Lifetime Brands, Inc. Reports Fourth Quarter 2018 Financial Results

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GARDEN CITY, N.Y., March 14, 2019 (GLOBE NEWSWIRE) -- Lifetime Brands, Inc. LCUT, a leading global provider of branded kitchenware, tableware and other products used in the home, today reported its financial results for the fourth quarter and year ended December 31, 2018.

Fourth Quarter Financial Highlights:

Consolidated net sales were $228.3 million in the quarter ended December 31, 2018; an increase of $45.5 million, or 24.9%, as compared to consolidated net sales of $182.8 million for the corresponding period in 2017. In constant currency, which excludes the impact of foreign currency fluctuations, consolidated net sales increased $46.4 million, or 25.5%, as compared to consolidated net sales in the corresponding period in 2017.

Gross margin was $84.8 million, or 37.2%, as compared to $71.2 million, or 39.0%, for the corresponding period in 2017.

Income from operations was $22.9 million, as compared to $10.9 million in the prior year's quarter.

Net income was $10.0 million, or $0.49 per diluted share, in the quarter ended December 31, 2018, as compared to net income of $1.3 million, or $0.08 per diluted share, in the corresponding period in 2017.

Adjusted net income was $11.2 million, or $0.55 per diluted share, in the quarter ended December 31, 2018, as compared to adjusted net income of $7.1 million, or $0.47 per diluted share, in the corresponding period in 2017.

Full Year Financial Highlights:

Consolidated net sales were $704.5 million in the year ended December 31, 2018; an increase of $125.0 million, or 21.6%, as compared to consolidated net sales of $579.5 million for the corresponding period in 2017. In constant currency, which excludes the impact of foreign currency fluctuations, consolidated net sales increased $122.3 million, or 21.0%, as compared to consolidated net sales in the corresponding period in 2017.

Gross margin was $255.8 million, or 36.3%, in the year ended December 31, 2018 as compared to $215.2 million, or 37.1%, for the corresponding period in 2017.

Income from operations was $18.6 million, as compared to $15.2 million in the prior year.

Net loss was $1.7 million, or $0.09 per diluted share, in the year ended December 31, 2018, as compared to net income of $2.2 million, or $0.14 per diluted share, in the corresponding period in 2017.

Adjusted net income was $5.5 million, or $0.28 per diluted share, in the year ended December 31, 2018, as compared to adjusted net income of $10.6 million, or $0.71 per diluted share, in the corresponding period in 2017.

Consolidated adjusted EBITDA was $65.5 million in the year ended December 31, 2018. After giving effect to the non-recurring charge limitation permitted under our debt agreements, consolidated adjusted EBITDA was $64.9 million. A table which reconciles this non-GAAP measure to net income (loss), as reported, is included below.

Robert Kay, Lifetime's Chief Executive Officer, commented, "Our fourth quarter performance is not what we expect to deliver to our shareholders. We believe these results were in part due to significant macroeconomic events, including European softness primarily due to Brexit, and the inconsistent implementation of a new U.S. tariff program that prevented us from passing along timely price increases. Additionally, certain of our North American distribution channels delivered disappointing sales due to stocking levels and inventory management decisions by customers, including our largest e-commerce customer. While these events had an adverse impact on our results, we are optimistic that they are predominantly singular in nature."

Mr. Kay continued, "Importantly and encouragingly, the early results we are seeing in 2019 are positive, reflecting both a normalization of customer ordering behavior and promising performance of some of our newer products. We are confident that the strategic accomplishments achieved in 2018 - which include the completion of the Filament integration, a reorganization of our European operations, and meaningful cost reduction across the organization - will be critical to improving Lifetime Brands' results and profitability as we move forward."

Dividend

On Tuesday, March 12, 2019, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on May 15, 2019 to shareholders of record on May 1, 2019.

Conference Call

The Company has scheduled a conference call for Thursday, March 14, 2019 at 11:00 a.m. The dial-in number for the conference call is (866) 610-1072 or (973) 935-2840, passcode #6882627. A live webcast of the conference call will be accessible through https://event.on24.com/wcc/r/1953891-1/284F9F3F3909B4659A3B83565589FAB9. 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, adjusted net income, adjusted diluted income per common share, 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. Management uses these non-GAAP financial measurers as indicators of business performance. These non-GAAP financial 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. Such statements include all statements regarding our current and projected financial and operating performance, results, and profitability and all guidance related thereto, as well as our future plans and intentions regarding the Company and its consolidated subsidiaries. Such statements 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 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; 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; expenses and other challenges relating to the integration of the Filament Brands business and future acquisitions; 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 (Brexit); 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 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.

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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 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 and Vasconia®; respected tableware and giftware brands, including Mikasa®, Pfaltzgraff®, Fitz and Floyd®, Creative Tops®, Empire Silver™, Gorham®, International® Silver, Kirk Stieff®, Rabbit® Towle® Silversmiths, Tuttle®, Wallace®, Wilton Armetale®, V&A® and Royal Botanic Gardens Kew®; and valued home solutions brands, including Bombay®, BUILT NY®, Taylor® Bath and Taylor® Weather. 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

 
LIFETIME BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share data)
 
 Three Months Ended
December 31,
 Year Ended
December 31,
  2018   2017   2018   2017 
        
Net sales$228,274  $182,770  $704,542  $579,476 
Cost of sales 143,467   111,539   448,785   364,319 
Gross margin 84,807   71,231   255,757   215,157 
Distribution expenses 20,340   18,540   69,716   58,050 
Selling, general and administrative expenses 40,603   41,331   162,933   140,903 
Impairment of goodwill -   -   2,205   - 
Restructuring expenses 971   498   2,324   1,024 
Income from operations 22,893   10,862   18,579   15,180 
Interest expense (5,591)  (1,177)  (18,004)  (4,291)
Loss on early retirement of debt -   -   (66)  (110)
Income before income taxes and equity in earnings 17,302   9,685   509   10,779 
Income tax provision (7,558)  (8,169)  (2,889)  (9,032)
Equity in earnings (losses), net of taxes 243   (265)  660   407 
NET INCOME (LOSS)$9,987  $1,251  $(1,720) $2,154 
        
                
Weighted-average shares outstanding- basic 20,376   14,592   19,452   14,505 
                
BASIC INCOME (LOSS) PER COMMON SHARE$0.49  $0.09  $(0.09) $0.15 
        
Weighted-average shares outstanding- diluted 20,454   14,960   19,452   14,955 
                
DILUTED INCOME (LOSS) PER COMMON SHARE$0.49  $0.08  $(0.09) $0.14 


LIFETIME BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands - except share data)
 
 December 31,
  2018   2017 
    
ASSETS   
CURRENT ASSETS   
Cash and cash equivalents$7,647  $7,600 
Accounts receivable, less allowances of $7,855 at December 31, 2018 and $6,190 at December 31, 2017 125,292   108,033 
Inventory 173,601   132,436 
Prepaid expenses and other current assets 10,822   10,354 
Income taxes receivable 1,442   - 
TOTAL CURRENT ASSETS 318,804   258,423 
    
PROPERTY AND EQUIPMENT, net 25,762   23,065 
INVESTMENTS 22,582   23,978 
INTANGIBLE ASSETS, net 338,847   88,479 
DEFERRED INCOME TAXES 733   5,826 
OTHER ASSETS 1,844   1,750 
TOTAL ASSETS$708,572  $401,521 
    
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturity of term loan$1,253  $- 
Short term loan -   69 
Accounts payable 38,167   25,461 
Accrued expenses 45,456   44,121 
Income taxes payable -   1,864 
TOTAL CURRENT LIABILITIES 84,876   71,515 
    
DEFERRED RENT & OTHER LONG-TERM LIABILITIES 23,339   20,249 
DEFERRED INCOME TAXES 15,141   4,423 
INCOME TAXES PAYABLE, LONG-TERM 949   311 
REVOLVING CREDIT FACILITY 42,080   94,744 
TERM LOAN 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 -   - 
Common stock, $.01 par value, shares authorized: 50,000,000 at December 31, 2018 and 2017; shares issued and outstanding: 20,764,143 at December 31, 2018 and 14,902,527 at December 31, 2017 208   149 
Paid-in capital 258,637   178,909 
Retained earnings 55,264   60,546 
Accumulated other comprehensive loss (34,616)  (29,325)
TOTAL STOCKHOLDERS' EQUITY 279,493   210,279 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY$708,572  $401,521 


LIFETIME BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
 Year ended
December 31,
  2018   2017 
OPERATING ACTIVITIES   
Net (loss) income$(1,720) $2,154 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:   
Depreciation and amortization 23,329   14,189 
Impairment of goodwill 2,205   - 
Amortization of financing costs 1,543   519 
Deferred rent 57   (642)
Deferred income taxes 2,086   1,030 
Stock compensation expense 4,135   3,390 
Undistributed equity earnings (545)  (379)
Loss on early retirement of debt 66   110 
Contingent consideration fair value adjustment (1,774)  - 
Changes in operating assets and liabilities (excluding the effects of business acquisitions)   
Accounts receivable 8,020   1,481 
Inventory (13,819)  10,818 
Prepaid expenses, other current assets and other assets 540   (951)
Accounts payable, accrued expenses and other liabilities (3,153)  (9,778)
Income taxes receivable (1,442)  - 
Income taxes payable (353)  (4,935)
NET CASH PROVIDED BY OPERATING ACTIVITIES  19,175   17,006 
    
INVESTING ACTIVITIES   
Purchases of property and equipment (7,902)  (6,311)
Filament acquisition, net of cash acquired (216,527)  - 
Acquisitions, net of cash acquired -   (9,072)
Net proceeds from sale of property 249   15 
NET CASH USED IN INVESTING ACTIVITIES (224,180)  (15,368)
    
FINANCING ACTIVITIES   
Proceeds from revolving credit facility 268,912   237,658 
Repayments of revolving credit facility (320,767)  (229,696)
Proceeds from Term Loan 275,000   - 
Repayments of Term Loan (2,063)  - 
Repayments of Credit Agreement term loan -   (9,500)
Proceeds from short term loan 216   187 
Repayments of short term loan (278)  (239)
Payment of financing costs (11,171)  (31)
Payment of equity issuance costs (936)  - 
Cash dividends paid (3,273)  (2,475)
Payment of capital lease obligations (77)  (94)
Proceeds from the exercise of stock options 286   2,537 
Payments of tax withholding for stock based compensation (561)  (644)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES  205,288   (2,297)
    
Effect of foreign exchange on cash (236)  376 
    
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 47   (283)
    
Cash and cash equivalents at beginning of year 7,600   7,883 
    
CASH AND CASH EQUIVALENTS AT END OF YEAR$7,647  $7,600 


LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)
 
Reconciliation of GAAP to Non-GAAP Operating Results
 
Consolidated adjusted EBITDA for the year ended December 31, 2018:
 
  Three Months Ended Year Ended
  March 31,
2018
 June 30,
2018
 September 30,
2018
 December 31,
2018
 December 31,
2018
           
  (in thousands)
Net (loss) income as reported $(11,598) $(6,057)  5,948  $9,987  $(1,720)
Subtract out:          
Undistributed equity (earnings) losses, net  (77)  (155)  (185)  (128)  (545)
Add back:          
Income tax provision (benefit)  (3,810)  (1,765)  906   7,558   2,889 
Interest expense  2,103   4,676   5,634   5,591   18,004 
Loss on early retirement of debt  66   -   -   -   66 
Depreciation and amortization  4,309   6,422   6,076   6,522   23,329 
Impairment of goodwill  -   -   2,205   -   2,205 
Stock compensation expense  838   921   1,268   1,108   4,135 
Contingent consideration fair value adjustment  -   -   -   (1,774)  (1,774)
Unrealized loss (gain) on foreign currency contracts  393   (2,112)  (190)  (33)  (1,942)
Other permitted non-cash charges  287   916   307   -   1,510 
Acquisition related expenses  809   391   43   523   1,766 
Restructuring expenses  406   395   552   971   2,324 
Integration charges  35   110   103   433   681 
Warehouse relocation  2,384   168   55   118   2,725 
Pro forma Filament adjustment  3,326   -   -   -   3,326 
Projected synergies  -   -   -   -   8,546 
Consolidated adjusted EBITDA, before limitation $(529) $3,910  $22,722  $30,876  $65,525 
Permitted non-recurring charge limitation          (605)
Consolidated adjusted EBITDA         $64,920 
           
Consolidated adjusted EBITDA is a non-GAAP financial measure which is defined in the Company's debt agreements. Adjusted EBITDA is defined as net income (loss), adjusted to exclude undistributed equity in earnings (losses), income tax provision (benefit), interest, losses on early retirement of debt, depreciation and amortization, impairment of goodwill, stock compensation expense, unrealized (gain) loss on foreign currency contracts, permitted non-recurring charges such as warehouse relocation costs, transition expenses and restructuring expenses, and a non-cash charges such as a fair value adjustment on contingent consideration and purchase accounting adjustment to step-up the fair value of acquired inventory. Consolidated adjusted EBITDA includes pro forma adjustments, permitted under the debt agreements, for the acquisition of Filament and projected cost savings, operating expense reductions, restructuring charges and expenses and cost saving synergies projected by the Company as a result of actions taken through December 31, 2018 or expected to be taken as of December 31, 2018, net of the benefits realized.


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:
 
  Three Months Ended
December 31,
 Year Ended
December 31,
   2018   2017   2018   2017 
                 
  (in thousands)
Net income (loss), as reported $9,987  $1,251  $(1,720) $2,154 
Adjustments:        
Acquisition related expenses  523   2,424   1,766   2,616 
Restructuring expenses  971   498   2,324   1,024 
Severance expenses  -   166   -   321 
Integration charges  433   -   681   - 
Warehouse relocation  118   667   2,725   667 
Loss on early retirement of debt  -   -   66   110 
Other permitted non-cash charges  -   -   1,510   - 
Unrealized loss (gain) on foreign currency contracts  (33)  169   (1,942)  2,817 
Impairment of goodwill  -   -   2,205   - 
Contingent consideration fair value adjustment  (1,774)  -   (1,774)  - 
Deferred tax for foreign currency translation for Grupo Vasconia  275   (1)  -   (239)
Transition tax on non-U.S. subsidiaries' earnings  675   338   675   338 
Re-measurement of U.S. deferred tax assets and liabilities  -   2,981   -   2,981 
Income tax effect on adjustments  69   (1,432)  (1,009)  (2,224)
Adjusted net income $11,244  $7,061  $5,507  $10,565 
Adjusted diluted income per common share $0.55  $0.47  $0.28  $0.71 
         
Adjusted net income and adjusted diluted income per common share in the three months and year ended December 31, 2018 excludes restructuring expenses, acquisition related expenses, loss on early retirement of debt, integration charges, warehouse relocation costs, other permitted non-cash charges, the fair value adjustment on contingent consideration, the unrealized loss (gain) on foreign currency contracts, impairment of goodwill and deferred tax (benefit) expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation gains through other comprehensive income (loss). Adjusted net income and adjusted diluted income per common share in the three months and year ended December 31, 2018 also excludes the impact of the transition tax on non-U.S. subsidiaries' earnings. 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 and year ended December 31, 2017 excludes restructuring expenses, acquisition related expenses, loss on early retirement of debt, non-restructuring severance expense, warehouse relocation costs, the unrealized loss on foreign currency contracts and deferred tax (benefit) expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation gains through other comprehensive income (loss). Adjusted net income and adjusted diluted income per common share in the three months and year ended December 31, 2017 also excludes the impact of the transition tax on non-U.S. subsidiaries' earnings and re-measurement of U.S. deferred tax assets and liabilities included in the income tax provision as a result of the U.S. tax reform. The income tax effect on adjustments reflects the statutory tax rates applied on the adjustments.


LIFETIME BRANDS, INC.
Supplemental Information
(In thousands- except per share data)
 
Reconciliation of GAAP to Non-GAAP Operating Results (continued)
 
Constant Currency:
 
 As Reported Constant Currency (1)           
 Three Months Ended Three Months Ended   Year-Over-Year
 December 31, December 31,   Increase (Decrease)
Net sales2018 2017 Increase
(Decrease)
 2018 2017 Increase
(Decrease)
 Currency
Impact
 Excluding
Currency
  Including
Currency
  Currency
Impact
 
U.S.$199,094 $150,936 $48,158  $199,094 $150,859 $48,235  $(77) 32.0 % 31.9 % (0.1)%
International 29,180  31,834  (2,654)  29,180  31,020  (1,840)  (814) (5.9)% (8.3)% (2.4)%
Total net sales$228,274 $182,770 $45,504  $228,274 $181,879 $46,395  $(891) 25.5 % 24.9 % (0.6)%
                       
                       
 As Reported Constant Currency (1)           
 Year Ended Year Ended   Year-Over-Year
 December 31, December 31,   Increase (Decrease)
Net sales2018 2017 Increase
(Decrease)
 2018 2017 Increase
(Decrease)
 Currency
Impact
 Excluding
Currency
  Including
Currency
  Currency
Impact
 
U.S.$611,973 $481,719 $130,254  $611,973 $481,699 $130,274  $(20) 27.0 % 27.0 % (0.0)%
International 92,569  97,757  (5,188)  92,569  100,547  (7,978)  2,790  (7.9)% (5.3)% 2.6 %
Total net sales$704,542 $579,476 $125,066  $704,542 $582,246 $122,296  $2,770  21.0 % 21.6 % 0.6 %
                       
(1) Constant Currency" is determined by applying the 2018 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 currency.
                       

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