Lifetime Brands, Inc. Reports Second Quarter Financial Results

Reaffirms Financial Guidance for 2018

Declares Regular Quarterly Dividend

GARDEN CITY, N.Y., Aug. 06, 2018 (GLOBE NEWSWIRE) -- 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 second quarter ended June 30, 2018.

Second Quarter Financial Highlights:

Consolidated net sales were $148.7 million, as compared to consolidated net sales of $117.4 million for the corresponding period in 2017. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased $30.1 million, or 25.3%, as compared to consolidated net sales in the corresponding period in 2017.

Gross margin was $52.1 million, or 35.0%, as compared to $42.8 million, or 36.5%, for the corresponding period in 2017.

Loss from operations was $3.3 million, as compared to a loss of $3.1 million for the corresponding period in 2017.

Net loss was $6.1 million, or $0.30 per diluted share, as compared to a net loss of $2.1 million, or $0.14 per diluted share, in the corresponding period in 2017.

Adjusted net loss was $5.7 million, or $0.28 per diluted share, as compared to a loss of $0.8 million, or $0.05 per diluted share, in the corresponding period in 2017.

Equity in earnings, net of taxes, was $155 thousand, as compared to $458 thousand in the corresponding 2017 period.

Six Months Financial Highlights:

Consolidated net sales were $266.8 million, as compared to consolidated net sales of $230.7 million for the corresponding period in 2017. In constant currency, consolidated net sales increased 13.8%.

Gross margin was $97.2 million, or 36.4%, as compared to $86.7 million, or 37.6%, for the corresponding period in 2017.

Loss from operations was $16.6 million, as compared to a loss of $5.0 million for the corresponding period in 2017.

Net loss was $17.7 million, or $0.96 per diluted share, as compared to a net loss of $3.4 million, or $0.24 per diluted share, in the corresponding period in 2017.

Adjusted net loss was $14.0 million, or $0.76 per diluted share, as compared to a loss of $2.0 million, or $0.14 per diluted share, in the corresponding period in 2017.

Equity in earnings, net of taxes, was $232 thousand, as compared to $998 thousand in the corresponding 2017 period.

Consolidated adjusted EBITDA was $69.2 million for the twelve months ended June 30, 2018, after giving effect to the pro forma adjustments, permitted under our debt agreements, for the acquisition of Filament and projected synergies.

Chief Executive Officer Rob Kay commented, "The integration of Filament Brands has been proceeding smoothly and we are ahead of schedule both in terms of identified cost savings and implementation timing. The meaningful steps we have taken to optimize the Company's combined business structure have enabled us to surpass our original goal of realizing $8.1 million in annualized synergy savings. We are now on track to realize $10.0 million in savings annually. 2018 is expected to benefit by the realization of in excess of $2.0 million in savings, and we expect to realize the full amount of the $10.0 million in annual savings in 2019. This timing is consistent with our previously announced plan.

"We continue to expect the combination of Lifetime and Filament to be transformational, with progress becoming evident in the second half of this year and becoming more meaningful in 2019. While to date, our first priority has been to achieve substantial operational efficiencies, we are also working hard to evaluate and reposition our product portfolio as well as enter growth categories and lay the groundwork for realizing increased profit opportunities worldwide. Recognizing that today's retail environment is challenging, we believe Lifetime's expanded capabilities, customer base and ability to evolve will help us achieve these goals.

"Lifetime Brands is executing our plan for 2018, including the shipment of the largest single order Lifetime has ever received in the third quarter combined with various other new programs and promotions. We expect these to have a positive impact on our financial results in the year's second half. Accordingly, we are reaffirming the Company's financial guidance for 2018, provided on May 8, 2018."

Dividend

On Tuesday, July 31, 2018, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on November 15, 2018 to shareholders of record on November 1, 2018.

Conference Call

The Company has scheduled a conference call for August 6, 2018 at 11:00 a.m. ET. The dial-in number for the conference call is (844) 787-0801 or (661) 378-9632, passcode #3477586. A live webcast of the conference call will be accessible through https://edge.media-server.com/m6/p/wzu2m5ei. 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 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 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 this non-GAAP information as an indicator 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 and all guidance related thereto, our future plans and intentions regarding the Company and its consolidated subsidiaries, and the expected results of the combination of Lifetime and Filament. 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; 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; 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; 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. 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
[email protected]

Lippert/Heilshorn& Assoc.
Harriet Fried, SVP
212-838-3777
[email protected]

LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands - except per share data)
(unaudited)
		Three Months Ended			Six Months Ended
		June 30,			June 30,
			2018				2017					2018				2017
Net sales	$	148,651			$	117,393				$	266,820			$	230,749
Cost of sales		96,573				74,596					169,655				144,011
Gross margin		52,078				42,797					97,165				86,738
Distribution expenses		14,942				12,582					32,764				26,015
Selling, general and administrative expenses		40,042				33,102					80,217				65,484
Restructuring expenses		395				254					801				254
Loss from operations		(3,301	)			(3,141	)				(16,617	)			(5,015	)
Interest expense		(4,676	)			(1,001	)				(6,779	)			(1,942	)
Loss on early retirement of debt		-				(110	)				(66	)			(110	)
Loss before income taxes and equity in earnings		(7,977	)			(4,252	)				(23,462	)			(7,067	)
Income tax benefit		1,765				1,698					5,575				2,642
Equity in earnings, net of taxes		155				458					232				998
NET LOSS	$	(6,057	)		$	(2,096	)			$	(17,655	)		$	(3,427	)
Weighted-average shares outstanding - basic		20,327				14,456					18,474				14,426
BASIC LOSS PER COMMON SHARE	$	(0.30	)		$	(0.14	)			$	(0.96	)		$	(0.24	)
Weighted-average shares outstanding - diluted		20,327				14,456					18,474				14,426
DILUTED LOSS PER COMMON SHARE	$	(0.30	)		$	(0.14	)			$	(0.96	)		$	(0.24	)
Cash dividends declared per common share	$	0.0425			$	0.0425				$	0.085			$	0.085

LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands - except share data)
				June 30,		December 31,
					2018				2017
				(unaudited)
ASSETS
CURRENT ASSETS
	Cash and cash equivalents	$	5,999			$	7,600
	Accounts receivable, less allowances of $6,037 at June 30, 2018 and $6,190 at December 31, 2017		93,100				108,033
	Inventory		197,879				132,436
	Prepaid expenses and other current assets		14,712				10,354
	Income taxes receivable		4,095				-
		TOTAL CURRENT ASSETS		315,785				258,423
PROPERTY AND EQUIPMENT, net		25,643				23,065
INVESTMENTS		23,501				23,978
INTANGIBLE ASSETS, net		366,198				88,479
DEFERRED INCOME TAXES		8,957				5,826
OTHER ASSETS		1,962				1,750
			TOTAL ASSETS	$	742,046			$	401,521
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
	Current maturity of term loan	$	1,247			$	-
	Short term loan		76				69
	Accounts payable		43,915				25,461
	Accrued expenses		52,937				44,121
	Income taxes payable		-				1,864
		TOTAL CURRENT LIABILITIES		98,175				71,515
DEFERRED RENT & OTHER LONG-TERM LIABILITIES		20,847				20,249
DEFERRED INCOME TAXES		33,968				4,423
INCOME TAXES PAYABLE, LONG-TERM		311				311
REVOLVING CREDIT FACILITY		59,577				94,744
TERM LOAN		263,329				-
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 June 30, 2018 and December 31, 2017; shares issued and outstanding: 20,740,997 at June 30, 2018 and 14,902,527 at December 31, 2017		207				149
	Paid-in capital		256,182				178,909
	Retained earnings		41,126				60,546
	Accumulated other comprehensive loss		(31,676	)			(29,325	)
		TOTAL STOCKHOLDERS' EQUITY		265,839				210,279
			TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	742,046			$	401,521

LIFETIME BRANDS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
				Six Months Ended
				June 30,
					2018				2017
OPERATING ACTIVITIES
	Net loss	$	(17,655	)		$	(3,427	)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Depreciation and amortization		10,731				6,634
		Amortization of financing costs		663				282
		Deferred rent		368				(304	)
		Stock compensation expense		1,759				1,530
		Undistributed equity in earnings, net		(232	)			(970	)
		Loss on early retirement of debt		66				110
	Changes in operating assets and liabilities (excluding the effects of business acquisitions)
		Accounts receivable		41,441				37,950
		Inventory		(39,555	)			(30,769	)
		Prepaid expenses, other current assets and other assets		(185	)			1,107
		Accounts payable, accrued expenses and other liabilities		5,170				(5,291	)
		Income taxes receivable		(4,095	)			(4,279	)
		Income taxes payable		(4,242	)			(6,858	)
			NET CASH USED IN OPERATING ACTIVITIES		(5,766	)			(4,285	)
INVESTING ACTIVITIES
	Purchases of property and equipment		(3,168	)			(2,710	)
	Filament acquisition, net of cash acquired		(217,932	)			-
			NET CASH USED IN INVESTING ACTIVITIES		(221,100	)			(2,710	)
FINANCING ACTIVITIES
	Proceeds from revolving credit facility		126,283				123,534
	Repayments of revolving credit facility		(161,173	)			(110,937	)
	Proceeds from Term Loan		275,000				-
	Repayment of Term Loan		(688	)			-
	Repayment of Credit Agreement term loan		-				(9,500	)
	Proceeds from short term loan		79				119
	Payments on short term loan		(71	)			(114	)
	Payment of financing costs		(11,154	)			(30	)
	Payment of equity issuance costs		(936	)			-
	Payments for capital leases		(24	)			(49	)
	Payments of tax withholding for stock based compensation		(398	)			(176	)
	Proceeds from exercise of stock options		-				1,425
	Cash dividends paid		(1,535	)			(1,235	)
			NET CASH PROVIDED BY FINANCING ACTIVITIES		225,383				3,037
Effect of foreign exchange on cash		(118	)			197
DECREASE IN CASH AND CASH EQUIVALENTS		(1,601	)			(3,761	)
Cash and cash equivalents at beginning of period		7,600				7,883
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	5,999			$	4,122

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, 2018:

		Consolidated adjusted EBITDA for the Four Quarters Ended June 30, 2018
Three months ended June 30, 2018	$	3,910
Three months ended March 31, 2018		(529	)
Three months ended December 31, 2017		29,767
Three months ended September 30, 2017		26,500
Pro forma projected synergies		9,595
	Total for the four quarters	$	69,243

				June 30, 2018		March 31, 2018		December 31, 2017		September 30, 2017		Twelve months ended June 30, 2018
Net income (loss) as reported		$	(6,057	)		$	(11,598	)		$	1,251		$	4,330		$	(12,074	)
	Subtract out:
		Undistributed equity in (earnings) losses, net			(155	)			(77	)			265			326			359
	Add back:
		Income tax expense (benefit)			(1,765	)			(3,810	)			8,169			3,505			6,099
		Interest expense			4,676				2,103				1,177			1,172			9,128
		Loss on early retirement of debt			-				66				-			-			66
		Depreciation and amortization			6,422				4,309				3,468			4,063			18,262
		Stock compensation expense			921				838				908			952			3,619
		Unrealized (gain) loss on foreign currency contracts			(2,112	)			393				169			897			(653	)
		Other permitted non-cash charges			916				287				-			-			1,203
		Permitted acquisition related expenses			391				809				2,424			166			3,790
		Permitted non-recurring charges			673				2,825				1,331			272			5,101
		Pro forma Filament adjustment			-				3,326				10,605			10,817			24,748
		Twelve Months ended June 30, 2018, Pro forma projected synergies			-				-				-			-			9,595
	Consolidated adjusted EBITDA		$	3,910			$	(529	)		$	29,767		$	26,500		$	69,243

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 taxes, interest, losses on early retirement of debt, depreciation and amortization, stock compensation expense, unrealized (gain) loss on foreign currency contracts, permitted non-recurring charges such as severance expense, warehouse relocation costs, transition expenses and restructuring expenses, and a non-cash 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 June 30, 2018 or expected to be taken as of June 30, 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 loss and adjusted diluted loss per common share:

		Three Months Ended		Six Months Ended
		June 30, 2018,		June 30, 2018,
			2018				2017				2018				2017
Net loss as reported	$	(6,057	)		$	(2,096	)		$	(17,655	)		$	(3,427	)
Adjustments:
	Acquisition related expenses (adjustments), net		391				(9	)			1,200				26
	Restructuring expenses		395				254				801				254
	Severance expense		-				69				-				155
	Integration charges		110				-				145				-
	Warehouse relocation		168				-				2,552				-
	Loss on early retirement of debt		-				110				66				110
	Non-cash purchase accounting charges		916				-				1,203				-
	Unrealized (gain) loss on foreign currency contracts		(2,112	)			1,456				(1,719	)			1,751
	Deferred tax for foreign currency translation for Grupo Vasconia		501				(140	)			306				(365	)
	Income tax effect on adjustments		9				(397	)			(861	)			(502	)
Adjusted net loss	$	(5,679	)		$	(753	)		$	(13,962	)		$	(1,998	)
Adjusted diluted loss per common share	$	(0.28	)		$	(0.05	)		$	(0.76	)		$	(0.14	)

Adjusted net loss in the three and six months ended June 30, 2018 excludes acquisition related expenses, restructuring expenses, integration charges, warehouse relocation expenses, loss on retirement of debt, non-cash purchase accounting charges, the unrealized gain on foreign currency contracts and the deferred tax for foreign currency translation for Grupo Vasconia. Adjusted net loss in the three and six months ended June 30, 2017 excludes acquisition related expenses, restructuring expenses, severance expense, the unrealized loss on foreign currency contracts and the deferred tax for foreign currency translation for Grupo Vasconia.

LIFETIME BRANDS, INC.
Supplemental Information
(In thousands)

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
		June 30,		June 30,				Increase (Decrease)
	Net sales		2018			2017		Increase (Decrease)			2018			2017		Increase (Decrease)		Currency Impact		Excluding Currency			Including Currency			Currency Impact
	U.S. Wholesale	$	124,348		$	94,770		$	29,578			$	124,348		$	94,784		$	29,564			$	14		31.2		%		31.2		%		-	%
	International		19,083			19,365			(282	)			19,083			20,559			(1,476	)			1,194		(7.2	)	%		(1.5	)	%		5.7	%
	Retail Direct		5,220			3,258			1,962				5,220			3,258			1,962				-		60.2		%		60.2		%		-	%
	Total net sales	$	148,651		$	117,393		$	31,258			$	148,651		$	118,601		$	30,050			$	1,208		25.3		%		26.6		%		1.3	%
		As Reported		Constant Currency (1)
		Six Months Ended		Six Months Ended				Year-Over-Year
		June 30,		June 30,				Increase (Decrease)
	Net sales		2018			2017		Increase (Decrease)			2018			2017		Increase (Decrease)		Currency Impact		Excluding Currency			Including Currency			Currency Impact
	U.S. Wholesale	$	215,143		$	182,162		$	32,981			$	215,143		$	182,188		$	32,955			$	26		18.1		%		18.1		%		-	%
	International		40,929			40,593			336				40,929			44,367			(3,438	)			3,774		(7.7	)	%		0.8		%		8.5	%
	Retail Direct		10,748			7,994			2,754				10,748			7,994			2,754				-		34.5		%		34.5		%		-	%
	Total net sales	$	266,820		$	230,749		$	36,071			$	266,820		$	234,549		$	32,271			$	3,800		13.8		%		15.6		%		1.8	%

⁽¹⁾"Constant Currency" is determined by applying the 2018 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.

Source: Lifetime Brands, Inc.

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