Lifetime Brands, Inc. Reports First Quarter 2014 Results
EBITDA Increases 19% on 20% Sales Increase; Company Reaffirms Net
Sales Guidance for 2014 of Approximately
-
Consolidated net sales for the quarter were
$118.4 million , an increase of$19.7 million , or 20.0%, as compared to$98.7 million for the corresponding period in 2013. -
Consolidated net sales for the Company’s wholesale segment were
$113.8 million , an increase of$20.7 million or 22.2%, as compared to net sales of$93.1 million for the corresponding period in 2013. Consolidated net wholesale sales in the 2014 period included$17.1 million of net sales from Kitchen Craft and other acquisitions that were completed in the first quarter of 2014. -
Gross margin was
$44.3 million , or 37.4%, as compared to$36.3 million , or 36.8% for the corresponding period in 2013. Gross margin for the wholesale segment was 36.2% for the 2014 period, as compared to 34.9% for the corresponding period in 2013. -
Net loss for the quarter was
$2.9 million , as compared to$0.6 million for the corresponding period in 2013. -
Diluted net loss per common share was
$0.22 , as compared to$0.05 for the corresponding period in 2013. -
Adjusted net loss was
$1.7 million , or$0.13 per diluted share, in the 2014 period, as compared to adjusted net loss of$0.6 million , or$0.05 per diluted share, in the 2013 period. -
Consolidated EBITDA was
$3.7 million , as compared to$3.1 million for the corresponding 2013 period, an increase of 18.9%. -
Equity in earnings (losses), net of taxes was
$(0.2) million in the 2014 period as compared to$0.2 million in corresponding 2013 period.
“I am very pleased with the Company’s progress during the quarter, which includes the results of the four businesses we acquired during the period. These acquisitions necessitated significant non-recurring acquisition expenses and a write-off of debt financing fees that, combined with higher other SG&A expenses -- especially increased staffing levels to enable us to achieve our aggressive growth targets -- produced a decline in net results for the current quarter versus last year. However, as we reported, EBITDA increased 18.9% over the comparable quarter of last year. We expect the impact of the ongoing greater SG&A expenses to be mitigated by higher levels of sales during the second half of the year.
“In January, we acquired
“In February, we purchased the intellectual property and certain assets
of
“Also in February, we acquired the intellectual property and certain
assets of
“In March, we purchased the business and certain assets of La Cafetière
Ltd., a supplier of products to brew and serve coffee and tea; further
broadening our product classifications and strengthening our presence in
the
“Of these acquisitions, only Kitchen Craft recorded any significant
revenues during the first quarter. However, we expect all four to be
running smoothly in the second half of the year and to add over
“In addition, we will begin supplying kitchenware products to almost 400
Walmart stores in
“On our last conference call, we stated that, for all of 2014, we
foresaw sales increasing by approximately 5% organically and
approximately 15% from acquisitions, to a total of approximately
Mr. Siegel added,
“Grupo Vasconia S.A.B., our 30%-owned
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. As required by
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 corporate website is www.lifetimebrands.com.
LIFETIME BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands - except per share data) (unaudited) |
|||||||||||
Three Months Ended | |||||||||||
March 31, | |||||||||||
2014 | 2013 | ||||||||||
Net sales | $ | 118,411 | $ | 98,657 | |||||||
Cost of sales | 74,079 | 62,345 | |||||||||
Gross margin | 44,332 | 36,312 | |||||||||
Distribution expenses | 12,346 | 10,796 | |||||||||
Selling, general and administrative expenses | 34,183 | 25,631 | |||||||||
Loss from operations | (2,197 | ) | (115 | ) | |||||||
Interest expense | (1,390 | ) | (1,162 | ) | |||||||
Loss on early retirement of debt | (319 | ) | - | ||||||||
Loss before income taxes and equity in earnings | (3,906 | ) | (1,277 | ) | |||||||
Income tax benefit | 1,185 | 399 | |||||||||
Equity in (losses) earnings, net of taxes | (208 | ) | 246 | ||||||||
NET LOSS | $ | (2,929 | ) | $ | (632 | ) | |||||
BASIC LOSS PER COMMON SHARE | $ | (0.22 | ) | $ | (0.05 | ) | |||||
DILUTED LOSS PER COMMON SHARE | $ | (0.22 | ) | $ | (0.05 | ) | |||||
Cash dividends declared per common share | $ | 0.03750 | $ | 0.03125 | |||||||
LIFETIME BRANDS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands - except share data) (unaudited) |
|||||||||||
March 31, |
December 31, | ||||||||||
2014 | 2013 | ||||||||||
(unaudited) | |||||||||||
ASSETS | |||||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ | 4,223 | $ | 4,947 | |||||||
Accounts receivable, less allowances of $6,402 at March 31, 2014
and |
83,568 | 87,217 | |||||||||
Inventory | 136,384 | 112,791 | |||||||||
Prepaid expenses and other current assets | 11,254 | 5,781 | |||||||||
Deferred income taxes | 3,969 | 3,940 | |||||||||
TOTAL CURRENT ASSETS | 239,398 | 214,676 | |||||||||
PROPERTY AND EQUIPMENT, net | 27,707 | 27,698 | |||||||||
INVESTMENTS | 36,750 | 36,948 | |||||||||
INTANGIBLE ASSETS, net | 112,168 | 55,149 | |||||||||
OTHER ASSETS | 3,228 | 2,268 | |||||||||
TOTAL ASSETS | $ | 419,251 | $ | 336,739 | |||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
CURRENT LIABILITIES | |||||||||||
Current maturity of Credit Agreement Term Loan | $ | 7,500 | $ | - | |||||||
Current maturity of Senior Secured Term Loan | - | 3,937 | |||||||||
Accounts payable | 28,284 | 21,426 | |||||||||
Accrued expenses | 35,539 | 41,095 | |||||||||
Income taxes payable | 1,701 | 3,036 | |||||||||
TOTAL CURRENT LIABILITIES | 73,024 | 69,494 | |||||||||
DEFERRED RENT & OTHER LONG-TERM LIABILITIES | 20,225 | 18,644 | |||||||||
DEFERRED INCOME TAXES | 10,608 | 1,777 | |||||||||
REVOLVING CREDIT FACILITY | 84,430 | 49,231 | |||||||||
CREDIT AGREEMENT TERM LOAN | 42,500 | - | |||||||||
SENIOR SECURED TERM LOAN | - | 16,688 | |||||||||
STOCKHOLDERS’ EQUITY | |||||||||||
Preferred stock, $.01 par value, shares authorized: 100 shares of
Series A |
- | - | |||||||||
Common stock, $.01 par value, shares authorized: 25,000,000; |
136 | 128 | |||||||||
Paid-in capital | 156,575 | 146,273 | |||||||||
Retained earnings | 34,767 | 38,224 | |||||||||
Accumulated other comprehensive loss | (3,014 | ) | (3,720 | ) | |||||||
TOTAL STOCKHOLDERS’ EQUITY | 188,464 | 180,905 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 419,251 | $ | 336,739 | |||||||
LIFETIME BRANDS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) |
|||||||||||
Three Months Ended | |||||||||||
March 31, | |||||||||||
2014 | 2013 | ||||||||||
OPERATING ACTIVITIES | |||||||||||
Net loss | $ | (2,929 | ) | $ | (632 | ) | |||||
Adjustments to reconcile net loss to net cash provided by operating |
|||||||||||
Provision for doubtful accounts | 50 | 32 | |||||||||
Depreciation and amortization | 3,613 | 2,523 | |||||||||
Amortization of financing costs | 149 | 123 | |||||||||
Deferred rent | (274 | ) | (199 | ) | |||||||
Deferred income tax | (179 | ) | |||||||||
Stock compensation expense | 726 | 671 | |||||||||
Undistributed equity earnings | 208 | (246 | ) | ||||||||
Loss on retirement of debt | 319 | - | |||||||||
Changes in operating assets and liabilities (excluding the effects
of business |
|||||||||||
Accounts receivable | 19,218 | 35,185 | |||||||||
Inventory | (3,068 | ) | 541 | ||||||||
Prepaid expenses, other current assets and other assets | (5,130 | ) | (94 | ) | |||||||
Accounts payable, accrued expenses and other liabilities | (10,197 | ) | (8,009 | ) | |||||||
Income taxes payable | (2,947 | ) | (4,933 | ) | |||||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | (441 | ) | 24,962 | ||||||||
INVESTING ACTIVITIES | |||||||||||
Purchases of property and equipment | (1,156 | ) | (1,187 | ) | |||||||
Kitchen Craft acquisition, net of cash acquired | (59,856 | ) | - | ||||||||
Other business acquisitions, net of cash acquired | (5,280 | ) | - | ||||||||
NET CASH USED IN INVESTING ACTIVITIES | (66,292 | ) | (1,187 | ) | |||||||
FINANCING ACTIVITIES | |||||||||||
Proceeds from Revolving Credit Facility | 78,657 | 40,121 | |||||||||
Repayments of Revolving Credit Facility | (43,458 | ) | (62,750 | ) | |||||||
Repayment of Senior Secured Term Loan | (20,625 | ) | - | ||||||||
Proceeds from Credit Agreement Term Loan | 50,000 | - | |||||||||
Proceeds from the exercise of stock options | 1,200 | 302 | |||||||||
Cash dividend paid | (501 | ) | (319 | ) | |||||||
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 65,273 | (22,646 | ) | ||||||||
Effect of foreign exchange on cash | 736 | (572 | ) | ||||||||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (724 | ) | 557 | ||||||||
Cash and cash equivalents at beginning of year | 4,947 | 1,871 | |||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 4,223 | $ | 2,428 | |||||||
LIFETIME BRANDS, INC. Supplemental Information (In thousands) |
||||||
Consolidated EBITDA for the four quarters ended | ||||||
March 31, 2014 | ||||||
Three months ended March 31, 2014 | $ | 3,660 | ||||
Three months ended December 31, 2013 | 21,011 | |||||
Three months ended September 30, 2013 | 15,067 | |||||
Three months ended June 30, 2013 | 4,321 | |||||
Total for the four quarters | $ | 44,059 | ||||
Consolidated EBITDA for the four quarters ended | ||||||
March 31, 2013 | ||||||
Three months ended March 31, 2013 | $ | 3,079 | ||||
Three months ended December 31, 2012 | 17,868 | |||||
Three months ended September 30, 2012 | 11,568 | |||||
Three months ended June 30, 2012 | 5,584 | |||||
Total for the four quarters | $ | 38,099 | ||||
Reconciliation of GAAP to Non-GAAP Operating Results |
||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, |
December 31, |
September 30, |
June 30, |
|||||||||||||||||
Net income (loss) as reported | $ | (2,929 | ) | $ | 9,388 | $ | 1,093 | $ | (568 | ) | ||||||||||
Subtract out: | ||||||||||||||||||||
Undistributed equity (earnings) losses, net | 208 | (332 | ) | 5,452 | 480 | |||||||||||||||
Add back: | ||||||||||||||||||||
Income tax provision (benefit) | (1,185 | ) | 6,182 | 3,869 | (477 | ) | ||||||||||||||
Interest expense | 1,390 | 1,256 | 1,280 | 1,149 | ||||||||||||||||
Depreciation and amortization | 3,613 | 2,708 | 2,517 | 2,667 | ||||||||||||||||
Stock compensation expense | 726 | 750 | 738 | 722 | ||||||||||||||||
Loss on early retirement of debt | 319 | 102 | - | - | ||||||||||||||||
Restructuring | - | - | 79 | 288 | ||||||||||||||||
Permitted acquisition related expenses | 1,518 | 957 | 39 | 60 | ||||||||||||||||
Consolidated EBITDA | $ | 3,660 | $ | 21,011 | $ | 15,067 | $ | 4,321 | ||||||||||||
LIFETIME BRANDS, INC. Supplemental Information (In thousands) |
|||||||||||||||||||||
Reconciliation of GAAP to Non-GAAP Operating Results (continued) |
|||||||||||||||||||||
Three Months Ended | |||||||||||||||||||||
March 31, |
December 31, |
September 30, |
June 30, |
||||||||||||||||||
Net income (loss) as reported | $ | (632 | ) | $ | 15,154 | $ | 3,890 | $ | 559 | ||||||||||||
Subtract out: | |||||||||||||||||||||
Undistributed equity earnings | (246 | ) | (4,464 | ) | (695 | ) | (108 | ) | |||||||||||||
Add back: | |||||||||||||||||||||
Income tax provision (benefit) | (399 | ) | 2,596 | 1,930 | 94 | ||||||||||||||||
Interest expense | 1,162 | 1,254 | 1,271 | 1,675 | |||||||||||||||||
Depreciation and amortization | 2,523 | 2,446 | 2,409 | 2,262 | |||||||||||||||||
Stock compensation expense | 671 | 662 | 679 | 754 | |||||||||||||||||
Loss on early retirement of debt | - | - | 1,015 | 348 | |||||||||||||||||
Intangible asset impairment | - | - | 1,069 | - | |||||||||||||||||
Permitted acquisition related expenses | - | 220 | - | - | |||||||||||||||||
Consolidated EBITDA | $ | 3,079 | $ | 17,868 | $ | 11,568 | $ | 5,584 | |||||||||||||
Consolidated EBITDA is a non-GAAP measure that the Company defines as net income (loss), adjusted to exclude undistributed equity (earnings) losses, income taxes, interest, depreciation and amortization, stock compensation expense, intangible asset impairment and acquisition related expenses, as shown in the table above.
Adjusted Net Loss and Adjusted Diluted Loss Per Share: |
||||||||||||||||
Three Months Ended | ||||||||||||||||
March 31, | ||||||||||||||||
2014 |
2013 |
|||||||||||||||
Net loss as reported | $ | (2,929 | ) | (632 | ) | |||||||||||
Adjustments: | ||||||||||||||||
Loss on early retirement of debt, net of tax | 191 | - | ||||||||||||||
Acquisition related expenses, net of tax | 989 | - | ||||||||||||||
Adjusted net loss | $ | (1,749 | ) | $ | (632 | ) | ||||||||||
Adjusted diluted loss per share | $ | (0.13 | ) | $ | (0.05 | ) |
Source:
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