Lifetime Brands, Inc. Reports Third Quarter 2012 Results
Declares Quarterly Dividend of
Net sales for the three and nine months ended
Gross margin percentage for the three months ended
Net income for the three months ended
Adjusted net income for the quarter was
“I am pleased to report that our core Kitchenware products category
performed well during the quarter, as it has all year; reflecting
increases in our Kitchen Tools & Gadgets and Kitchen Cutlery & Cutting
Board product lines, and strong gains in Cookware, driven by the
introduction our new
“These gains were offset by declines in our Tabletop and Home Solutions
product categories. Sales of tabletop products were negatively impacted
by several factors, including a decision to restrict sales of
“As previously noted, we are transitioning some of our home décor business to higher quality branded products sold under our Mikasa® and Pfaltzgraff® brands.
“I am pleased to report that Hurricane Sandy and its aftermath had little impact on our operations.
“Our holiday season is shaping up well. Based on our current bookings and orders, we expect consolidated net sales for the fourth quarter to be approximately 5% greater than net sales in the fourth quarter of 2011.”
On
Conference Call
The Company has scheduled a conference call for
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.
EBITDA is a non-GAAP measure that the Company defines as net income, adjusted to exclude undistributed equity earnings, an extraordinary item, income taxes, interest, depreciation and amortization, restructuring expenses, stock compensation expense, acquisition related expenses, intangible asset impairment and loss on early retirement of debt, as shown in the table below. Adjusted net income and adjusted diluted income per share are non-GAAP measures that the Company defines as net income, adjusted to exclude intangible asset impairment, loss on early retirement of debt, an expense related to retirement benefit obligations, acquisition related expenses and the equity earnings from an entity that discontinued the sale of products in late 2011 and include income tax adjustments to reflect a normalized annual tax rate.
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.
The Company’s website is www.lifetimebrands.com.
LIFETIME BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands - except per share data) (unaudited) |
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Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||
Net sales | $ | 128,050 | $ | 124,663 | $ | 332,030 | $ | 306,807 | ||||||||||||||||
Cost of sales | 83,141 | 80,424 | 211,287 | 195,132 | ||||||||||||||||||||
Gross margin | 44,909 | 44,239 | 120,743 | 111,675 | ||||||||||||||||||||
Distribution expenses | 10,536 | 10,352 | 31,943 | 30,598 | ||||||||||||||||||||
Selling, general and administrative expenses | 25,893 | 23,589 | 74,935 | 66,451 | ||||||||||||||||||||
Intangible asset impairment | 1,069 | - | 1,069 | - | ||||||||||||||||||||
Income from operations | 7,411 | 10,298 | 12,796 | 14,626 | ||||||||||||||||||||
Interest expense | (1,271 | ) | (1,789 | ) | (4,644 | ) | (5,807 | ) | ||||||||||||||||
Loss on early retirement of debt | (1,015 | ) | - | (1,363 | ) | - | ||||||||||||||||||
Income before income taxes and equity in earnings | 5,125 | 8,509 | 6,789 | 8,819 | ||||||||||||||||||||
Income tax provision | (1,930 | ) | (2,089 | ) | (2,612 | ) | (2,609 | ) | ||||||||||||||||
Equity in earnings, net of taxes | 695 | 1,113 | 1,616 | 2,437 | ||||||||||||||||||||
NET INCOME | $ | 3,890 | $ | 7,533 | $ | 5,793 | $ | 8,647 | ||||||||||||||||
BASIC INCOME PER COMMON SHARE | $ | 0.31 | $ | 0.62 | $ | 0.46 | $ | 0.72 | ||||||||||||||||
DILUTED INCOME PER COMMON SHARE | $ | 0.30 | $ | 0.60 | $ | 0.45 | $ | 0.69 | ||||||||||||||||
Cash dividends declared per common share | $ | 0.025 | $ | - | $ | 0.10 | $ | 0.05 | ||||||||||||||||
LIFETIME BRANDS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands - except share data) (unaudited) |
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September 30, | December 31, | ||||||||||
2012 | 2011 | ||||||||||
(unaudited) | |||||||||||
ASSETS | |||||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ 1,749 | $ 2,972 | |||||||||
Accounts receivable, less allowances of $3,381 at September 30, 2012 and $4,602 at December 31, 2011 |
91,269 | 77,749 | |||||||||
Inventory | 128,954 | 110,337 | |||||||||
Prepaid expenses and other current assets | 6,052 | 5,264 | |||||||||
Deferred income taxes | 3,441 | 2,475 | |||||||||
TOTAL CURRENT ASSETS | 231,465 | 198,797 | |||||||||
PROPERTY AND EQUIPMENT, net | 32,002 | 34,324 | |||||||||
INVESTMENTS | 36,228 | 34,515 | |||||||||
INTANGIBLE ASSETS, net | 44,668 | 46,937 | |||||||||
OTHER ASSETS | 2,904 | 4,172 | |||||||||
TOTAL ASSETS | $ 347,267 | $ 318,745 | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
CURRENT LIABILITIES | |||||||||||
Revolving Credit Facility | $ 37,826 | $ 15,000 | |||||||||
Current portion of Senior Secured Term Loan | 3,500 | - | |||||||||
Accounts payable | 27,133 | 18,985 | |||||||||
Accrued expenses | 35,349 | 33,877 | |||||||||
Income taxes payable | 1,342 | 2,100 | |||||||||
TOTAL CURRENT LIABILITIES | 105,150 | 69,962 | |||||||||
DEFERRED RENT & OTHER LONG-TERM LIABILITIES | 16,207 | 14,598 | |||||||||
DEFERRED INCOME TAXES | 4,821 | 5,385 | |||||||||
REVOLVING CREDIT FACILITY | 35,838 | 42,625 | |||||||||
SENIOR SECURED TERM LOAN | 31,500 | - | |||||||||
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: 12,570,899 at September 30, 2012 and 12,430,893 at December 31, 2011 |
126 | 124 | |||||||||
Paid-in capital | 139,975 | 137,467 | |||||||||
Retained earnings | 19,013 | 14,465 | |||||||||
Accumulated other comprehensive loss | (5,363) | (5,881) | |||||||||
TOTAL STOCKHOLDERS’ EQUITY | 153,751 | 146,175 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 347,267 | $ 318,745 | |||||||||
LIFETIME BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) |
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Nine Months Ended | |||||||||||||||
September 30, | |||||||||||||||
2012 | 2011 | ||||||||||||||
OPERATING ACTIVITIES | |||||||||||||||
Net income | $ | 5,793 | $ | 8,647 | |||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|||||||||||||||
Depreciation and amortization | 6,878 | 6,061 | |||||||||||||
Amortization of debt discount | - | 543 | |||||||||||||
Deferred rent | (421 | ) | (41 | ) | |||||||||||
Deferred income taxes | (687 | ) | 573 | ||||||||||||
Stock compensation expense | 2,131 | 2,105 | |||||||||||||
Undistributed equity earnings | (1,201 | ) | (1,971 | ) | |||||||||||
Loss on early retirement of debt | 1,363 | - | |||||||||||||
Intangible asset impairment | 1,069 | - | |||||||||||||
Changes in operating assets and liabilities (excluding the effects
of business
acquisitions) |
|||||||||||||||
Accounts receivable | (13,170 | ) | (23,367 | ) | |||||||||||
Inventory | (18,617 | ) | (23,223 | ) | |||||||||||
Prepaid expenses, other current assets and other assets | (883 | ) | 1,040 | ||||||||||||
Accounts payable, accrued expenses and other liabilities | 10,642 | 8,601 | |||||||||||||
Income taxes payable | (758 | ) | (6,094 | ) | |||||||||||
NET CASH USED IN OPERATING ACTIVITIES | (7,861 | ) | (27,126 | ) | |||||||||||
INVESTING ACTIVITIES | |||||||||||||||
Purchases of property and equipment | (3,371 | ) | (3,366 | ) | |||||||||||
Net proceeds from sale of property | 15 | - | |||||||||||||
NET CASH USED IN INVESTING ACTIVITIES | (3,356 | ) | (3,366 | ) | |||||||||||
FINANCING ACTIVITIES | |||||||||||||||
Proceeds from Revolving Credit Facility, net of repayments | 16,039 | 52,645 | |||||||||||||
Proceeds from Senior Secured Term Loan | 35,000 | - | |||||||||||||
Repayment of Term Loan | (40,000 | ) | - | ||||||||||||
Repurchase of 4.75% convertible senior notes | - | (24,100 | ) | ||||||||||||
Proceeds from exercise of stock options | 380 | 26 | |||||||||||||
Excess tax benefits from exercise of stock options | - | 8 | |||||||||||||
Payment of capital lease obligations | - | (74 | ) | ||||||||||||
Cash dividend paid | (935 | ) | (604 | ) | |||||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 10,484 | 27,901 | |||||||||||||
Effect of foreign exchange on cash | (490 | ) | - | ||||||||||||
DECREASE IN CASH AND CASH EQUIVALENTS | (1,223 | ) | (2,591 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 2,972 | 3,351 | |||||||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 1,749 | $ | 760 | |||||||||||
LIFETIME BRANDS, INC. Supplemental Information (In thousands) |
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Consolidated EBITDA for the four quarters ended | |||||
September 30, 2012 | |||||
Three months ended September 30, 2012 | $ | 11,568 | |||
Three months ended June 30, 2012 | 5,584 | ||||
Three months ended March 31, 2012 | 6,222 | ||||
Three months ended December 31, 2011 | 14,342 | ||||
Total for the four quarters | $ | 37,716 | |||
Consolidated EBITDA for the four quarters ended | |||||
September 30, 2011 | |||||
Three months ended September 30, 2011 | $ | 13,524 | |||
Three months ended June 30, 2011 | 7,512 | ||||
Three months ended March 31, 2011 | 2,720 | ||||
Three months ended December 31, 2010 | 17,544 | ||||
Total for the four quarters | $ | 41,300 | |||
Reconciliation of GAAP to Non-GAAP Operating Results
|
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Consolidated EBITDA: |
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Three Months Ended | |||||||||||||||||||||||||||||
September 30,
2012 |
June 30,
2012 |
March 31,
2012 |
December 31, |
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Net income as reported | $ | 3,890 | $ | 559 | $ | 1,344 | $ | 5,419 | |||||||||||||||||||||
Subtract out: | |||||||||||||||||||||||||||||
Undistributed equity earnings | (695 | ) | (108 | ) | (398 | ) | (925 | ) | |||||||||||||||||||||
Add back: | |||||||||||||||||||||||||||||
Income tax provision (benefit) | 1,930 | 94 | 588 | 3,513 | |||||||||||||||||||||||||
Interest expense | 1,271 | 1,675 | 1,698 | 1,951 | |||||||||||||||||||||||||
Loss on early retirement of debt | 1,015 | 348 | - | - | |||||||||||||||||||||||||
Intangible asset impairment | 1,069 | - | - | - | |||||||||||||||||||||||||
Depreciation and amortization | 2,409 | 2,262 | 2,207 | 2,336 | |||||||||||||||||||||||||
Stock compensation expense | 679 | 754 | 698 | 690 | |||||||||||||||||||||||||
Permitted acquisition related expenses | - | - | 85 | 1,358 | |||||||||||||||||||||||||
Consolidated EBITDA | $ | 11,568 | $ | 5,584 | $ | 6,222 | $ | 14,342 | |||||||||||||||||||||
LIFETIME BRANDS, INC. Supplemental Information (In thousands - except per share data)
Reconciliation of GAAP to Non-GAAP Operating Results (continued)
|
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Consolidated EBITDA: |
|||||||||||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||||||||||
September 30,
2011 |
June 30,
2011 |
March 31,
2011 |
December 31, |
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Net income as reported | $ | 7,533 | $ | 2,063 | $ | (949 | ) | $ | 13,928 | ||||||||||||||||||||
Subtract out: | |||||||||||||||||||||||||||||
Undistributed equity earnings | (1,113 | ) | (393 | ) | (465 | ) | (733 | ) | |||||||||||||||||||||
Extraordinary item, net of taxes | - | - | - | (2,477 | ) | ||||||||||||||||||||||||
Add back: | |||||||||||||||||||||||||||||
Income tax provision (benefit) | 2,089 | 1,108 | (588 | ) | 1,600 | ||||||||||||||||||||||||
Interest expense | 1,789 | 2,039 | 1,979 | 2,188 | |||||||||||||||||||||||||
Depreciation and amortization | 2,046 | 2,020 | 1,995 | 2,292 | |||||||||||||||||||||||||
Stock compensation expense | 682 | 675 | 748 | 746 | |||||||||||||||||||||||||
Permitted acquisition related expenses | 498 | - | - | - | |||||||||||||||||||||||||
Consolidated EBITDA | $ | 13,524 | $ | 7,512 | $ | 2,720 | $ | 17,544 | |||||||||||||||||||||
Adjusted Net Income and Adjusted Diluted Income Per Share: |
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Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||||||||||
Net income as reported | $ | 3,890 | $ | 7,533 | $ | 5,793 | $ | 8,647 | ||||||||||||||||
Adjustments: | ||||||||||||||||||||||||
Intangible asset impairment, net of tax | 645 | - | 645 | - | ||||||||||||||||||||
Loss on early retirement of debt, net of tax | 612 | - | 822 | - | ||||||||||||||||||||
Retirement benefit obligation expense, net of tax | - | - | 268 | - | ||||||||||||||||||||
Acquisition related expenses, net of tax | - | 311 | 85 | 306 | ||||||||||||||||||||
Equity in earnings of World Alliance Enterprises Limited |
- | (133 | ) | - | (448 | ) | ||||||||||||||||||
Normalized tax provision on reported income | - | (1,115 | ) | - | (784 | ) | ||||||||||||||||||
Adjusted net income | $ | 5,147 | $ | 6,596 | $ | 7,613 | $ | 7,721 | ||||||||||||||||
Adjusted diluted income per share | $ | 0.40 | $ | 0.52 | $ | 0.60 | $ | 0.62 | ||||||||||||||||
Source:
Lifetime Brands, Inc.
Laurence Winoker, 516-203-3590
Chief
Financial Officer
investor.relations@lifetimebrands.com
or
Lippert/Heilshorn
& Assoc.
Harriet Fried, SVP, 212-838-3777
hfried@lhai.com