November 08, 2012 at 07:00 AM EST
Lifetime Brands, Inc. Reports Third Quarter 2012 Results

Lifetime Brands, Inc. (NasdaqGS: LCUT), a global provider of branded products used to prepare, serve and consume foods in the home, today reported its financial results for the quarter ended September 30, 2012.

Net sales for the three and nine months ended September 30, 2012 were $128.1 million and $332.0 million, respectively. Net sales grew by 2.7% and 8.2% compared to the corresponding periods in 2011. Net sales increased as a result of the inclusion of the net sales of Creative Tops, acquired in November 2011, and a strong increase in sales of Kitchenware products, offset by a decrease in demand for Tabletop and Home Solutions products.

Gross margin percentage for the three months ended September 30, 2012 was 35.1%, as compared to 35.5%, in the corresponding period in 2011. Gross margin for the nine months ended September 30, 2012 and for the corresponding period in 2011 was 36.4%.

Net income for the three months ended September 30, 2012 decreased to $3.9 million, or $0.30 per diluted share, from $7.5 million, or $0.60 per diluted share, in the corresponding 2011 period. For the nine months ended September 30, 2012, net income decreased to $5.8 million, or $0.45 per diluted share, from $8.6 million, or $0.69 per diluted share, in the corresponding 2011 period.

Adjusted net income for the quarter was $5.1 million, or $0.40 per diluted share, as compared to $6.6 million, or $0.52 per diluted share, in 2011. Adjusted net income for the nine month period was $7.6 million, or $0.60 per diluted share, as compared to $7.7 million, or $0.62 per diluted share, in 2011. Adjusted net income in each of the 2012 periods excludes intangible asset impairment, a loss on early retirement of debt related to the repayment of the Company’s Term Loan, an expense related to retirement benefit obligations and acquisition related expenses. Adjusted net income in the 2011 periods excludes the equity earnings from an entity that discontinued the sale of products in late 2011 and acquisition related expenses and includes adjustments to reflect a normalized annual tax rate.

Jeffrey Siegel, Chairman, President and Chief Executive Officer said,

“I am pleased to report that our core Kitchenware products category performed well during the quarter, as it has all year; reflecting increases in our Kitchen Tools & Gadgets and Kitchen Cutlery & Cutting Board product lines, and strong gains in Cookware, driven by the introduction our new Guy Fieri® cookware line.

“These gains were offset by declines in our Tabletop and Home Solutions product categories. Sales of tabletop products were negatively impacted by several factors, including a decision to restrict sales of Mikasa-branded dinnerware to customers that maintain and primarily sell through brick and mortar facilities and the well-publicized problems at a major retailer that traditionally had been a significant customer of our tabletop products.

“As previously noted, we are transitioning some of our home décor business to higher quality branded products sold under our Mikasa® and Pfaltzgraff® brands.

“I am pleased to report that Hurricane Sandy and its aftermath had little impact on our operations.

“Our holiday season is shaping up well. Based on our current bookings and orders, we expect consolidated net sales for the fourth quarter to be approximately 5% greater than net sales in the fourth quarter of 2011.”

On November 2, 2012, the Board of Directors declared a quarterly dividend of $0.025 per share payable on February 15, 2013 to shareholders of record on February 1, 2013.

Conference Call

The Company has scheduled a conference call for Thursday, November 8, 2012 at 11:00 a.m. ET. The dial-in number for the conference call is (800) 291-9234 or (617) 614-3923, passcode #56998213. A replay of the call will also be available through November 15, 2012 and can be accessed by dialing (888) 286-8010 or (617) 801-6888, conference ID #23693174. 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. Pursuant to the requirements of Regulation G, 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. Management uses this non-GAAP information as an indicator of business performance.

EBITDA is a non-GAAP measure that the Company defines as net income, adjusted to exclude undistributed equity earnings, an extraordinary item, income taxes, interest, depreciation and amortization, restructuring expenses, stock compensation expense, acquisition related expenses, intangible asset impairment and loss on early retirement of debt, as shown in the table below. Adjusted net income and adjusted diluted income per share are non-GAAP measures that the Company defines as net income, adjusted to exclude intangible asset impairment, loss on early retirement of debt, an expense related to retirement benefit obligations, acquisition related expenses and the equity earnings from an entity that discontinued the sale of products in late 2011 and include income tax adjustments to reflect a normalized annual tax rate.

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, tabletop and other products used in the home. The Company markets its products under such well-known kitchenware brands as Farberware®, KitchenAid®, CasaMōda®, Cuisinart®, Cuisine de France®, Guy Fieri®, Hoffritz®, Kizmos™, Misto®, Pedrini®, Roshco®, Sabatier®, Savora™ and Vasconia®; respected tabletop 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 Elements®, Melannco®, Kamenstein® and Design for Living™. The Company also provides exclusive private label products to leading retailers worldwide.

The Company’s website is www.lifetimebrands.com.

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 (In thousands - except per share data)

(unaudited)

Three Months EndedNine Months Ended
September 30,September 30,
2012201120122011
Net sales $ 128,050 $ 124,663 $ 332,030 $ 306,807
Cost of sales 83,141 80,424 211,287 195,132
Gross margin 44,909 44,239 120,743 111,675
Distribution expenses 10,536 10,352 31,943 30,598
Selling, general and administrative expenses 25,893 23,589 74,935 66,451
Intangible asset impairment 1,069 - 1,069 -
Income from operations 7,411 10,298 12,796 14,626
Interest expense (1,271 ) (1,789 ) (4,644 ) (5,807 )
Loss on early retirement of debt (1,015 ) - (1,363 ) -
Income before income taxes and equity in earnings 5,125 8,509 6,789 8,819
Income tax provision (1,930 ) (2,089 ) (2,612 ) (2,609 )
Equity in earnings, net of taxes 695 1,113 1,616 2,437
NET INCOME $ 3,890 $ 7,533 $ 5,793 $ 8,647
BASIC INCOME PER COMMON SHARE $ 0.31 $ 0.62 $ 0.46 $ 0.72
DILUTED INCOME PER COMMON SHARE $ 0.30 $ 0.60 $ 0.45 $ 0.69
Cash dividends declared per common share $ 0.025 $ - $ 0.10 $ 0.05

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 (In thousands - except share data)

(unaudited)

September 30,December 31,
20122011
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,749 $ 2,972

Accounts receivable, less allowances of $3,381 at September 30, 2012

 and $4,602 at December 31, 2011

91,269 77,749
Inventory 128,954 110,337
Prepaid expenses and other current assets 6,052 5,264
Deferred income taxes 3,441 2,475
TOTAL CURRENT ASSETS 231,465 198,797
PROPERTY AND EQUIPMENT, net 32,002 34,324
INVESTMENTS 36,228 34,515
INTANGIBLE ASSETS, net 44,668 46,937
OTHER ASSETS 2,904 4,172
TOTAL ASSETS $ 347,267 $ 318,745
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Revolving Credit Facility $ 37,826 $ 15,000
Current portion of Senior Secured Term Loan 3,500 -
Accounts payable 27,133 18,985
Accrued expenses 35,349 33,877
Income taxes payable 1,342 2,100
TOTAL CURRENT LIABILITIES 105,150 69,962
DEFERRED RENT & OTHER LONG-TERM LIABILITIES 16,207 14,598
DEFERRED INCOME TAXES 4,821 5,385
REVOLVING CREDIT FACILITY 35,838 42,625
SENIOR SECURED TERM LOAN 31,500 -
TERM LOAN - 40,000
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: 12,570,899 at September 30, 2012 and

 12,430,893 at December 31, 2011

126 124
Paid-in capital 139,975 137,467
Retained earnings 19,013 14,465
Accumulated other comprehensive loss (5,363) (5,881)
TOTAL STOCKHOLDERS’ EQUITY 153,751 146,175
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 347,267 $ 318,745

LIFETIME BRANDS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

Nine Months Ended
September 30,
20122011
OPERATING ACTIVITIES
Net income $ 5,793 $ 8,647

Adjustments to reconcile net income to net cash provided by (used in) operating

 activities:

Depreciation and amortization 6,878 6,061
Amortization of debt discount - 543
Deferred rent (421 ) (41 )
Deferred income taxes (687 ) 573
Stock compensation expense 2,131 2,105
Undistributed equity earnings (1,201 ) (1,971 )
Loss on early retirement of debt 1,363 -
Intangible asset impairment 1,069 -
Changes in operating assets and liabilities (excluding the effects of business

acquisitions)

Accounts receivable (13,170 ) (23,367 )
Inventory (18,617 ) (23,223 )
Prepaid expenses, other current assets and other assets (883 ) 1,040
Accounts payable, accrued expenses and other liabilities 10,642 8,601
Income taxes payable (758 ) (6,094 )
NET CASH USED IN OPERATING ACTIVITIES (7,861 ) (27,126 )
INVESTING ACTIVITIES
Purchases of property and equipment (3,371 ) (3,366 )
Net proceeds from sale of property 15 -
NET CASH USED IN INVESTING ACTIVITIES (3,356 ) (3,366 )
FINANCING ACTIVITIES
Proceeds from Revolving Credit Facility, net of repayments 16,039 52,645
Proceeds from Senior Secured Term Loan 35,000 -
Repayment of Term Loan (40,000 ) -
Repurchase of 4.75% convertible senior notes - (24,100 )
Proceeds from exercise of stock options 380 26
Excess tax benefits from exercise of stock options - 8
Payment of capital lease obligations - (74 )
Cash dividend paid (935 ) (604 )
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,484 27,901
Effect of foreign exchange on cash (490 ) -
DECREASE IN CASH AND CASH EQUIVALENTS (1,223 ) (2,591 )
Cash and cash equivalents at beginning of period 2,972 3,351
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,749 $ 760

LIFETIME BRANDS, INC.

Supplemental Information

(In thousands)

Consolidated EBITDA for the four quarters ended
September 30, 2012
Three months ended September 30, 2012 $ 11,568
Three months ended June 30, 2012 5,584
Three months ended March 31, 2012 6,222
Three months ended December 31, 2011 14,342
Total for the four quarters $ 37,716
Consolidated EBITDA for the four quarters ended
September 30, 2011
Three months ended September 30, 2011 $ 13,524
Three months ended June 30, 2011 7,512
Three months ended March 31, 2011 2,720
Three months ended December 31, 2010 17,544
Total for the four quarters $ 41,300

Reconciliation of GAAP to Non-GAAP Operating Results

Consolidated EBITDA:

Three Months Ended
September 30,

2012

June 30,

2012

March 31,

2012

December 31,
2011

Net income as reported $ 3,890 $ 559 $ 1,344 $ 5,419
Subtract out:
Undistributed equity earnings (695 ) (108 ) (398 ) (925 )
Add back:
Income tax provision (benefit) 1,930 94 588 3,513
Interest expense 1,271 1,675 1,698 1,951
Loss on early retirement of debt 1,015 348 - -
Intangible asset impairment 1,069 - - -
Depreciation and amortization 2,409 2,262 2,207 2,336
Stock compensation expense 679 754 698 690
Permitted acquisition related expenses - - 85 1,358
Consolidated EBITDA $ 11,568 $ 5,584 $ 6,222 $ 14,342

LIFETIME BRANDS, INC.

Supplemental Information

(In thousands - except per share data)

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

Consolidated EBITDA:

Three Months Ended
September 30,

2011

June 30,

2011

March 31,

2011

December 31,
2010

Net income as reported $ 7,533 $ 2,063 $ (949 ) $ 13,928
Subtract out:
Undistributed equity earnings (1,113 ) (393 ) (465 ) (733 )
Extraordinary item, net of taxes - - - (2,477 )
Add back:
Income tax provision (benefit) 2,089 1,108 (588 ) 1,600
Interest expense 1,789 2,039 1,979 2,188
Depreciation and amortization 2,046 2,020 1,995 2,292
Stock compensation expense 682 675 748 746
Permitted acquisition related expenses 498 - - -
Consolidated EBITDA $ 13,524 $ 7,512 $ 2,720 $ 17,544

Adjusted Net Income and Adjusted Diluted Income Per Share:

Three Months EndedNine Months Ended
September 30,September 30,
2012201120122011
Net income as reported $ 3,890 $ 7,533 $ 5,793 $ 8,647
Adjustments:
Intangible asset impairment, net of tax 645 - 645 -
Loss on early retirement of debt, net of tax 612 - 822 -
Retirement benefit obligation expense, net of tax - - 268 -
Acquisition related expenses, net of tax - 311 85 306

Equity in earnings of World Alliance

 Enterprises Limited

- (133 ) - (448 )
Normalized tax provision on reported income - (1,115 ) - (784 )
Adjusted net income $ 5,147 $ 6,596 $ 7,613 $ 7,721
Adjusted diluted income per share $ 0.40 $ 0.52 $ 0.60 $ 0.62

Contacts:

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