Lifetime Brands, Inc. Reports Fourth Quarter 2015 Financial Results

GARDEN CITY, N.Y.--()--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 fourth quarter and year ended December 31, 2015.

Fourth Quarter Financial Highlights:

  • Consolidated net sales were $185.9 million in the quarter ended December 31, 2015; a decrease of $4.1 million, or 2%, as compared to consolidated net sales of $190.0 million for the corresponding period in 2014. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales decreased 1.2%, as compared to consolidated net sales in the corresponding period in 2014.
  • Gross margin was $69.0 million, or 37.1%, in the quarter ended December 31, 2015 as compared to $69.8 million, or 36.7%, for the corresponding period in 2014.
  • Income from operations was $17.6 million, as compared to $18.3 million in the prior year’s quarter.
  • Net income was $11.0 million, or $0.77 per diluted share, in the quarter ended December 31, 2015, as compared to net income of $9.3 million, or $0.66 per diluted share, in the corresponding period in 2014.
  • Adjusted net income was $10.8 million, or $0.75 per diluted share, in the quarter ended December 31, 2015, as compared to adjusted net income of $9.4 million, or $0.66 per diluted share, in the corresponding period in 2014.
  • Consolidated EBITDA was $23.9 million, equal to 12.9% of consolidated net sales, in the quarter ended December 31, 2015, as compared to $20.9 million, or 11.0% of consolidated net sales, for the corresponding 2014 period.
  • Equity in earnings, net of taxes, was $0.7 million for the three months ended December 31, 2015, as compared to equity in losses of $1.1 million for the three months ended December 31, 2014.

Full Year Financial Highlights:

  • Consolidated net sales were $587.7 million in the year ended December 31, 2015; an increase of $1.7 million, or 0.3%, as compared to consolidated net sales of $586.0 million for the corresponding period in 2014. In constant currency, consolidated net sales increased 2.3%.
  • Gross margin was $214.4 million, or 36.5%, in the year ended December 31, 2015 as compared to $212.9 million, or 36.3%, for the corresponding period in 2014.
  • Income from operations was $24.2 million, as compared to $21.4 million in the prior year.
  • Net income was $12.3 million, or $0.86 per diluted share, in the year ended December 31, 2015, as compared to net income of $1.5 million, or $0.11 per diluted share, in the corresponding period in 2014.
  • Adjusted net income was $14.2 million, or $1.00 per diluted share, in the year ended December 31, 2015, as compared to adjusted net income of $10.3 million, or $0.73 per diluted share, in the corresponding period in 2014.
  • Consolidated EBITDA was $44.9 million in the year ended December 31, 2015, as compared to $42.5 million for the corresponding 2014 period.
  • Equity in earnings, net of taxes, was $0.6 million for the year ended December 31, 2015, as compared to equity in losses, net of taxes, of $6.5 million. The 2014 period includes a charge of $6.0 million, net of tax, for the reduction in the fair value of the Company’s investment in GS Internacional S/A.

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

“In 2015, net sales in the Company’s U.S. wholesale segment grew by 3.9%. Sales of kitchenware, tableware and home solutions products all rose, with a particularly strong increase in our home décor product category, where we leveraged the Bombay® license for giftables. In kitchenware, we benefited from strong increases in cutlery and the expansion of our important Farberware® brand, which is increasingly accepted as ‘America’s Housewares Brand.’ Tableware sales also rose, reflecting good reception of several new programs for dinnerware and flatware.

“The strength in the Company’s U.S. operations was offset by currency challenges in the U.K., where our businesses were adversely affected by weakness of the British pound relative to the dollar, which on a relative basis increased cost of goods, which are sourced in dollars, and by weakness of the euro relative to the pound, which hurt export sales. Nevertheless, improved operating margins produced a 5.5% increase in consolidated EBITDA, which grew to $44.9 million.

“With the assistance of a major international consulting firm, we recently began an in-depth review of Lifetime’s U.S. wholesale businesses to ensure that we have the right structure to grow and thrive in today’s complex business environment. The study -- which includes evaluations of our divisional organization structure, product pipeline and brand management, as well as SKU rationalization and SG&A spending -- will serve as a blueprint to right size Lifetime’s SG&A expense base, realign our operating structure and redirect our operating activities to increase our efficiency and effectiveness. When fully implemented, we believe our business will be in a stronger position to achieve future growth and improved profitability.

“So far this year, we have shown our line-up of new products for 2016 at the Birmingham Spring Fair, at Ambiente in Frankfurt and, just this week, in Chicago at the International Home + Housewares Show. I am very pleased to report that the reaction to our new products was overwhelmingly positive. To succeed with today’s consumers, housewares manufacturers need to deliver improved performance, expanded function and great design. The wide array of new products we offered clearly showed that Lifetime is leading this effort, keeping ahead of the curve on the ever-evolving kitchenware industry.

“While we believe that our strong position with major retailers in the U.S. and the U.K., our expanding footprint with independent retailers world-wide and the breadth of new product offerings should enable us to grow at an accelerated pace, we are mindful of the risks posed by the possibility of some weakness in the U.S. retail sector, continued foreign exchange challenges and economic uncertainty in some key international markets. Consequently, at this point in the year, we expect low- to mid- single digit overall sales growth for 2016.”

Dividend

On Thursday, March 3, 2016, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on May 16, 2016 to shareholders of record on May 2, 2016.

Conference Call

The Company has scheduled a conference call for Friday, March 11, 2016 at 11:00 a.m. ET. The dial-in number for the conference call is (866) 271-6130 or (617) 213-8894 passcode #85615758. A live webcast of the conference call will be accessible through http://edge.media-server.com/m/p/hnrtzbon. 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. 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 foreign exchange fluctuations; 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share data)

 

Three Months Ended
December 31,

 

Year Ended
December 31,

2015   2014 2015   2014
 
Net sales $ 185,880 $ 190,034 $ 587,670 $ 586,010
 
Cost of sales   116,865   120,260   373,284   373,129
 
Gross margin 69,015 69,774 214,386 212,881
 
Distribution expenses 15,437 16,134 54,815 54,202
Selling, general and administrative expenses 35,514 35,330 134,903 133,786
Intangible asset impairment - - - 3,384
Restructuring expenses   437   -   437   125
 
Income from operations 17,627 18,310 24,231 21,384
 
Interest expense (1,402) (1,658) (5,746) (6,418)
Financing expense - (758) (154) (758)
Loss on early retirement of debt   -   (27)   -   (346)
 
Income before income taxes and equity in earnings 16,225 15,867 18,331 13,862
 
Income tax provision (5,962) (5,473) (6,627) (5,825)
Equity in earnings (losses), net of taxes   743   (1,133)   574   (6,493)
 
NET INCOME $ 11,006 $ 9,261 $ 12,278 $ 1,544
 
Weighted-average shares outstanding- basic   13,929   13,695   13,850   13,519
 
BASIC INCOME PER COMMON SHARE $ 0.79 $ 0.68 $ 0.89 $ 0.11
 
Weighted-average shares outstanding- diluted   14,336   14,115   14,266   13,974
 
DILUTED INCOME PER COMMON SHARE $ 0.77 $ 0.66 $ 0.86 $ 0.11
 
Cash dividends declared per common share $ 0.0425 $ 0.0375 $ 0.16 $ 0.15
 
   

LIFETIME BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands - except share data)

 
December 31,
2015

2014

 
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 7,131 $ 5,068
Accounts receivable, less allowances of $5,300 at December 31, 2015 and $6,663 at

December 31, 2014

90,576 107,211
Inventory 136,890 137,924
Prepaid expenses and other current assets   8,783   7,914
TOTAL CURRENT ASSETS 243,380 258,117
 
PROPERTY AND EQUIPMENT, net 24,877 26,801
INVESTMENTS 24,973 28,155
INTANGIBLE ASSETS, net 96,593 103,597
DEFERRED INCOME TAXES 6,486 -
OTHER ASSETS   2,643   4,732
TOTAL ASSETS $ 398,952 $ 421,402
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturity of Credit Agreement Term Loan $ 20,000 $ 10,000
Short term loan 252 765
Accounts payable 27,245 28,694
Accrued expenses 40,154 36,961
Deferred income taxes - 2,293
Income taxes payable   4,064   5,156
TOTAL CURRENT LIABILITIES 91,715 83,869
 
DEFERRED RENT & OTHER LONG-TERM LIABILITIES 18,556 20,160
DEFERRED INCOME TAXES 8,596 1,485
REVOLVING CREDIT FACILITY 65,617 92,655
CREDIT AGREEMENT TERM LOAN 15,000 35,000
 
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: 14,030,221 at December 31, 2015 and 13,712,081 at December 31, 2014

 

140 137
Paid-in capital 165,780 160,315
Retained earnings 47,733 37,703
Accumulated other comprehensive loss   (14,185)   (9,922)
TOTAL STOCKHOLDERS’ EQUITY   199,468   188,233
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 398,952 $ 421,402
 
 

LIFETIME BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

 

Year ended
December 31,

2015   2014
OPERATING ACTIVITIES
Net income $ 12,278 $ 1,544
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts 46 286
Depreciation and amortization 14,203 14,200
Amortization of financing costs 641 617
Deferred rent 848 (722)
Deferred income taxes (1,440) (3,757)
Stock compensation expense 5,286 4,493
Undistributed equity (earnings) losses (348) 6,724
Intangible asset impairment - 3,384
Loss on early retirement of debt - 346
Contingent consideration fair value adjustment 650 (4,203)
Changes in operating assets and liabilities (excluding the effects of business acquisitions)
Accounts receivable 15,481 (6,209)
Inventory (308) (6,354)
Prepaid expenses, other current assets and other assets 1,387 (2,063)
Accounts payable, accrued expenses and other liabilities (397) (950)
Income taxes payable   (1,517)   (2,747)
NET CASH PROVIDED BY OPERATING ACTIVITIES   46,810   4,589
 
INVESTING ACTIVITIES
Purchases of property and equipment (5,166) (6,171)
Equity investments 112 (764)
Kitchen Craft acquisition, net of cash acquired - (59,977)
Other acquisition, net of cash acquired - (5,389)
Net proceeds from sale of property   26   68
NET CASH USED IN INVESTING ACTIVITIES   (5,028)   (72,233)
 
FINANCING ACTIVITIES
Proceeds from Revolving Credit Facility 263,632 278,014
Repayments of Revolving Credit Facility (290,346) (234,067)
Repayments of Senior Secured Term Loan - (20,625)
Proceeds from Credit Agreement Term Loan - 50,000
Repayments of Credit Agreement Term Loan (10,000) (5,000)
Proceeds from Short Term Loan 289 1,645
Repayments of Short Term Loan (802) (880)
Payment of financing costs (212) (2,283)
Cash dividends paid (2,150) (2,031)
Payment of capital lease obligations (50) -
Payment of contingent consideration (391) -
Proceeds from the exercise of stock options 843 2,488
Excess tax benefits from stock options, net   43   553

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

  (39,144)   67,814
 
Effect of foreign exchange on cash   (575)   (49)
INCREASE IN CASH AND CASH EQUIVALENTS   2,063   121
Cash and cash equivalents at beginning of year   5,068   4,947
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 7,131 $ 5,068
 
   

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)

 

Reconciliation of GAAP to Non-GAAP Operating Results

 

Consolidated EBITDA:

 

Three Months Ended
December 31,

Year Ended
December 31,

2015   2014 2015   2014
(in thousands)
Net income as reported $ 11,006 $ 9,261 $ 12,278 $ 1,544
Subtract out:
Undistributed equity (earnings) losses, net (517) 1,364 (348) 6,724
Add back:
Income tax provision 5,962 5,473 6,627 5,825
Interest expense 1,402 1,658 5,746 6,418
Financing expense - 758 154 758
Depreciation and amortization 3,500 3,572 14,203 14,200
Stock compensation expense 2,972 2,360 5,286 4,493
Loss on early retirement of debt - 27 - 346
Intangible asset impairment - - - 3,384
Contingent consideration (876) (4,115) 816 (3,450)
Restructuring expenses 437 - 437 125
Permitted acquisition related expenses   3   560   (314)   2,175
Consolidated EBITDA $ 23,889 $ 20,918 $ 44,885 $ 42,542
 

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

   

LIFETIME BRANDS, INC.

Supplemental Information

(In thousands- except per share data)

 

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

 

Adjusted net income and adjusted diluted income per common share:

 

Three Months Ended
December 31,

Year Ended
December 31,

2015   2014 2015   2014
(in thousands)
Net income as reported $ 11,006 $ 9,261 $ 12,278 $ 1,544
Adjustments:
Contingent consideration (724) (4,203) 821 (4,203)
Impairment of GS Internacional S/A - 764 - 6,012
Intangible asset impairment - - - 3,384
Loss on early retirement of debt - 27 - 346
Acquisition related expenses (recoveries), net 3 574 (382) 2,176
Financing expenses - 758 154 758
Restructuring expenses 437 - 437 125
Deferred tax for foreign currency translation for Grupo Vasconia (28) 1,063 1,303 1,063
Income tax effect on adjustments   114   1,135   (412)   (942)
Adjusted net income $ 10,808 $ 9,379 $ 14,199 $ 10,263
Adjusted diluted income per common share $ 0.75 $ 0.66 $ 1.00 $ 0.73
 

Adjusted net income in the three months and year ended December 31, 2015 excludes the fair value adjustment of certain contingent consideration, acquisition related expenses, the recovery of acquisition related expenses for an acquisition not completed, financing expenses and deferred tax expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation losses through other comprehensive income. Adjusted net income in the three months and year ended December 31, 2014 excludes certain acquisition related expenses, the loss on retirement of debt, restructuring expenses, intangible asset impairment, the impairment of the Company’s investment in GS Internacional S/A and deferred tax expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation losses through other comprehensive income.

 

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 2015 2014

Increase
(Decrease)

2015 2014

Increase
(Decrease)

Currency
Impact

Excluding
Currency

Including
Currency

Currency
Impact

U.S. Wholesale $ 146,883 $ 145,138 $ 1,745 $ 146,883 $ 144,929 $ 1,954 $ (209) 1.3 % 1.2 % (0.1) %
International 31,359 37,261 (5,902) 31,359 35,667 (4,308) (1,594) (12.1) % (15.8) % (3.8) %
Retail Direct   7,638   7,635   3   7,638   7,635   3   - 0.0 % 0.0 % - %
Total net sales $ 185,880 $ 190,034 $ (4,154) $ 185,880 $ 188,231 $ (2,351) $ (1,803) (1.2) % (2.2) % (0.9) %
 
 
 
As Reported Constant Currency (1)
Year Ended Year Ended Year-Over-Year
December 31, December 31, Increase (Decrease)
Net sales 2015 2014

Increase
(Decrease)

2015 2014

Increase
(Decrease)

Currency
Impact

Excluding
Currency

Including
Currency

Currency
Impact

U.S. Wholesale $ 458,593 $ 441,293 $ 17,300 $ 458,593 $ 440,839 $ 17,754 $ (454) 4.0 % 3.9 % (0.1) %
International 108,000 125,230 (17,230) 108,000 114,373 (6,373) (10,857) (5.6) % (13.8) % (8.2) %
Retail Direct   21,077   19,487   1,590   21,077   19,487   1,590   - 8.2 % 8.2 % - %
Total net sales $ 587,670 $ 586,010 $ 1,660 $ 587,670 $ 574,699 $ 12,971 $ (11,311) 2.3 % 0.3 % (2.0) %
 

(1) "Constant Currency" is determined by applying the 2015 average exchange rates to the prior year local currency net 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 net sales growth excludes the impact of currency.

Contacts

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

Contacts

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