Lifetime Brands, Inc. Reports Second Quarter Financial Results

Net Sales Increase by 19% to $115.3 Million

Company Reaffirms Net Sales Guidance for 2014

Reports Significant Investments to Support Future Growth

GARDEN CITY, N.Y.--(BUSINESS WIRE)--Aug. 5, 2014-- 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 second quarter ended June 30, 2014.

Second Quarter Financial Highlights:

• Consolidated net sales were $115.3 million in the quarter ended June 30, 2014; an increase of $18.3 million, or 18.9%, as compared to consolidated net sales of $97.0 million for the corresponding period in 2013. Consolidated net sales in the quarter ended June 30, 2014 included $16.0 million of net sales from Kitchen Craft and other acquisitions that were completed in the first quarter of 2014.
• Gross margin was $40.9 million, or 35.4%, in the quarter ended June 30, 2014, as compared to $36.4 million, or 37.5%, for the corresponding period in 2013.
• Loss from operations was $3.2 million in the quarter ended June 30, 2014, as compared to income from operations of $12,000, for the corresponding period in 2013.
• Net loss was $3.2 million, or $0.24 per diluted share, in the quarter ended June 30, 2014, as compared to net loss of $0.6 million, or $0.04 per diluted share, in the corresponding period in 2013.
• Adjusted net loss was $3.1 million, or $0.23 per diluted share, in the quarter ended June 30, 2014, as compared to adjusted net loss of $1.1 million, or $0.08 per diluted share, in the corresponding period in 2013.
• Consolidated EBITDA was $1.5 million, in the quarter ended June 30, 2014, as compared to $4.3 million for the corresponding 2013 period.
• Equity in earnings, net of taxes, was $41,000 in the quarter ended June 30, 2014 as compared to $92,000 in the corresponding 2013 period.

Six Months Financial Highlights:

• Consolidated net sales were $233.7 million in the six months ended June 30, 2014, an increase of $38.1 million, or 19.5%, as compared to net sales of $195.6 million for the corresponding period in 2013. Consolidated net sales in the six months ended June 30, 2014 included $33.2 million of net sales from Kitchen Craft and other acquisitions that were completed in the first quarter of 2014.
• Gross margin was $85.2 million, or 36.4%, in the six months ended June 30, 2014 as compared to $72.7 million, or 37.1%, for the corresponding period in 2013.
• Loss from operations was $5.4 million in the six months ended June 30, 2014, as compared to loss from operations of $0.1 million, for the corresponding period in 2013.
• Net loss was $6.1 million, or $0.46 per diluted share, in the six months ended June 30, 2014, as compared to net loss of $1.2 million, or $0.09 per diluted share, in the 2013 period.
• Adjusted net loss was $4.8 million, or $0.36 per diluted share, in the six months ended June 30, 2014, as compared to adjusted net loss of $1.7 million, or $0.13 per diluted share, in the 2013 period.
• Consolidated EBITDA was $5.2 million in the six months ended June 30, 2014, as compared to $7.4 million for the corresponding 2013 period.
• Equity in losses, net of taxes was $0.2 million in the six months ended June 30, 2014 as compared to equity in earnings of $0.3 million, net of taxes in the corresponding 2013 period.

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

“During the quarter, our U.S. wholesale segment was challenged by the slow retail environment and by uneven retailer replenishment activity that did not keep pace with stronger point-of-sale performance. Wholesale gross margin in the U.S. declined during the quarter, as we moved to create opportunities to expand our market share; however, we expect to recoup a substantial portion of this decline during the balance of the year. U.S. SG&A increased, reflecting the acquisition of Built NY and investments to grow our domestic business. Excluding these activities, U.S. SG&A expenses increased by approximately 3%.

“Our international segment, comprising Creative Tops and Kitchen Craft, produced outstanding results. Creative Tops recorded a 45% organic sales growth in local currency, and we are pleased with Kitchen Craft’s performance. The segment’s gross margin was strong, reflecting a significant improvement for Creative Tops and the inclusion of Kitchen Craft, which is in a higher margin product category. SG&A expenses for the segment as a percentage of net sales improved from the prior period.

“Our consolidated gross margin for the full year 2014 is expected to be comparable to 2013’s. Improvements in gross margin for Creative Tops and the inclusion of Kitchen Craft are expected to offset any decline in the U.S. segment.

Grupo Vasconia, our Partner Company in Mexico, also recorded a strong quarter with significant increases in both net sales and income from operations. Net income and our share of its income would have increased but for a value added tax recovery in the 2013 quarter.”

Mr. Siegel continued, “The first half of 2014 has been a period of remarkable activity, in which we successfully executed strategic initiatives in acquisitions, brand development, channel expansion, product innovation, and geographic growth. In this period, we:

• Completed four acquisitions, Kitchen Craft, La Cafetière, Built NY and Empire Silver;
• Introduced 4,000 new products and introduced our new acquisitions and other new brands, including Bombay^®, Brick Oven^®, Debbie Meyer^® and Reo^®;
• Appointed new managers to oversee the development of a new Hong Kong-based sales team, which we are supporting with a new 12,000 square foot showroom and a new third-party bonded distribution facility in China;
• Began supplying kitchenware and tableware products to the 400 Walmart Supercenters in China and hired a sales team to service that account, together with other Chinese retailers, and opened a distribution facility to support that business;
• Appointed managers to coordinate export sales by our U.S. and U.K. based companies and to focus on the independent retail store channel; and
• Made significant investments in Lifetime to position it for growth in the U.S. and internationally. These investments include hiring talent to strengthen our global sourcing and quality control teams, to further grow our U.S. businesses, to support our new Wal-Mart business in China and to develop a Hong Kong based export business.

“We previously stated that we expected net sales for the full year to total approximately $600 million. Today, we are reaffirming that guidance.”

Dividend

On July 29, 2014, the Board of Directors declared a quarterly dividend of $0.0375 per share payable on November 14, 2014 to shareholders of record on October 31, 2014.

Conference Call

The Company has scheduled a conference call for Tuesday, August 5, 2014 at 11:00 a.m. ET. The dial-in number for the conference call is (877) 474-9505 or (857) 244-7558, passcode #20312904. A replay of the call will also be available through Tuesday, August 12, 2014 and can be accessed by dialing (888) 286-8010 or (617) 801-6888, conference ID #37651110. 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 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																Six Months Ended
						June 30,																June 30,
						2014								2013								2014								2013
Net sales						$		115,321						$		96,976						$		233,732						$		195,633
Cost of sales								74,469								60,620								148,548								122,965
Gross margin								40,852								36,356								85,184								72,668
Distribution expenses								12,460								10,129								24,806								20,925
Selling, general and administrative expenses								31,424								25,927								65,607								51,558
Restructuring expenses								125								288								125								288
Income (loss) from operations								(3,157	)							12								(5,354	)							(103	)
Interest expense								(1,672	)							(1,149	)							(3,062	)							(2,311	)
Loss on early retirement of debt								-								-								(319	)							-
Loss before income taxes and equity in earnings								(4,829	)							(1,137	)							(8,735	)							(2,414	)
Income tax benefit								1,586								477								2,771								876
Equity in earnings (losses), net of taxes								41								92								(167	)							338
NET LOSS						$		(3,202	)					$		(568	)					$		(6,131	)					$		(1,200	)
Weighted-average shares outstanding - basic and diluted								13,483								12,808								13,379								12,784
BASIC AND DILUTED LOSS PER COMMON SHARE						$		(0.24	)					$		(0.04	)					$		(0.46	)					$		(0.09	)
Cash dividends declared per common share						$		0.0375						$		0.03125						$		0.0750						$		0.0625

LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands - except share data)
(unaudited)
						June 30,								December 31,
						2014								2013
						(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents						$		5,229						$		4,947
Accounts receivable, less allowances of $6,082 at June 30, 2014 and
$5,209 at December 31, 2013								70,059								87,217
Inventory								153,241								112,791
Prepaid expenses and other current assets								11,365								5,781
Deferred income taxes								3,994								3,940
TOTAL CURRENT ASSETS								243,888								214,676
PROPERTY AND EQUIPMENT, net								27,127								27,698
INVESTMENTS								37,407								36,948
INTANGIBLE ASSETS, net								110,800								55,149
OTHER ASSETS								3,315								2,268
	TOTAL ASSETS					$		422,537						$		336,739
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturity of Credit Agreement Term Loan						$		10,000						$		-
Current maturity of Senior Secured Term Loan								-								3,937
Accounts payable								27,823								21,426
Accrued expenses								27,808								41,095
Income taxes payable								333								3,036
TOTAL CURRENT LIABILITIES								65,964								69,494
DEFERRED RENT & OTHER LONG-TERM LIABILITIES								20,827								18,644
DEFERRED INCOME TAXES								10,665								1,777
REVOLVING CREDIT FACILITY								98,349								49,231
CREDIT AGREEMENT TERM LOAN								40,000								-
SENIOR SECURED TERM LOAN								-								16,688
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: 13,511,864 at June 30, 2014 and 12,777,407 at
December 31, 2013								136								128
Paid-in capital								157,546								146,273
Retained earnings								31,058								38,224
Accumulated other comprehensive loss								(2,008	)							(3,720	)
TOTAL STOCKHOLDERS’ EQUITY								186,732								180,905
	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY					$		422,537						$		336,739

LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
					Six Months Ended
					June 30,
					2014								2013
OPERATING ACTIVITIES
Net loss					$		(6,131	)					$		(1,200	)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Provision for doubtful accounts							156								32
Depreciation and amortization							7,329								5,190
Amortization of financing costs							311								266
Deferred rent							(530	)							(459	)
Deferred income taxes							-								180
Stock compensation expense							1,439								1,393
Undistributed equity in earnings, net							167								234
Loss on early retirement of debt							319								-
Changes in operating assets and liabilities (excluding the effects of
business acquisitions)
Accounts receivable							33,180								39,877
Inventory							(18,960	)							(7,970	)
Prepaid expenses, other current assets and other assets							(4,050	)							(3,512	)
Accounts payable, accrued expenses and other liabilities							(17,356	)							(3,112	)
Income taxes payable							(3,277	)							(3,615	)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES							(7,403	)							27,304
INVESTING ACTIVITIES
Purchases of property and equipment							(2,783	)							(1,992	)
Kitchen Craft acquisition, net of cash acquired							(61,676	)							-
Other acquisitions, net of cash acquired							(5,280	)							-
Net proceeds from sale of property							70								-
NET CASH USED IN INVESTING ACTIVITIES							(69,669	)							(1,992	)
FINANCING ACTIVITIES
Proceeds from Revolving Credit Facility							163,986								88,155
Repayments of Revolving Credit Facility							(115,102	)							(107,208	)
Repayments of Senior Secured Term Loan							(20,625	)							(3,500	)
Proceeds from Credit Agreement Term Loan							50,000								-
Payment of financing costs							(1,375	)							-
Payments for common stock repurchases							-								(3,229	)
Proceeds from exercise of stock options							1,460								676
Cash dividends paid							(1,007	)							(720	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES							77,337								(25,826	)
Effect of foreign exchange on cash							17								(175	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS							282								(689	)
Cash and cash equivalents at beginning of period							4,947								1,871
CASH AND CASH EQUIVALENTS AT END OF PERIOD					$		5,229						$		1,182

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)
					Consolidated EBITDA for the Four Quarters Ended June 30, 2014
Three months ended June 30, 2014					$	1,494
Three months ended March 31, 2014						3,660
Three months ended December 31, 2013						21,011
Three months ended September 30, 2013						15,067
Total for the four quarters					$	41,232
					Consolidated EBITDA for the Four Quarters Ended June 30, 2013
Three months ended June 30, 2013					$	4,321
Three months ended March 31, 2013						3,079
Three months ended December 31, 2012						17,868
Three months ended September 30, 2012						11,568
Total for the four quarters					$	36,836

Reconciliation of GAAP to Non-GAAP Operating Results
Consolidated EBITDA:
							Three Months Ended
							June 30, 2014									March 31, 2014									December 31, 2013								September 30, 2013
Net income as reported							$		(3,202	)						$		(2,929	)						$		9,388						$		1,093
	Subtract out:
		Undistributed equity in (earnings) losses, net							(41	)								208									(332	)							5,452
	Add back:
		Income tax provision (benefit)							(1,586	)								(1,185	)								6,182								3,869
		Interest expense							1,672									1,390									1,256								1,280
		Loss on early retirement of debt							-									319									102								-
		Depreciation and amortization							3,716									3,613									2,708								2,517
		Stock compensation expense							713									726									750								738
		Permitted acquisition related expenses							97									1,518									957								39
		Restructuring expenses							125									-									-								79
Consolidated EBITDA							$		1,494							$		3,660							$		21,011						$		15,067

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)
Reconciliation of GAAP to Non-GAAP Operating Results (continued)
Consolidated EBITDA:
							Three Months Ended
							June 30, 2013										March 31, 2013										December 31, 2012								September 30, 2012
Net income as reported							$				(568	)					$				(632	)					$		15,154						$		3,890
	Subtract out:
		Undistributed equity in (earnings) losses, net									480										(246	)							(4,464	)							(695	)
	Add back:
		Income tax provision (benefit)									(477	)									(399	)							2,596								1,930
		Interest expense									1,149										1,162								1,254								1,271
		Loss on early retirement of debt									-										-								-								1,015
		Depreciation and amortization									2,667										2,523								2,446								2,409
		Stock compensation expense									722										671								662								679
		Intangible asset impairment									-										-								-								1,069
		Permitted acquisition related expenses									60										-								220								-
		Restructuring expenses									288										-								-								-
Consolidated EBITDA							$				4,321						$				3,079						$		17,868						$		11,568

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, 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 loss and adjusted diluted loss per common share:
						Three Months Ended																		Six Months Ended
						June 30,																		June 30,
						2014									2013									2014								2013
Net loss as reported						$			(3,202	)					$			(568	)					$		(6,131	)					$		(1,200	)
Adjustments:
	Acquisition related expenses, net of tax								68									-								1,057								-
	Loss on early retirement of debt, net of tax								-									-								191								-
	Restructuring expenses, net of tax								75									170								75								170
	Grupo Vasconia recovery of value-added taxes								-									(672	)							-								(672	)
Adjusted net loss						$			(3,059	)					$			(1,070	)					$		(4,808	)					$		(1,702	)
Adjusted diluted loss per share						$			(0.23	)					$			(0.08	)					$		(0.36	)					$		(0.13	)

Adjusted net loss in the three and six months ended June 30, 2014 excludes acquisition related expenses, the loss on retirement of debt and restructuring expenses. Adjusted net loss in the three and six months ended June 30, 2013 excludes restructuring expenses related to the planned closure of the Fred^®& Friends distribution center and a recovery by Grupo Vasconia of value-added taxes related to a 2004 tax position.

Source: Lifetime Brands, Inc.

Lifetime Brands, Inc.
Laurence Winoker, Chief Financial Officer
516-203-3590
investor.relations@lifetimebrands.com
or
Lippert/Heilshorn & Assoc.
Harriet Fried, SVP
212-838-3777
hfried@lhai.com