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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. (NASDAQ: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.

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 sales 2018   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 sales 2018   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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