Market Overview

Lifetime Brands, Inc. Reports Second Quarter 2020 Financial Results

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Declares Regular Quarterly Dividend

GARDEN CITY, N.Y., Aug. 06, 2020 (GLOBE NEWSWIRE) -- Lifetime Brands, Inc. (NASDAQ:LCUT), a leading global designer, developer and marketer of a broad range of branded consumer products used in the home, today reported its financial results for the quarter ended June 30, 2020.

Robert Kay, Lifetime's Chief Executive Officer, commented, "We are pleased with Lifetime's strong results in the second quarter, which were driven by end market demand in several categories including kitchen tools and gadgets, bakeware, barware and cutlery. This result was achieved through our ability to capture revenues by quickly shifting to meet strong demand in several channels including e-commerce, mass and grocery retailers. Overall, Lifetime grew consolidated net sales by 5.3% over the second quarter of 2019 producing strong bottom line growth. Income from operations increased by $16.8 million and net loss declined by $7.5 million over the second quarter of 2019, resulting in an increase in last twelve months consolidated adjusted EBITDA of $8.1 million or 13% compared to last quarter. During the quarter, we achieved meaningful progress in our international business which, although down compared to prior year, showed growth by June as we started to see the benefits of our shift to a drop ship model and the beginning of a recovery in their end markets. Our continued focus on maintaining solid liquidity and a flexible balance sheet allowed us to continue to generate significant cash flow and lower our net debt in the second quarter. While we navigate through the COVID-19 environment, we are seeing the results from a resilient demand for our products, the investments from Lifetime 2.0 and the cost containment strategies we have executed. Accordingly, we are confident in our ability to execute on our Lifetime 2.0 strategic plan and continue to deliver profitable growth."

Second Quarter Financial Highlights:

Consolidated net sales for the three months ended June 30, 2020 were $150.1 million, representing an increase of $7.6 million, or 5.3%, as compared to net sales of $142.5 million for the corresponding period in 2019. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased by $8.2 million, or 5.8%, as compared to consolidated net sales in the corresponding period in 2019.

Gross margin for the three months ended June 30, 2020 was $54.2 million, or 36.1%, as compared to $44.0 million, or 30.9%, for the corresponding period in 2019. Excluding an $8.5 million non-recurring, non-cash charge for the SKU rationalization initiative, gross margin would have been $52.5 million, or 36.8%, in the 2019 period.

Income from operations was $4.3 million, as compared to a loss from operations of $12.5 million for the corresponding period in 2019. Excluding an $8.5 million non-recurring, non-cash charge for the SKU rationalization initiative, loss from operations would have been $4.0 million, for the corresponding period in 2019. A table which reconciles this non-GAAP financial measure to income (loss) from operations, as reported, is included below.

Net loss was $4.0 million, or $0.19 per diluted share, as compared to a net loss of $11.5 million, or $0.56 per diluted share, in the corresponding period in 2019.

Adjusted net loss of $3.1 million, or $0.15 per diluted share, as compared to adjusted net loss, excluding the impact of SKU rationalization, of $4.5 million, or $0.22 per diluted share, in the corresponding period in 2019. A table which reconciles this non-GAAP financial measure to net loss, as reported, is included below.

Six Months Financial Highlights:

Consolidated net sales for the six months ended June 30, 2020 were $295.2 million, representing an increase of $2.7 million, or 0.9%, as compared to net sales of $292.5 million for the corresponding period in 2019. In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2020 average rates to 2019 local currency amounts, net sales increased by $3.8 million, or 1.3%, as compared to consolidated net sales in the corresponding period in 2019.

Gross margin for the six months ended June 30, 2020 was $107.1 million, or 36.3%, as compared to $98.3 million, or 33.6%, for the corresponding period in 2019.

Loss from operations was $20.9 million in 2020 and $14.8 million for the corresponding period in 2019. Income from operations, excluding the impact of certain non-cash charges was $2.0 million compared to a loss from operations of $6.3 million in the corresponding period in 2019. A table which reconciles this non-GAAP financial measure to loss from operations, as reported, is included below.

Net loss was $32.1 million, or $1.55 per diluted share, as compared to a net loss of $16.4 million, or $0.80 per diluted share, in the corresponding period in 2019. This includes a non-cash goodwill and intangible asset impairment charge of $20.1 million incurred in the first quarter of 2020.

Adjusted net loss was $8.8 million, or $0.42 per diluted share in 2020 and $8.5 million, or $0.41 per diluted share in 2019. A table which reconciles this non-GAAP financial measure to net loss, as reported, is included below.

Consolidated adjusted EBITDA, after giving effect to certain adjustments as permitted and defined under our debt agreements, was $69.3 million for the twelve months ended June 30, 2020. A table which reconciles this non-GAAP financial measure to net loss, as reported, is included below.

Outlook

As a result of the uncertainty surrounding the COVID-19 pandemic, the Company is not providing outlook for the full fiscal year 2020. 

Dividend

On August 4, 2020, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on November 16, 2020, to shareholders of record on November 2, 2020.

Conference Call

The Company has scheduled a conference call for Thursday, August 6, 2020 at 11:00 a.m. The dial-in number for the conference call is (866) 610-1072 (U.S.) or (973) 935-2840 (International), Conference ID: 5281916.

A live webcast of the conference call will be accessible through:
https://event.on24.com/wcc/r/2543314/737B029FC6ACB6B3E0918C7EDE7A71F0

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, income from operations excluding certain non-cash charges, adjusted net loss, adjusted diluted loss per common share, gross margin (excluding non-recurring charges) 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 by investors and analysts. Management uses these non-GAAP financial measures as indicators of business performance. These non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, GAAP financial 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 the growth of the Company, our financial outlook, our ability to navigate the current environment and advance our strategy, our initiatives to create value, our efforts to mitigate geopolitical factors and tariffs, our efforts to stabilize our international business, our current and projected financial and operating performance, results, and profitability and all guidance related thereto, including forecasted exchange rates and effective tax rates, as well as our future plans and intentions regarding the Company and its consolidated subsidiaries. Such statements represent the Company's current judgments, estimates, and assumptions about possible future events. The Company believes these judgments, estimates, and assumptions 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; the possibility of impairments to the Company's intangible assets; 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; the impact of our SKU rationalization initiative, expenses and other challenges relating to the integration of the Filament Brands business and future acquisitions; warehouse consolidation efforts performed by the business; the ongoing reorganization of our U.K. operations; 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; shortages of and price volatility for certain commodities; global health epidemics, such as the COVID-19 pandemic, social unrest, including related protests and disturbances, and 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 designer, developer and marketer of a broad range of branded consumer 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®, Swing-A-Way®, Taylor® Kitchen, and Rabbit®; respected tableware and giftware brands, including Mikasa®, Pfaltzgraff®, Fitz and Floyd®, Creative Tops®, Empire Silver™, Gorham®, International® Silver, Kirk Stieff®, Towle® Silversmiths, Wallace®, Wilton Armetale®, V&A® and Royal Botanic Gardens Kew®; and valued home solutions brands, including BUILT NY®, Taylor® Bath, Taylor® Kitchen, Taylor® Weather and Planet Box®. 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 / Rose Temple
212-355-4449


LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands—except per share data)
(unaudited)

  Three Months Ended
June 30,
  Six Months Ended
June 30,
  2020   2019   2020   2019
Net sales $ 150,140     $ 142,536     $ 295,210     $ 292,462  
Cost of sales 95,972     98,517     188,108     194,122  
Gross margin 54,168     44,019     107,102     98,340  
Distribution expenses 15,192     15,541     31,749     31,401  
Selling, general and administrative expenses 34,427     40,850     75,949     80,990  
Restructuring expenses 253     173     253     781  
Goodwill and other impairments         20,100      
Income (loss) from operations 4,296     (12,545 )   (20,949 )   (14,832 )
Interest expense (4,230 )   (5,044 )   (8,966 )   (9,966 )
Mark to market (loss) gain on interest rate derivatives (164 )   350     (2,415 )   350  
Loss before income taxes and equity in losses (98 )   (17,239 )   (32,330 )   (24,448 )
Income tax (provision) benefit (3,031 )   5,795     698     8,253  
Equity in losses, net of taxes (848 )   (69 )   (509 )   (185 )
NET LOSS $ (3,977 )   $ (11,513 )   $ (32,141 )   $ (16,380 )
BASIC LOSS PER COMMON SHARE $ (0.19 )   $ (0.56 )   $ (1.55 )   $ (0.80 )
DILUTED LOSS PER COMMON SHARE $ (0.19 )   $ (0.56 )   $ (1.55 )   $ (0.80 )
               


LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands—except share data)

  June 30,
2020
  December 31,
2019
  (unaudited)    
ASSETS      
CURRENT ASSETS      
Cash and cash equivalents $ 63,537     $ 11,370  
Accounts receivable, less allowances of $13,040 at June 30, 2020 and $9,681 at December 31, 2019 111,361     128,639  
Inventory 168,928     173,427  
Prepaid expenses and other current assets 12,249     14,140  
Income taxes receivable 2,466     1,577  
TOTAL CURRENT ASSETS 358,541     329,153  
PROPERTY AND EQUIPMENT, net 25,100     28,168  
OPERATING LEASE RIGHT-OF-USE ASSETS 99,883     106,871  
INVESTMENTS 17,020     21,289  
INTANGIBLE ASSETS, net 250,515     280,471  
OTHER ASSETS 2,743     4,071  
        TOTAL ASSETS $ 753,802     $ 770,023  
LIABILITIES AND STOCKHOLDERS' EQUITY      
CURRENT LIABILITIES      
Current maturity of term loan $ 13,527     $ 8,413  
Accounts payable 66,678     36,173  
Accrued expenses 62,114     52,060  
Current portion of operating lease liabilities 10,660     10,661  
TOTAL CURRENT LIABILITIES 152,979     107,307  
OTHER LONG-TERM LIABILITIES 16,159     12,214  
INCOME TAXES PAYABLE, LONG-TERM 1,217     1,217  
OPERATING LEASE LIABILITIES 106,195     112,180  
DEFERRED INCOME TAXES 12,661     13,685  
REVOLVING CREDIT FACILITY 27,383     32,822  
TERM LOAN 242,337     254,281  
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, $0.01 par value, shares authorized: 50,000,000 at June 30, 2020 and December 31, 2019; shares issued and outstanding: 21,768,740 at June 30, 2020 and 21,255,660 at December 31, 2019 218     213  
Paid-in capital 265,630     263,386  
(Accumulated deficit) retained earnings (26,813 )   7,173  
Accumulated other comprehensive loss (44,164 )   (34,455 )
TOTAL STOCKHOLDERS' EQUITY 194,871     236,317  
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 753,802     $ 770,023  


LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

  Six Months Ended
June 30,
  2020   2019
OPERATING ACTIVITIES      
Net loss $ (32,141 )   $ (16,380 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Depreciation and amortization 12,295     12,649  
Goodwill and other impairments 20,100      
Amortization of financing costs 878     876  
Mark to market loss (gain) on interest rate derivatives 2,415     (350 )
Non-cash lease expense 2,020     1,156  
Provision for doubtful accounts 2,987     386  
Stock compensation expense 2,746     2,100  
Undistributed equity in losses, net of taxes 509     185  
SKU Rationalization     8,500  
Changes in operating assets and liabilities:      
Accounts receivable 12,661     33,798  
Inventory 2,398     (40,900 )
Prepaid expenses, other current assets and other assets 782     (1,218 )
Accounts payable, accrued expenses and other liabilities 39,430     15,587  
Income taxes receivable (871 )   (9,247 )
          NET CASH PROVIDED BY OPERATING ACTIVITIES  66,209     7,142  
INVESTING ACTIVITIES      
Purchases of property and equipment (1,380 )   (3,867 )
          NET CASH USED IN INVESTING ACTIVITIES (1,380 )   (3,867 )
FINANCING ACTIVITIES      
Proceeds from revolving credit facility 95,851     136,455  
Repayments of revolving credit facility (99,134 )   (133,497 )
Repayments of term loan (7,583 )   (1,375 )
Payments for finance lease obligations (50 )   (12 )
Payments of tax withholding for stock based compensation (486 )   (390 )
Proceeds from the exercise of stock options     133  
Cash dividends paid (937 )   (1,786 )
          NET CASH USED IN FINANCING ACTIVITIES  (12,339 )   (472 )
Effect of foreign exchange on cash (323 )   85  
INCREASE IN CASH AND CASH EQUIVALENTS 52,167     2,888  
Cash and cash equivalents at beginning of period 11,370     7,647  
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 63,537     $ 10,535  


LIFETIME BRANDS, INC.

Supplemental Information
(in thousands)

Reconciliation of GAAP to Non-GAAP Operating Results

Consolidated adjusted EBITDA for the twelve months ended June 30, 2020:

  Consolidated adjusted EBITDA for the Four Quarters Ended June 30, 2020
  (in thousands)
Three months ended June 30, 2020 $ 12,388  
Three months ended March 31, 2020 3,252  
Three months ended December 31, 2019 27,873  
Three months ended September 30, 2019 25,758  
Consolidated adjusted EBITDA $ 69,271  


  Three Months Ended   Twelve Months Ended June 30, 2020
  September 30, 2019   December 31,
2019
  March 31,
2020
  June 30,
2020
 
  (in thousands)
Net loss as reported $ (13,519 )   $ (14,516 )   $ (28,164 )   $ (3,977 )   $ (60,176 )
Undistributed equity losses (earnings), net 210     (738 )   (339 )   848     (19 )
Income tax provision (benefit) 15,066     (5,704 )   (3,729 )   3,031     8,664  
Interest expense 5,172     5,590     4,736     4,230     19,728  
Mark to market loss on interest rate derivatives         2,251     164     2,415  
Depreciation and amortization 6,122     6,344     6,234     6,061     24,761  
Goodwill and other impairments 9,748     33,242     20,100         63,090  
Stock compensation expense 1,505     1,436     1,326     1,420     5,687  
Acquisition and divestment related expenses     55     47     55     157  
Restructuring expenses 338     316         253     907  
Integration charges 235     159             394  
Warehouse relocation 881     1,689     790     303     3,663  
Consolidated adjusted EBITDA $ 25,758     $ 27,873     $ 3,252     $ 12,388     $ 69,271  

Consolidated adjusted EBITDA is a non-GAAP financial measure which is defined in the Company's debt agreements. Consolidated adjusted EBITDA is defined as net income (loss), adjusted to exclude undistributed equity in (earnings) losses, income tax (benefit) provision, interest expense, mark to market loss on interest rate derivatives, depreciation and amortization, goodwill and other impairments, stock compensation expense, and other items detailed in the table above that are consistent with exclusions permitted by our debt agreements.

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 (in thousands):

  Three Months Ended June 30,   Six Months Ended June 30,
  2020   2019   2020   2019
Net loss as reported $ (3,977 )   $ (11,513 )   $ (32,141 )   $ (16,380 )
Adjustments:              
Acquisition and divestment related expenses 55         102     151  
Restructuring expenses 253     173     253     781  
Integration charges     695         869  
Warehouse relocation 303         1,093     215  
Mark to market loss on interest rate derivatives 164         2,415      
Goodwill and other impairments         20,100      
SKU Rationalization     8,500         8,500  
Foreign currency translation loss reclassified from Accumulated Other Comprehensive Loss 235         235      
Income tax effect on adjustments (162 )   (2,333 )   (889 )   (2,605 )
Adjusted net loss $ (3,129 )   $ (4,478 )   $ (8,832 )   $ (8,469 )
Adjusted diluted loss per common share $ (0.15 )   $ (0.22 )   $ (0.42 )   $ (0.41 )

Adjusted net loss and adjusted diluted loss per common share in the three and six months ended June 30, 2020 and 2019 excludes acquisition and divestment related expenses, restructuring expenses, integration charges, warehouse relocation expenses, mark to market loss on interest rate derivatives, goodwill and other impairments and SKU Rationalization. The income tax effect on adjustments reflects the statutory tax rates applied on the adjustments.

LIFETIME BRANDS, INC.
Supplemental Information
(in thousands)

Reconciliation of GAAP to Non-GAAP Operating Results (continued)

Constant Currency:

  As Reported
Three Months Ended
June 30,
  Constant Currency (1)
Three Months Ended
June 30,
      Year-Over-Year
Increase (Decrease)
Net sales 2020   2019   Increase
(Decrease)
  2020   2019   Increase
(Decrease)
  Currency
Impact
  Excluding
Currency
  Including
Currency
  Currency
Impact
U.S. $ 132,591     $ 123,092     $ 9,499     $ 132,591     $ 123,104     $ 9,487     (12 )   7.7 %   7.7 %   0.0 %
International 17,549     19,444     (1,895 )   17,549     18,800     (1,251 )   644     (6.7 )%   (9.7 )%   3.0 %
Total net sales $ 150,140     $ 142,536     $ 7,604     $ 150,140     $ 141,904     $ 8,236     $ 632     5.8 %   5.3 %   0.5 %


  As Reported Six Months Ended
June 30,
  Constant Currency (1)
Six Months Ended June 30,
      Year-Over-Year Increase (Decrease)
Net sales 2020   2019   Increase
(Decrease)
  2020   2019   Increase (Decrease)   Currency Impact   Excluding
Currency
  Including
Currency
  Currency
Impact
U.S. $ 261,799     $ 250,130     $ 11,669     $ 261,799     $ 250,129     $ 11,670     1     4.7 %   4.7 %   0.0 %
International 33,411     42,332     (8,921 )   33,411     41,323     (7,912 )   1,009     (19.1 )%   (21.1 )%   2.0 %
Total net sales $ 295,210     $ 292,462     $ 2,748     $ 295,210     $ 291,452     $ 3,758     $ 1,010     1.3 %   0.9 %   0.4 %

(1) "Constant Currency" is determined by applying the 2020 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 fluctuations in foreign currency exchange rates.

LIFETIME BRANDS, INC.
Supplemental Information
(in thousands)

Reconciliation of GAAP to Non-GAAP Operating Results (continued)

Income (loss) from operations excluding certain non-cash charges (in thousands):

  Three Months Ended June 30,   Six Months Ended June 30,
  2020   2019   2020   2019
Income (loss) from operations $ 4,296     $ (12,545 )   $ (20,949 )   $ (14,832 )
Excluded non-cash charges:              
Impairment of goodwill         20,100      
Bad debt reserve (1)         2,844      
SKU Rationalization     8,500         8,500  
Total excluded non-cash charges     8,500     22,944     8,500  
Income (loss) from operations excluding certain non-cash charges $ 4,296     $ (4,045 )   $ 1,995     $ (6,332 )

(1) Bad debt reserve recorded in the first quarter of fiscal 2020 to establish a provision against potential credit problems from certain retail customers who may have financial difficulty that has been caused or increased due to COVID-19 Pandemic. This reflects the Company's assessment of risk of not being able to collect such receivables from certain customers in the U.S. that are at risk of seeking or have already obtained bankruptcy protection and our international customer base which has a higher proportion of small and independent brick-and-mortar retailers. This charge was taken in response to the Company's assessment on the impact of the COVID-19 crises on these accounts.

 

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