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Lifetime Brands Reports 2012 Financial Results

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 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®, Fred ®, Guy Fieri®, Hoffritz®, Kizmos™, Misto®, Pedrini®, Roshco®, Sabatier® 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 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,
2012     2011 2012     2011
 
Net sales $ 154,812 $ 137,611 $ 486,842 $ 444,418
 
Cost of sales   98,767     86,926     310,054     282,058  
 
Gross margin 56,045 50,685 176,788 162,360
 
Distribution expenses 12,103 13,284 44,046 43,882
Selling, general and administrative expenses 29,403 27,443 104,338 93,894
Intangible asset impairment   -     -     1,069     -  
 
Income from operations 14,539 9,958 27,335 24,584
 
Interest expense (1,254 ) (1,951 ) (5,898 ) (7,758 )
Loss on early retirement of debt   -     -     (1,363 )   -  
 
Income before income taxes and equity in earnings 13,285 8,007 20,074 16,826
 
Income tax provision (2,596 ) (3,513 ) (5,208 ) (6,122 )
Equity in earnings, net of taxes   4,465     925     6,081     3,362  
 
NET INCOME $ 15,154   $ 5,419   $ 20,947   $ 14,066  
 
BASIC INCOME PER COMMON SHARE $ 1.21   $ 0.45   $ 1.67   $ 1.16  
 
DILUTED INCOME PER COMMON SHARE $ 1.19   $ 0.43   $ 1.64   $ 1.12  
       
LIFETIME BRANDS, INC.
CONSOLIDATED BALANCE SHEETS

(In thousands - except share data)
 
December 31,
2012 2011
 
ASSETS
CURRENT ASSETS

Cash and cash equivalents
$ 1,871 $ 2,972

Accounts receivable, less allowances of $3,996 at December 31, 2012 and $4,602 at

December 31, 2011
97,369 77,749

Inventory
104,584 110,337

Prepaid expenses and other current assets
5,393 5,264

Deferred income taxes
  3,542     2,475  

TOTAL CURRENT ASSETS
212,759 198,797
 
PROPERTY AND EQUIPMENT, net 31,646 34,324
INVESTMENTS 43,685 34,515
INTANGIBLE ASSETS, net 57,842 46,937
OTHER ASSETS   2,865     4,172  

TOTAL ASSETS
$ 348,797   $ 318,745  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES

Revolving Credit Facility
$ 7,000 $ 15,000

Current maturity of Senior Secured Term Loan
4,375 -

Accounts payable
18,555 18,985

Accrued expenses
33,354 33,877

Income taxes payable
  3,615     2,100  

TOTAL CURRENT LIABILITIES
66,899 69,962
 
DEFERRED RENT & OTHER LONG-TERM LIABILITIES 21,565 14,598
DEFERRED INCOME TAXES 3,510 5,385
REVOLVING CREDIT FACILITY 53,968 42,625
SENIOR SECURED TERM LOAN 30,625 -
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: 12,754,467 at December 31, 2012 and 12,430,893 at December 31, 2011
128 124

Paid-in capital
142,489 137,467

Retained earnings
33,849 14,465

Accumulated other comprehensive loss
  (4,236 )   (5,881 )

TOTAL STOCKHOLDERS’ EQUITY
  172,230     146,175  

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$ 348,797   $ 318,745  
 
 

LIFETIME BRANDS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
     
Year ended

December 31,
2012     2011
OPERATING ACTIVITIES
Net income $ 20,947 $ 14,066
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts 123 (24 )
Depreciation and amortization 9,324 8,397
Amortization of debt discount - 543
Deferred rent (668 ) (133 )
Deferred income taxes (3,011 ) (1,218 )
Stock compensation expense 2,793 2,795
Undistributed equity earnings (5,665 ) (2,896 )
Intangible asset impairment 1,069 -
Loss on early retirement of debt 1,363 -

Changes in operating assets and liabilities (excluding the effects of business acquisitions)
Accounts receivable (14,741 ) 3,297
Inventory 9,694 (5,365 )
Prepaid expenses, other current assets and other assets 120 1,120
Accounts payable, accrued expenses and other liabilities (166 ) (4,673 )
Income taxes payable   1,515     (3,722 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   22,697     12,187  
 
INVESTING ACTIVITIES
Purchases of property and equipment (4,955 ) (4,959 )
Equity investments (2,765 ) (5,123 )
Business acquisition, net of cash acquired (14,500 ) (20,584 )
Net proceeds from sale of property   27     31  
NET CASH USED IN INVESTING ACTIVITIES   (22,193 )   (30,635 )
 
FINANCING ACTIVITIES
Proceeds from Revolving Credit Facility, net 3,343 43,525
Proceeds from Term Loan 35,000 -
Repayment of Term Loan (40,000 ) -
Repurchase of 4.75% convertible senior notes - (24,100 )
Financing Costs - (761 )
Cash dividends paid (1,249 ) (913 )
Payment of capital lease obligations - (78 )
Proceeds from the exercise of stock options 577 225
Excess tax benefits from exercise of stock options   150     -  

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
  (2,179 )   17,898  
 
Effect of foreign exchange on cash   574     171  
 
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   (1,101 )   (379 )
 
Cash and cash equivalents at beginning of year   2,972     3,351  
 
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,871   $ 2,972  
               

LIFETIME BRANDS, INC.

Supplemental Information

Reconciliation of GAAP to Non-GAAP Operating Results

(In thousands - except per share data)
 

Consolidated EBITDA:

Three Months Ended
Year Ended

December 31,
December 31,
2012 2011 2012 2011
(in thousands)

Net income as reported
$ 15,154 $ 5,419 $ 20,947 $ 14,066

Subtract out:
Undistributed equity in earnings, net (4,464 ) (925 ) (5,665 ) (2,896 )

Add back:
Income tax provision 2,596 3,513 5,208 6,122
Interest expense 1,254 1,951 5,898 7,758
Depreciation and amortization 2,446 2,336 9,324 8,397
Stock compensation expense 662 690 2,793 2,795
Loss on early retirement of debt - - 1,363 -
Intangible asset impairment - - 1,069 -
Permitted acquisition related expenses   220     1,358     305     1,856  

Consolidated EBITDA
$ 17,868   $ 14,342   $ 41,242   $ 38,098  
 

Adjusted net income and adjusted diluted income per share:
 

Three Months Ended
Year Ended

December 31,
December 31,
2012 2011 2012 2011
(in thousands)

Net income as reported
$ 15,154 $ 5,419 $ 20,947 $ 14,066

Adjustments:
Bargain purchase gain in equity in earnings, net of tax (4,112 ) - (4,112 ) -
Tax benefit recorded in equity in earnings (1,116 ) - (1,116 ) -
Impairment of Vasconia investment, net of tax 1,336 - 1,336 -
Intangible asset impairment, net of tax - - 645 -
Loss on early retirement of debt, net of tax - - 822 -
Retirement benefit obligation expense, net of tax - - 268 -
Acquisition related expenses, net of tax 135 895 188 1,230

Reduction of deferred tax liability related to prior year
(2,283 ) - (2,283 ) -

Normalized tax benefit (provision) on reported income
  (435 )   214     (539 )   (810 )

Adjusted net income
$ 8,679   $ 6,528   $ 16,156   $ 14,486  

Adjusted diluted income per share
$ 0.67   $ 0.52   $ 1.26   $ 1.16  
 

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

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