 2012, as compared to $14.1 million, or $1.12 per diluted share, in 2011.
• Adjusted net income was $16.2 million, or $1.26 per diluted share, in 2012, as compared to $14.5 million, or $1.16 per diluted share, in 2011.
• Consolidated EBITDA was $41.2 million, as compared to $38.1 million for the year ended December 31, 2011.

On March 12, 2013, the Board of Directors declared a quarterly dividend of $0.03125 per share payable on May 15, 2013 to shareholders of record on May 1, 2013.

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

“Lifetime finished 2012 on a very positive note. For the quarter, Consolidated Net Sales increased 12.5% on an actual basis and 8.6% on an organic basis. During the quarter, we acquired the business and assets of Fred® & Friends, a line of innovative products featuring fun kitchen tools, tabletop accessories, party goods and giftware products.

“For the year, Consolidated Net Sales increased 9.5% (actual) and 1.4% (organic).

“Despite the increase in Consolidated Net Sales, the acquisition of Fred® and Friends and a planned, temporary build-up of inventory in the UK in anticipation of increased duties on Chinese ceramics, which are expected to be enacted later this year, total inventory at year-end decreased to $104.6 million, from $110.3 million, reflecting our improving inventory management practices.

“Earlier this month, we presented our new line-up of kitchenware products at the annual International Home + Housewares Show in Chicago. The reaction to our new products was overwhelmingly positive, which we believe foretells the successful placement of many of these new products later in the year.

“While the U.S. and European economies remain troubled, we nevertheless foresee our overall business increasing by 4-6% in 2013. The increased cash dividend we announced today demonstrates our positive outlook and confidence in our products.”

Conference Call

Lifetime has scheduled a conference call for Thursday, March 14, 2013 at 11:00 a.m. ET to discuss its fourth quarter 2012 results. The dial-in number for the conference call is (800) 510-9836 or (617) 614-3670, passcode #15045565. A replay of the call will also be available through March 15, 2013 and can be accessed by dialing (888) 286-8010 or (617) 801-6888, conference ID #43636130. 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.

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 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®, Fred ®, Guy Fieri®, Hoffritz®, Kizmos™, Misto®, Pedrini®, Roshco®, Sabatier® 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 corporate website is www.lifetimebrands.com.

LIFETIME BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share data)
			Three Months Ended December 31,										Year Ended December 31,
			2012					2011					2012					2011
Net sales			$	154,812				$	137,611				$	486,842				$	444,418
Cost of sales				98,767					86,926					310,054					282,058
Gross margin				56,045					50,685					176,788					162,360
Distribution expenses				12,103					13,284					44,046					43,882
Selling, general and administrative expenses				29,403					27,443					104,338					93,894
Intangible asset impairment				-					-					1,069					-
Income from operations				14,539					9,958					27,335					24,584
Interest expense				(1,254	)				(1,951	)				(5,898	)				(7,758	)
Loss on early retirement of debt				-					-					(1,363	)				-
Income before income taxes and equity in earnings				13,285					8,007					20,074					16,826
Income tax provision				(2,596	)				(3,513	)				(5,208	)				(6,122	)
Equity in earnings, net of taxes				4,465					925					6,081					3,362
NET INCOME			$	15,154				$	5,419				$	20,947				$	14,066
BASIC INCOME PER COMMON SHARE			$	1.21				$	0.45				$	1.67				$	1.16
DILUTED INCOME PER COMMON SHARE			$	1.19				$	0.43				$	1.64				$	1.12

LIFETIME BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands - except share data)
			December 31,
			2012					2011
ASSETS
CURRENT ASSETS
Cash and cash equivalents			$	1,871				$	2,972
Accounts receivable, less allowances of $3,996 at December 31, 2012 and $4,602 at
December 31, 2011				97,369					77,749
Inventory				104,584					110,337
Prepaid expenses and other current assets				5,393					5,264
Deferred income taxes				3,542					2,475
TOTAL CURRENT ASSETS				212,759					198,797
PROPERTY AND EQUIPMENT, net				31,646					34,324
INVESTMENTS				43,685					34,515
INTANGIBLE ASSETS, net				57,842					46,937
OTHER ASSETS				2,865					4,172
TOTAL ASSETS			$	348,797				$	318,745
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Revolving Credit Facility			$	7,000				$	15,000
Current maturity of Senior Secured Term Loan				4,375					-
Accounts payable				18,555					18,985
Accrued expenses				33,354					33,877
Income taxes payable				3,615					2,100
TOTAL CURRENT LIABILITIES				66,899					69,962
DEFERRED RENT & OTHER LONG-TERM LIABILITIES				21,565					14,598
DEFERRED INCOME TAXES				3,510					5,385
REVOLVING CREDIT FACILITY				53,968					42,625
SENIOR SECURED TERM LOAN				30,625					-
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: 12,754,467 at December 31, 2012 and 12,430,893 at December 31, 2011				128					124
Paid-in capital				142,489					137,467
Retained earnings				33,849					14,465
Accumulated other comprehensive loss				(4,236	)				(5,881	)
TOTAL STOCKHOLDERS’ EQUITY				172,230					146,175
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY			$	348,797				$	318,745

LIFETIME BRANDS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
				Year ended December 31,
				2012					2011
OPERATING ACTIVITIES
Net income				$	20,947				$	14,066
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts					123					(24	)
Depreciation and amortization					9,324					8,397
Amortization of debt discount					-					543
Deferred rent					(668	)				(133	)
Deferred income taxes					(3,011	)				(1,218	)
Stock compensation expense					2,793					2,795
Undistributed equity earnings					(5,665	)				(2,896	)
Intangible asset impairment					1,069					-
Loss on early retirement of debt					1,363					-
Changes in operating assets and liabilities (excluding the effects of business acquisitions)
Accounts receivable					(14,741	)				3,297
Inventory					9,694					(5,365	)
Prepaid expenses, other current assets and other assets					120					1,120
Accounts payable, accrued expenses and other liabilities					(166	)				(4,673	)
Income taxes payable					1,515					(3,722	)
NET CASH PROVIDED BY OPERATING ACTIVITIES					22,697					12,187
INVESTING ACTIVITIES
Purchases of property and equipment					(4,955	)				(4,959	)
Equity investments					(2,765	)				(5,123	)
Business acquisition, net of cash acquired					(14,500	)				(20,584	)
Net proceeds from sale of property					27					31
NET CASH USED IN INVESTING ACTIVITIES					(22,193	)				(30,635	)
FINANCING ACTIVITIES
Proceeds from Revolving Credit Facility, net					3,343					43,525
Proceeds from Term Loan					35,000					-
Repayment of Term Loan					(40,000	)				-
Repurchase of 4.75% convertible senior notes					-					(24,100	)
Financing Costs					-					(761	)
Cash dividends paid					(1,249	)				(913	)
Payment of capital lease obligations					-					(78	)
Proceeds from the exercise of stock options					577					225
Excess tax benefits from exercise of stock options					150					-
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES					(2,179	)				17,898
Effect of foreign exchange on cash					574					171
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS					(1,101	)				(379	)
Cash and cash equivalents at beginning of year					2,972					3,351
CASH AND CASH EQUIVALENTS AT END OF YEAR				$	1,871				$	2,972

LIFETIME BRANDS, INC.
Supplemental Information
Reconciliation of GAAP to Non-GAAP Operating Results
(In thousands - except per share data)
Consolidated EBITDA:
			Three Months Ended										Year Ended
			December 31,										December 31,
			2012					2011					2012					2011
			(in thousands)
Net income as reported			$	15,154				$	5,419				$	20,947				$	14,066
Subtract out:
Undistributed equity in earnings, net				(4,464	)				(925	)				(5,665	)				(2,896	)
Add back:
Income tax provision				2,596					3,513					5,208					6,122
Interest expense				1,254					1,951					5,898					7,758
Depreciation and amortization				2,446					2,336					9,324					8,397
Stock compensation expense				662					690					2,793					2,795
Loss on early retirement of debt				-					-					1,363					-
Intangible asset impairment				-					-					1,069					-
Permitted acquisition related expenses				220					1,358					305					1,856
Consolidated EBITDA			$	17,868				$	14,342				$	41,242				$	38,098
Adjusted net income and adjusted diluted income per share:
			Three Months Ended										Year Ended
			December 31,										December 31,
			2012					2011					2012					2011
			(in thousands)
Net income as reported			$	15,154				$	5,419				$	20,947				$	14,066
Adjustments:
Bargain purchase gain in equity in earnings, net of tax				(4,112	)				-					(4,112	)				-
Tax benefit recorded in equity in earnings				(1,116	)				-					(1,116	)				-
Impairment of Vasconia investment, net of tax				1,336					-					1,336					-
Intangible asset impairment, net of tax				-					-					645					-
Loss on early retirement of debt, net of tax				-					-					822					-
Retirement benefit obligation expense, net of tax				-					-					268					-
Acquisition related expenses, net of tax				135					895					188					1,230
Reduction of deferred tax liability related to prior year				(2,283	)				-					(2,283	)				-
Normalized tax benefit (provision) on reported income				(435	)				214					(539	)				(810	)
Adjusted net income			$	8,679				$	6,528				$	16,156				$	14,486
Adjusted diluted income per share			$	0.67				$	0.52				$	1.26				$	1.16

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

Adjusted net income in 2012 excludes the bargain purchase gain included in equity in earnings, a tax benefit recorded in equity in earnings, a write down in the Vasconia investment to fair value, 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, acquisition related expenses, a reduction of the Company’s deferred tax liability related to the prior year and includes an adjustment to reflect a normalized annual tax rate. Adjusted net income in 2011 excludes acquisition related expenses and includes an adjustment to reflect a normalized annual tax rate.

Adjusted net income in the three-month period ending December 31, 2012 excludes the bargain purchase gain included in equity in earnings, a tax benefit recorded in equity in earnings, a write down in the Vasconia investment to fair value, acquisition related expenses, a reduction of the Company’s deferred tax liability related to the prior year and includes an adjustment to reflect a normalized annual tax rate. Adjusted net income in the corresponding 2011 period excludes acquisition related expenses and includes an adjustment to reflect a normalized annual tax rate.

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