News Column

Lifetime Brands, Inc. Reports First Quarter 2014 Results

May 1, 2014

EBITDA Increases 19% on 20% Sales Increase; Company Reaffirms Net Sales Guidance for 2014 of Approximately $600 Million, Including from Acquisitions

GARDEN CITY, N.Y.--(BUSINESS WIRE)-- 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 first quarter ended March 31, 2014.

  • Consolidated net sales for the quarter were $118.4 million, an increase of $19.7 million, or 20.0%, as compared to $98.7 million for the corresponding period in 2013.
  • Consolidated net sales for the Company’s wholesale segment were $113.8 million, an increase of $20.7 million or 22.2%, as compared to net sales of $93.1 million for the corresponding period in 2013. Consolidated net wholesale sales in the 2014 period included $17.1 million of net sales from Kitchen Craft and other acquisitions that were completed in the first quarter of 2014.
  • Gross margin was $44.3 million, or 37.4%, as compared to $36.3 million, or 36.8% for the corresponding period in 2013. Gross margin for the wholesale segment was 36.2% for the 2014 period, as compared to 34.9% for the corresponding period in 2013.
  • Net loss for the quarter was $2.9 million, as compared to $0.6 million for the corresponding period in 2013.
  • Diluted net loss per common share was $0.22, as compared to $0.05 for the corresponding period in 2013.
  • Adjusted net loss was $1.7 million, or $0.13 per diluted share, in the 2014 period, as compared to adjusted net loss of $0.6 million, or $0.05 per diluted share, in the 2013 period.
  • Consolidated EBITDA was $3.7 million, as compared to $3.1 million for the corresponding 2013 period, an increase of 18.9%.
  • Equity in earnings (losses), net of taxes was $(0.2) million in the 2014 period as compared to $0.2 million in corresponding 2013 period.

    Jeffrey Siegel, Lifetime’s Chairman and Chief Executive Officer, remarked,

    “I am very pleased with the Company’s progress during the quarter, which includes the results of the four businesses we acquired during the period. These acquisitions necessitated significant non-recurring acquisition expenses and a write-off of debt financing fees that, combined with higher other SG&A expenses -- especially increased staffing levels to enable us to achieve our aggressive growth targets -- produced a decline in net results for the current quarter versus last year. However, as we reported, EBITDA increased 18.9% over the comparable quarter of last year. We expect the impact of the ongoing greater SG&A expenses to be mitigated by higher levels of sales during the second half of the year.

    “In January, we acquired Thomas Plant (Birmingham) Limited. Trading as Kitchen Craft, Thomas Plant is one of the United Kingdom’s leading suppliers of kitchenware products and accessories. The company’s broad ranges of housewares products are marketed under well-known proprietary, customer-exclusive and private label brands to over 2,600 retailers in the U.K. and in over 70 countries worldwide.

    “In February, we purchased the intellectual property and certain assets of Built NY, Inc., a designer and distributor of lunch boxes, wine bags and baby accessories. The acquisition of Built brings us new and exciting product classifications and provides us access to a broad base of independent retailers in over 60 countries worldwide.

    “Also in February, we acquired the intellectual property and certain assets of Empire Silver Company, a U.S. manufacturer of sterling silver and pewter gift items, principally baby cups, rattles and hollowware.

    “In March, we purchased the business and certain assets of La CafetiÈre Ltd., a supplier of products to brew and serve coffee and tea; further broadening our product classifications and strengthening our presence in the U.K. and Continental Europe.

    “Of these acquisitions, only Kitchen Craft recorded any significant revenues during the first quarter. However, we expect all four to be running smoothly in the second half of the year and to add over $75 million in net sales and significantly to increase our net income and diluted earnings per share in 2014.

    “In addition, we will begin supplying kitchenware products to almost 400 Walmart stores in China in the second half of this year.

    “On our last conference call, we stated that, for all of 2014, we foresaw sales increasing by approximately 5% organically and approximately 15% from acquisitions, to a total of approximately $600 million. Today, we are reaffirming that guidance.”

    Mr. Siegel added,

    “Grupo Vasconia S.A.B., our 30%-owned Partner Company in Mexico, reported net income of $0.1 million ($0.8 million, excluding an income tax adjustment) for the 2014 period, as compared to $1.2 million in 2013. The reduction in income reflects continuing weak retail sales in Mexico and significant manufacturing inefficiencies associated with the integration of Almexa Alumino, S.A. de C.V., which it acquired in 2012. ”

    Conference Call

    The Company has scheduled a conference call for Thursday, May 1, 2014 at 11:00 a.m. ET. The dial-in number for the conference call is (877) 703-6107 or (857) 244-7306, passcode #81134143. A replay of the call will also be available through May 4, 2014 and can be accessed by dialing (888) 286-8010 or (617) 801-6888, conference ID #94792219. 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. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets, or statements of cash flows of the Company; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. As required by 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
    March 31,
      2014         2013  
     
    Net sales $ 118,411 $ 98,657
     
    Cost of sales   74,079     62,345  
     
    Gross margin 44,332 36,312
     
    Distribution expenses 12,346 10,796
    Selling, general and administrative expenses   34,183     25,631  
     
    Loss from operations (2,197 ) (115 )
     
     
    Interest expense (1,390 ) (1,162 )
    Loss on early retirement of debt   (319 )   -  
     
    Loss before income taxes and equity in earnings (3,906 ) (1,277 )
     
    Income tax benefit 1,185 399
    Equity in (losses) earnings, net of taxes   (208 )   246  
     
    NET LOSS $ (2,929 ) $ (632 )
     
    BASIC LOSS PER COMMON SHARE $ (0.22 ) $ (0.05 )
     
    DILUTED LOSS PER COMMON SHARE $ (0.22 ) $ (0.05 )
     
    Cash dividends declared per common share $ 0.03750 $ 0.03125
     
             

    LIFETIME BRANDS, INC.

    CONDENSED CONSOLIDATED BALANCE SHEETS

    (In thousands - except share data)

    (unaudited)

     

        March 31,    

    December 31,
      2014     2013  
    (unaudited)
    ASSETS
    CURRENT ASSETS
    Cash and cash equivalents $ 4,223 $ 4,947

    Accounts receivable, less allowances of $6,402 at March 31, 2014 and

       $5,209 at December 31, 2013

    83,568 87,217
    Inventory 136,384 112,791
    Prepaid expenses and other current assets 11,254 5,781
    Deferred income taxes   3,969     3,940  
    TOTAL CURRENT ASSETS 239,398 214,676
     
    PROPERTY AND EQUIPMENT, net 27,707 27,698
    INVESTMENTS 36,750 36,948
    INTANGIBLE ASSETS, net 112,168 55,149
    OTHER ASSETS   3,228     2,268  
    TOTAL ASSETS $ 419,251   $ 336,739  
     
    LIABILITIES AND STOCKHOLDERS’ EQUITY
    CURRENT LIABILITIES
    Current maturity of Credit Agreement Term Loan $ 7,500 $ -
    Current maturity of Senior Secured Term Loan - 3,937
    Accounts payable 28,284 21,426
    Accrued expenses 35,539 41,095
    Income taxes payable   1,701     3,036  
    TOTAL CURRENT LIABILITIES 73,024 69,494
     
    DEFERRED RENT & OTHER LONG-TERM LIABILITIES 20,225 18,644
    DEFERRED INCOME TAXES 10,608 1,777
    REVOLVING CREDIT FACILITY 84,430 49,231
    CREDIT AGREEMENT TERM LOAN 42,500 -
    SENIOR SECURED TERM LOAN - 16,688
     
    STOCKHOLDERS’ EQUITY

    Preferred stock, $.01 par value, shares authorized: 100 shares of Series A

       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: 13,465,823 at March 31, 2014

       and 12,777,407 at December 31, 2013

    136 128
    Paid-in capital 156,575 146,273
    Retained earnings 34,767 38,224
    Accumulated other comprehensive loss   (3,014 )   (3,720 )
    TOTAL STOCKHOLDERS’ EQUITY   188,464     180,905  
    TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 419,251   $ 336,739  
     
             

    LIFETIME BRANDS, INC.

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In thousands)

    (unaudited)

     
    Three Months Ended
    March 31,
      2014     2013  
    OPERATING ACTIVITIES
    Net loss $ (2,929 ) $ (632 )

    Adjustments to reconcile net loss to net cash provided by operating

      activities:

    Provision for doubtful accounts 50 32
    Depreciation and amortization 3,613 2,523
    Amortization of financing costs 149 123
    Deferred rent (274 ) (199 )
    Deferred income tax (179 )
    Stock compensation expense 726 671
    Undistributed equity earnings 208 (246 )
    Loss on retirement of debt 319 -

    Changes in operating assets and liabilities (excluding the effects of business

      acquisitions)

    Accounts receivable 19,218 35,185
    Inventory (3,068 ) 541
    Prepaid expenses, other current assets and other assets (5,130 ) (94 )
    Accounts payable, accrued expenses and other liabilities (10,197 ) (8,009 )
    Income taxes payable   (2,947 )   (4,933 )
    NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES   (441 )   24,962  
     
    INVESTING ACTIVITIES
    Purchases of property and equipment (1,156 ) (1,187 )
    Kitchen Craft acquisition, net of cash acquired (59,856 ) -
    Other business acquisitions, net of cash acquired   (5,280 )   -  
    NET CASH USED IN INVESTING ACTIVITIES   (66,292 )   (1,187 )
     
    FINANCING ACTIVITIES
    Proceeds from Revolving Credit Facility 78,657 40,121
    Repayments of Revolving Credit Facility (43,458 ) (62,750 )
    Repayment of Senior Secured Term Loan (20,625 ) -
    Proceeds from Credit Agreement Term Loan 50,000 -
    Proceeds from the exercise of stock options 1,200 302
    Cash dividend paid   (501 )   (319 )
    NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   65,273     (22,646 )
    Effect of foreign exchange on cash   736     (572 )
    (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS   (724 )   557  
    Cash and cash equivalents at beginning of year   4,947     1,871  
    CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,223   $ 2,428  
     
     

    LIFETIME BRANDS, INC.

    Supplemental Information

    (In thousands)

     
    Consolidated EBITDA for the four quarters ended
    March 31, 2014
    Three months ended March 31, 2014       $   3,660
    Three months ended December 31, 2013 21,011
    Three months ended September 30, 2013 15,067
    Three months ended June 30, 2013     4,321
    Total for the four quarters $   44,059
     
     
    Consolidated EBITDA for the four quarters ended
    March 31, 2013
    Three months ended March 31, 2013 $ 3,079
    Three months ended December 31, 2012 17,868
    Three months ended September 30, 2012 11,568
    Three months ended June 30, 2012     5,584
    Total for the four quarters $   38,099
     
                 

    Reconciliation of GAAP to Non-GAAP Operating Results

     
    Three Months Ended

       March 31,   

    2014

       

    December 31,

    2013

     

    September 30,

    2013

     

       June 30,    

    2013

    Net income (loss) as reported $ (2,929 ) $ 9,388 $ 1,093 $ (568 )
    Subtract out:
    Undistributed equity (earnings) losses, net 208 (332 ) 5,452 480
    Add back:
    Income tax provision (benefit) (1,185 ) 6,182 3,869 (477 )
    Interest expense 1,390 1,256 1,280 1,149
    Depreciation and amortization 3,613 2,708 2,517 2,667
    Stock compensation expense 726 750 738 722
    Loss on early retirement of debt 319 102 - -
    Restructuring - - 79 288
    Permitted acquisition related expenses   1,518     957     39   60  
    Consolidated EBITDA $ 3,660   $ 21,011   $ 15,067 $ 4,321  
     
         

    LIFETIME BRANDS, INC.

    Supplemental Information

    (In thousands)

     

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

     
    Three Months Ended

       March 31,    

    2013

       

    December 31,

    2012

       

    September 30,

    2012

       

         June 30,     

    2012

    Net income (loss) as reported $ (632 ) $ 15,154   $ 3,890   $ 559
    Subtract out:
    Undistributed equity earnings (246 ) (4,464 ) (695 ) (108 )
    Add back:
    Income tax provision (benefit) (399 ) 2,596 1,930 94
    Interest expense 1,162 1,254 1,271 1,675
    Depreciation and amortization 2,523 2,446 2,409 2,262
    Stock compensation expense 671 662 679 754
    Loss on early retirement of debt - - 1,015 348
    Intangible asset impairment - - 1,069 -
    Permitted acquisition related expenses   -     220     -     -  
    Consolidated EBITDA $ 3,079   $ 17,868   $ 11,568   $ 5,584  
     


    Consolidated EBITDA is a non-GAAP measure that the Company defines as net income (loss), adjusted to exclude undistributed equity (earnings) losses, income taxes, interest, depreciation and amortization, stock compensation expense, intangible asset impairment and acquisition related expenses, as shown in the table above.

                   

    Adjusted Net Loss and Adjusted Diluted Loss Per Share:

     
    Three Months Ended
    March 31,
      2014        

      2013  

     
     
    Net loss as reported $ (2,929 ) (632 )
    Adjustments:
    Loss on early retirement of debt, net of tax 191 -
    Acquisition related expenses, net of tax   989     -  
    Adjusted net loss $ (1,749 ) $ (632 )
    Adjusted diluted loss per share $ (0.13 ) $ (0.05 )





    Lifetime Brands, Inc.

    Laurence Winoker, 516-203-3590

    Chief Financial Officer

    investor.relations@lifetimebrands.com

    or

    Lippert/Heilshorn & Assoc.

    Harriet Fried, 212-838-3777

    SVP

    hfried@lhai.com


    Source: Lifetime Brands, Inc.


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