UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 8-K
__________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 11, 2020
__________________________
Lifetime Brands, Inc.
(Exact Name of Registrant as Specified in Its Charter)
__________________________
| Delaware | 0-19254 | 11-2682486 | ||||||
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||
1000 Stewart Avenue, Garden City, New York 11530
(Address of Principal Executive Offices) (Zip Code)
516-683-6000
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
__________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | ||||
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | ||||
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | ||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Common Stock, $0.01 par value | LCUT | The NASDAQ Global Select Market | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On March 11, 2020, Lifetime Brands, Inc. (the “Company”) issued a press release announcing the Company’s results for the fourth quarter ended December 31, 2019. A copy of the Company’s press release is furnished as Exhibit 99.1 hereto.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Lifetime Brands, Inc. | ||||||||
| By: | /s/ Laurence Winoker | |||||||
| Laurence Winoker Senior Vice President – Finance, Treasurer and Chief Financial Officer | ||||||||
Date: March 11, 2020
Exhibit 99.1
Lifetime Brands, Inc. Reports Fourth Quarter and Full Year 2019 Financial Results
Declares Regular Quarterly Dividend
GARDEN CITY, NY, March 11, 2020 – Lifetime Brands, Inc. (NasdaqGS: LCUT), a leading global designer, developer and marketer of a broad range of branded consumer products used in the home, today reported its financial results for the quarter and full year ended December 31, 2019.
Robert Kay, Lifetime’s Chief Executive Officer, commented,
“We are pleased that we continued to deliver growth in our core U.S. business, which led the Company to generate significant cash flow for the fourth quarter and full year 2019; however, despite those positive achievements, our performance this quarter fell short of our expectations driven by the operational issues in our European business in the third and fourth quarters,” said Rob Kay, Chief Executive Officer of Lifetime Brands. “Our core U.S. business outperformed in the fourth quarter, as a result of strong performance in both brick and mortar retail and e-commerce, which continues to represent a meaningful growth driver for Lifetime. In addition, we continue to make progress on our product initiatives, including the ongoing ramp-up of our Mikasa® Hospitality line, and we remain committed to increasing the brand equity and trend of our best-in-class products and brands. Despite this momentum, operational challenges from our reorganized U.K. operations had an impact on shipments, which offset the Company’s overall results.”
Mr. Kay continued, “As we look ahead toward fiscal 2020, we are confident that we have the right plan in place to stabilize our international business, which we expect will enable us to continue advancing our strategy and ensuring that our business remains on track to capture the market opportunity and drive value for our shareholders. Specifically, as of January 2020, we believe we have addressed the operational issues in our European operations and are back to normal on-time deliveries. As we look forward to 2020, we are pleased with our first quarter results for which we have not seen any noticeable impact from the coronavirus outbreak.”
Fourth Quarter Financial Highlights:
Consolidated net sales for the three months ended December 31, 2019, were $226.9 million, representing a decrease of $1.4 million or 0.6% as compared to $228.3 million for the corresponding period in 2018. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales decreased $1.3 million or 0.5% in the fourth quarter of 2019 as compared to consolidated net sales in the corresponding period in 2018.
Gross margin was $83.9 million, or 37.0%, in 2019 as compared to $84.8 million, or 37.2%, for the corresponding period in 2018.
In the fourth quarter of 2019, the Company incurred a $33.2 million non-cash goodwill impairment charge related to the U.S. reporting unit. The goodwill impairment charge resulted from, among other factors, a sustained decline in the Company's market capitalization observed in the fourth quarter of 2019.
Loss from operations was $(15.5) million, as compared to income from operations of $22.9 million in the prior year's quarter. Income from operations, excluding the impact of certain non-cash charges, was $17.7 million in 2019, as compared to $21.1 million in the prior year's quarter. A table which reconciles this non-GAAP financial measure to (loss) income from operations, as reported, is included below.
Net loss was $(14.5) million, or $(0.70) per diluted share, in the quarter ended December 31, 2019, as compared to net income of $10.0 million, or $0.49 per diluted share, for the corresponding period in 2018.
Adjusted net income was $20.4 million, or $0.99 per diluted share, in the quarter ended December 31, 2019, as compared to adjusted net income of $11.2 million, or $0.55 per diluted share, for the corresponding period in 2018. A table which reconciles this non-GAAP financial measure to net loss, as reported, is included below.
1
Full Year Financial Highlights:
Consolidated net sales for the year ended December 31, 2019, were $734.9 million, an increase of $30.4 million, or 4.3%, as compared to consolidated net sales of $704.5 million for the corresponding period in 2018. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased $34.0 million, or 4.9%, as compared to consolidated net sales in the corresponding period in 2018.
Gross margin was $255.2 million, or 34.7%, compared to $255.8 million, or 36.3%, for the corresponding period in 2018. Excluding the SKU rationalization of $8.5 million, which was recorded in the second quarter of 2019, and the $1.5 million non-recurring inventory step-up adjustment related to the acquisition of Filament, which was recorded in 2018, gross margin would have been 35.9% and 36.5% in the 2019 and 2018 periods, respectively.
Loss from operations was $(23.4) million, as compared to income from operations of $18.6 million in the prior year. Income from operations, excluding the impact of certain non-cash charges, was $28.1 million, as compared to $20.5 million for the corresponding period in 2018.
Net loss was $(44.4) million, or $(2.16) per diluted share, in the year ended December 31, 2019, as compared to net loss of $(1.7) million, or $(0.09) per diluted share, in the corresponding period in 2018.
Adjusted net income was $9.2 million, or $0.45 per diluted share, as compared to $5.5 million, or $0.28 per diluted share, in the corresponding period in 2018.
Consolidated adjusted EBITDA was $64.1 million in the year ended December 31, 2019. After giving effect to the non-recurring charge limitation permitted under our debt agreements, consolidated adjusted EBITDA was $55.1 million. A table which reconciles this non-GAAP financial measure to net loss, as reported, is included below.
Dividend
On Tuesday, March 10, 2020, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on May 15, 2020 to shareholders of record on May 1, 2020.
Conference Call
The Company has scheduled a conference call for Wednesday, March 11, 2020 at 11:00 a.m. The dial-in number for the conference call is (866) 610-1072 (U.S.) or (973) 935-2840 (International), Conference ID: 8462839.
A live webcast of the conference call will be accessible through:
https://event.on24.com/wcc/r/2212549/2E4F194E6225D21316BDD837D8DE1974
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, income from operations excluding certain non-cash charges, adjusted net income, adjusted diluted income per common share, gross margin (excluding non-recurring charges) 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 by investors and analysts. Management uses these non-GAAP financial measures as indicators of business performance. These non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, GAAP financial measures of performance.
2
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 the growth of the Company, our financial outlook, our initiatives to create value, our efforts to mitigate geopolitical factors and tariffs, our efforts to stabilize our international business, our current and projected financial and operating performance, results, and profitability and all guidance related thereto, including forecasted exchange rates and effective tax rates, as well as our future plans and intentions regarding the Company and its consolidated subsidiaries. Such statements represent the Company’s current judgments, estimates, and assumptions about possible future events. The Company believes these judgments, estimates, and assumptions 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; the possibility of impairments to the Company’s intangible assets; 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; the impact of our SKU rationalization initiative, expenses and other challenges relating to the integration of the Filament Brands business and future acquisitions; warehouse consolidation efforts performed by the business; the ongoing reorganization of our U.K. operations; 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 (the "Brexit"); shortages of and price volatility for certain commodities; global health epidemics, such as the coronavirus outbreak, and 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 designer, developer and marketer of a broad range of branded consumer 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, Rabbit® and Vasconia®; respected tableware and giftware brands, including Mikasa®, Pfaltzgraff®, Fitz and Floyd®, Creative Tops®, Empire Silver™, Gorham®, International® Silver, Kirk Stieff®, Towle® Silversmiths, Wallace®, Wilton Armetale®, V&A® and Royal Botanic Gardens Kew®; and valued home solutions brands, including BUILT NY®, Taylor® Bath, Taylor® Weather and Planet Box®. 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
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LIFETIME BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands - except per share data)
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
| Net sales | $ | 226,938 | $ | 228,274 | $ | 734,902 | $ | 704,542 | |||||||||||||||
| Cost of sales | 143,028 | 143,467 | 479,711 | 448,785 | |||||||||||||||||||
| Gross margin | 83,910 | 84,807 | 255,191 | 255,757 | |||||||||||||||||||
| Distribution expenses | 22,605 | 20,340 | 72,543 | 69,716 | |||||||||||||||||||
| Selling, general and administrative expenses | 43,239 | 40,603 | 161,618 | 162,933 | |||||||||||||||||||
| Impairment of goodwill | 33,242 | — | 42,990 | 2,205 | |||||||||||||||||||
| Restructuring expenses | 316 | 971 | 1,435 | 2,324 | |||||||||||||||||||
(Loss) income from operations | (15,492) | 22,893 | (23,395) | 18,579 | |||||||||||||||||||
| Interest expense | (5,590) | (5,591) | (20,378) | (18,004) | |||||||||||||||||||
Loss on early retirement of debt | — | — | — | (66) | |||||||||||||||||||
(Loss) income before income taxes and equity in earnings | (21,082) | 17,302 | (43,773) | 509 | |||||||||||||||||||
Income tax benefit (provision) | 5,704 | (7,558) | (1,109) | (2,889) | |||||||||||||||||||
Equity in earnings, net of taxes | 862 | 243 | 467 | 660 | |||||||||||||||||||
NET (LOSS) INCOME | $ | (14,516) | $ | 9,987 | $ | (44,415) | $ | (1,720) | |||||||||||||||
| Weighted-average shares outstanding—basic | 20,660 | 20,376 | 20,597 | 19,452 | |||||||||||||||||||
BASIC (LOSS) INCOME PER COMMON SHARE | (0.70) | $ | 0.49 | (2.16) | $ | (0.09) | |||||||||||||||||
| Weighted-average shares outstanding—diluted | 20,660 | 20,454 | 20,597 | 19,452 | |||||||||||||||||||
DILUTED (LOSS) INCOME PER COMMON SHARE | (0.70) | $ | 0.49 | (2.16) | $ | (0.09) | |||||||||||||||||
4
LIFETIME BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands - except share data)
| December 31, | |||||||||||
| 2019 | 2018 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | 11,370 | $ | 7,647 | |||||||
Accounts receivable, less allowances of $11,591 at December 31, 2019 and $7,855 at December 31, 2018 | 128,639 | 125,292 | |||||||||
| Inventory | 173,427 | 173,601 | |||||||||
| Prepaid expenses and other current assets | 14,140 | 10,822 | |||||||||
| Income taxes receivable | 1,577 | 1,442 | |||||||||
| TOTAL CURRENT ASSETS | 329,153 | 318,804 | |||||||||
| PROPERTY AND EQUIPMENT, net | 28,168 | 25,762 | |||||||||
| OPERATING LEASE RIGHT-OF-USE ASSETS | 106,871 | — | |||||||||
| INVESTMENTS | 21,289 | 22,582 | |||||||||
| INTANGIBLE ASSETS, net | 280,471 | 338,847 | |||||||||
| OTHER ASSETS | 4,071 | 1,844 | |||||||||
| DEFERRED INCOME TAXES | — | 733 | |||||||||
| TOTAL ASSETS | $ | 770,023 | $ | 708,572 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES | |||||||||||
| Current maturity of term loan | $ | 8,413 | $ | 1,253 | |||||||
| Accounts payable | 36,173 | 38,167 | |||||||||
| Accrued expenses | 52,060 | 45,456 | |||||||||
| Current portion of operating lease liabilities | 10,661 | — | |||||||||
| TOTAL CURRENT LIABILITIES | 107,307 | 84,876 | |||||||||
| OTHER LONG-TERM LIABILITIES | 12,214 | 23,339 | |||||||||
| DEFERRED INCOME TAXES | 13,685 | 15,141 | |||||||||
| OPERATING LEASE LIABILITIES | 112,180 | — | |||||||||
| INCOME TAXES PAYABLE, LONG-TERM | 1,217 | 949 | |||||||||
| REVOLVING CREDIT FACILITY | 32,822 | 42,080 | |||||||||
| TERM LOAN | 254,281 | 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 | — | — | |||||||||
CCommon stock, $0.01 par value, shares authorized: 50,000,000 at December 31, 2019 and 2018; shares issued and outstanding: 21,255,660 at December 31, 2019 and 20,764,143 at December 31, 2018 | 213 | 208 | |||||||||
| Paid-in capital | 263,386 | 258,637 | |||||||||
Retained earnings | 7,173 | 55,264 | |||||||||
Accumulated other comprehensive loss | (34,455) | (34,616) | |||||||||
| TOTAL STOCKHOLDERS’ EQUITY | 236,317 | 279,493 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 770,023 | $ | 708,572 | |||||||
5
LIFETIME BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Year ended December 31, | |||||||||||||||||
| 2019 | 2018 | 2017 | |||||||||||||||
| OPERATING ACTIVITIES | |||||||||||||||||
Net (loss) income | $ | (44,415) | $ | (1,720) | $ | 2,154 | |||||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | 25,115 | 23,329 | 14,189 | ||||||||||||||
| Impairment of goodwill | 42,990 | 2,205 | — | ||||||||||||||
| Amortization of financing costs | 1,748 | 1,543 | 519 | ||||||||||||||
| Deferred rent | — | 57 | (642) | ||||||||||||||
| Non-cash lease expense | 1,047 | — | — | ||||||||||||||
| Deferred income taxes | (1,073) | 2,086 | 1,030 | ||||||||||||||
| Stock compensation expense | 5,041 | 4,135 | 3,390 | ||||||||||||||
Undistributed equity earnings | (343) | (545) | (379) | ||||||||||||||
| Loss on early retirement of debt | — | 66 | 110 | ||||||||||||||
| SKU Rationalization | 8,500 | — | — | ||||||||||||||
| Contingent consideration fair value adjustment | — | (1,774) | — | ||||||||||||||
Changes in operating assets and liabilities (excluding the effects of business acquisitions) | |||||||||||||||||
| Accounts receivable | (2,259) | 8,020 | 1,481 | ||||||||||||||
| Inventory | (7,455) | (13,819) | 10,818 | ||||||||||||||
| Prepaid expenses, other current assets and other assets | (4,257) | 540 | (951) | ||||||||||||||
| Accounts payable, accrued expenses and other liabilities | 5,108 | (3,153) | (9,778) | ||||||||||||||
| Income taxes receivable | (135) | (1,442) | — | ||||||||||||||
| Income taxes payable | 260 | (353) | (4,935) | ||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 29,872 | 19,175 | 17,006 | ||||||||||||||
| INVESTING ACTIVITIES | |||||||||||||||||
| Purchases of property and equipment | (9,169) | (7,902) | (6,311) | ||||||||||||||
| Filament acquisition, net of cash acquired | — | (216,527) | — | ||||||||||||||
| Fitz acquisition, net of cash acquired | — | — | (9,072) | ||||||||||||||
| Net proceeds from sale of property | — | 249 | 15 | ||||||||||||||
NET CASH USED IN INVESTING ACTIVITIES | (9,169) | (224,180) | (15,368) | ||||||||||||||
| FINANCING ACTIVITIES | |||||||||||||||||
| Proceeds from revolving credit facility | 345,494 | 268,912 | 237,658 | ||||||||||||||
| Repayments of revolving credit facility | (355,730) | (320,767) | (229,696) | ||||||||||||||
| Proceeds from Term Loan | — | 275,000 | — | ||||||||||||||
| Repayments of Term Loan | (2,750) | (2,063) | — | ||||||||||||||
| Repayments of Credit Agreement term loan | — | — | (9,500) | ||||||||||||||
| Proceeds from short term loan | — | 216 | 187 | ||||||||||||||
| Payments from short term loan | — | (278) | (239) | ||||||||||||||
| Payment of financing costs | — | (11,171) | (31) | ||||||||||||||
| Payment of equity issuance costs | — | (936) | — | ||||||||||||||
| Cash dividends paid | (3,571) | (3,273) | (2,475) | ||||||||||||||
| Payment of capital lease obligations | (92) | (77) | (94) | ||||||||||||||
| Proceeds from the exercise of stock options | 132 | 286 | 2,537 | ||||||||||||||
| Payments of tax withholding for stock based compensation | (399) | (561) | (644) | ||||||||||||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (16,916) | 205,288 | (2,297) | ||||||||||||||
| Effect of foreign exchange on cash | (64) | (236) | 376 | ||||||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 3,723 | 47 | (283) | ||||||||||||||
| Cash and cash equivalents at beginning of year | 7,647 | 7,600 | 7,883 | ||||||||||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 11,370 | $ | 7,647 | $ | 7,600 | |||||||||||
6
LIFETIME BRANDS, INC.
Supplemental Information
(in thousands)
Reconciliation of GAAP to Non-GAAP Operating Results
Consolidated adjusted EBITDA for the year ended December 31, 2019:
| Three Months Ended | Year Ended | ||||||||||||||||||||||||||||
March 31, 2019 | June 30, 2019 | September 30, 2019 | December 31, 2019 | December 31, 2019 | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
Net loss as reported | $ | (4,867) | $ | (11,513) | (13,519) | $ | (14,516) | $ | (44,415) | ||||||||||||||||||||
| Subtract out: | |||||||||||||||||||||||||||||
Undistributed equity losses (earnings), net | 116 | 69 | 210 | (738) | (343) | ||||||||||||||||||||||||
| Add back: | |||||||||||||||||||||||||||||
Income tax (benefit) provision | (2,458) | (5,795) | 15,066 | (5,704) | 1,109 | ||||||||||||||||||||||||
| Interest expense | 4,922 | 4,694 | 5,172 | 5,590 | 20,378 | ||||||||||||||||||||||||
| Depreciation and amortization | 6,359 | 6,290 | 6,122 | 6,344 | 25,115 | ||||||||||||||||||||||||
| Impairment of goodwill | — | — | 9,748 | 33,242 | 42,990 | ||||||||||||||||||||||||
| Stock compensation expense | 907 | 1,193 | 1,505 | 1,436 | 5,041 | ||||||||||||||||||||||||
SKU Rationalization (1) | — | 8,500 | — | — | 8,500 | ||||||||||||||||||||||||
| Acquisition and divestment related expenses | 151 | — | — | 55 | 206 | ||||||||||||||||||||||||
Restructuring expenses (1) | 608 | 173 | 338 | 316 | 1,435 | ||||||||||||||||||||||||
Integration charges (1) | 174 | 695 | 235 | 159 | 1,263 | ||||||||||||||||||||||||
Warehouse relocation (1) | 215 | — | 881 | 1,689 | 2,785 | ||||||||||||||||||||||||
| Consolidated adjusted EBITDA, before limitation | $ | 6,127 | $ | 4,306 | $ | 25,758 | $ | 27,873 | $ | 64,064 | |||||||||||||||||||
Permitted non-recurring charge limitation (1) | (8,929) | ||||||||||||||||||||||||||||
| Consolidated adjusted EBITDA | 55,135 | ||||||||||||||||||||||||||||
(1)Permitted non-recurring charges include restructuring expenses, integration charges, warehouse relocation costs, SKU Rationalization. These are permitted exclusions from the Company’s consolidated adjusted EBITDA, subject to limitations, pursuant to the Company’s Debt Agreements.
Consolidated adjusted EBITDA is a non-GAAP financial measure which is defined in the Company’s debt agreements. Consolidated adjusted EBITDA is defined as net income (loss), adjusted to exclude undistributed equity in (earnings) losses, income tax (benefit) provision, interest, depreciation and amortization, stock compensation expense, and other items detailed in the table above that are consistent with exclusions permitted by our debt agreements
7
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 (in thousands - except per share data):
Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
Net (loss) income as reported | $ | (14,516) | $ | 9,987 | $ | (44,415) | $ | (1,720) | |||||||||||||||
Adjustments: | |||||||||||||||||||||||
| Acquisition and divestment related expenses | 55 | 523 | 206 | 1,766 | |||||||||||||||||||
Restructuring expenses | 316 | 971 | 1,435 | 2,324 | |||||||||||||||||||
Integration charges | 159 | 433 | 1,263 | 681 | |||||||||||||||||||
Warehouse relocation | 1,689 | 118 | 2,785 | 2,725 | |||||||||||||||||||
Loss on early retirement of debt | — | — | — | 66 | |||||||||||||||||||
Other permitted non-cash charges | — | — | — | 1,510 | |||||||||||||||||||
Unrealized gain on derivative instruments | (402) | (33) | (402) | (1,942) | |||||||||||||||||||
| Impairment of goodwill | 33,242 | — | 42,990 | 2,205 | |||||||||||||||||||
| Contingent consideration fair value adjustment | — | (1,774) | — | (1,774) | |||||||||||||||||||
Deferred tax for foreign currency translation for Grupo Vasconia | — | 275 | — | — | |||||||||||||||||||
| SKU Rationalization | — | — | 8,500 | — | |||||||||||||||||||
| Transition tax on non-U.S. subsidiaries' earnings | — | 675 | — | 675 | |||||||||||||||||||
| Income tax effect on adjustments | (156) | 69 | (3,183) | (1,009) | |||||||||||||||||||
Adjusted net income | $ | 20,387 | $ | 11,243 | $ | 9,179 | $ | 5,507 | |||||||||||||||
Adjusted diluted income per share | $ | 0.99 | $ | 0.55 | $ | 0.45 | $ | 0.28 | |||||||||||||||
Adjusted net income and adjusted diluted income per common share in the three months ended and year ended December 31, 2019 excludes acquisition and divestment related expenses restructuring expenses, integration charges, warehouse relocation expenses, unrealized gains on derivative instruments, goodwill impairment and SKU rationalization expenses. 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 ended and year ended December 31, 2018 excludes acquisition and divestment related expenses, restructuring expenses, integration charges, warehouse relocation expenses, loss on early retirement of debt, other permitted non-cash charges, unrealized gain on foreign currency contracts, impairment of goodwill and the deferred tax expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation gains through other comprehensive (loss) income. The income tax effect on adjustments reflects the statutory tax rates applied on the adjustments.
8
LIFETIME BRANDS, INC.
Supplemental Information
(in thousands)
Reconciliation of GAAP to Non-GAAP Operating Results (continued)
Constant Currency:
As Reported Three Months Ended December 31, | Constant Currency (1) Three Months Ended December 31, | Year-Over-Year Increase (Decrease) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | 2019 | 2018 | Increase (Decrease) | 2019 | 2018 | Increase (Decrease) | Currency Impact | Excluding Currency | Including Currency | Currency Impact | |||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. | $ | 198,842 | $ | 198,158 | $ | 684 | $ | 198,842 | $ | 198,153 | $ | 689 | 5 | 0.3 | % | 0.3 | % | 0.0 | % | ||||||||||||||||||||||||||||||||||||||||
| International | 28,096 | 30,116 | (2,020) | 28,096 | 30,035 | (1,939) | 81 | (6.5) | % | (6.7) | % | (0.2) | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | 226,938 | $ | 228,274 | $ | (1,336) | $ | 226,938 | $ | 228,188 | $ | (1,250) | $ | 86 | (0.5) | % | (0.6) | % | (0.1) | % | |||||||||||||||||||||||||||||||||||||||
As Reported Year Ended December 31, | Constant Currency (1) Year Ended December 31, | Year-Over-Year Increase (Decrease) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net sales | 2019 | 2018 | Increase (Decrease) | 2019 | 2018 | Increase (Decrease) | Currency Impact | Excluding Currency | Including Currency | Currency Impact | |||||||||||||||||||||||||||||||||||||||||||||||||
| U.S. | $ | 644,171 | $ | 609,114 | $ | 35,057 | $ | 644,171 | $ | 609,092 | $ | 35,079 | 22 | 5.8 | % | 5.8 | % | 0.0 | % | ||||||||||||||||||||||||||||||||||||||||
| International | 90,731 | 95,428 | (4,697) | 90,731 | 91,805 | (1,074) | 3,622 | (1.2) | % | (4.9) | % | (3.7) | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | 734,902 | $ | 704,542 | $ | 30,360 | $ | 734,902 | $ | 700,897 | $ | 34,005 | $ | 3,644 | 4.9 | % | 4.3 | % | (0.6) | % | |||||||||||||||||||||||||||||||||||||||
(1)“Constant Currency” is determined by applying the 2019 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 fluctuations in foreign currency exchange rates.
9
LIFETIME BRANDS, INC.
Supplemental Information
(in thousands)
Reconciliation of GAAP to Non-GAAP Operating Results (continued)
Income from operations excluding certain non-cash charges (in thousands):
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
(Loss) income from operations | $ | (15,492) | $ | 22,893 | $ | (23,395) | $ | 18,579 | |||||||||||||||
| Excluded non-cash charges: | |||||||||||||||||||||||
| Impairment of goodwill | 33,242 | — | 42,990 | 2,205 | |||||||||||||||||||
| SKU Rationalization | — | — | 8,500 | — | |||||||||||||||||||
| Inventory step-up adjustment | — | — | — | 1,510 | |||||||||||||||||||
| Contingent consideration fair value adjustment | $ | — | $ | (1,774) | $ | — | $ | (1,774) | |||||||||||||||
| Total excluded non-cash charges | $ | 33,242 | $ | (1,774) | $ | 51,490 | $ | 1,941 | |||||||||||||||
Income from operations excluding certain non-cash charges | $ | 17,750 | $ | 21,119 | $ | 28,095 | $ | 20,520 | |||||||||||||||
10