Lifetime Brands Reports First Quarter 2011 Results

Lifetime Brands, Inc. (NasdaqGS: LCUT), North America's leading resource for nationally branded kitchenware, tabletop and home décor products, today reported its financial results for the first quarter ended March 31, 2011.

Consolidated net sales for the first quarter of 2011 were $91.8 million, an increase of 3.5%, as compared to consolidated net sales of $88.7 million for the corresponding period in 2010.

Net sales for the Wholesale segment were up $2.8 million, or 3.4%, to $84.9 million in the first quarter of 2011. Net sales for the Retail Direct segment were up $0.3 million, or 4.5%, to $6.9 million in the first quarter of 2011.

Loss from operations for the first quarter of 2011 was $23 thousand, as compared to income from operations of $2.5 million for the corresponding period in 2010.

Gross margin as a percentage of net sales for the Wholesale segment declined to 34.0% from 37.0% in the corresponding period in 2010. The decrease in the Company’s gross margin percentage is attributable to certain temporary price reductions related to marketing initiatives that, among other things, will provide the Company with additional retail shelf space later in the year, low margin sales of excess inventory and changes in product mix. Gross margin for the Retail Direct segment was 66.4% in the 2011 quarter as compared to 66.6% for the corresponding period in 2010.

Interest expense for the first quarter of 2011 declined to $2.0 million from $2.4 million in 2010, reflecting both lower average borrowings and lower interest rates.

Consolidated EBITDA for the three month period ended March 31, 2011 was $2.7 million, as compared to $5.7 million for the corresponding period in 2010. Consolidated EBITDA for the four quarters ended March 31, 2011, was $39.9 million as compared to $37.2 million for the four quarters ended March 31, 2010.

EBITDA is a non-GAAP measure that the Company defines as net income, adjusted to exclude undistributed earnings of Grupo Vasconia, an extraordinary item, income taxes, interest, depreciation and amortization, restructuring expenses, stock compensation expense and loss on early retirement of debt, as shown in the table below.

Jeffrey Siegel, Chairman, President and Chief Executive Officer said, “Lifetime’s first quarter results reflect continuing challenges in the retail economy, which have constrained sales at certain large retailers where such retailers’ traditional consumers are especially sensitive to increases in the price of food, clothing and fuel. In addition, during the quarter, we temporarily reduced certain prices in connection with targeted marketing programs and retailers’ price roll-back strategies. These marketing initiatives will provide us with additional facings, which should generate sufficient additional volume, beginning in the third quarter of the year to more than make up for the reductions in the gross margin percentage.

”Lifetime’s sales in the third and fourth quarters of 2011 also should benefit from sales of new products and programs introduced earlier this year at the International Home + Housewares Show. We have expanded our product categories to include a new line of whimsical kitchen gadgets, an extensive selection of ceramic knives, new enamel on cast iron cookware and new lines of food storage products, a new product category for Lifetime. These new products will be available in retailers’ stores beginning in the third quarter of 2011.

“In January, we announced that Lifetime and its international partners, Accent-Fairchild Group, Inc. and Grupo Vasconia S.A.B., had joined with Fackelmann GmbH Co. KG, a leading European housewares company, to form Housewares Corporation of Asia Limited (“HCA”). Operating from Hong Kong, HCA will assist retailers in North, Central and South America in developing, designing and supplying proprietary, direct import kitchenware programs. We already are working closely with selected retailers to source private label kitchenware programs through HCA.

“In anticipation of increases in input prices that we know we will have to contend with in the latter half of the year, we have worked with our retailer partners to raise prices with the goal of keeping our margins neutral, as well as protecting the retailers’ margins. We are not alone in having to pass along input price increases and our retailer partners generally have been supportive of our actions. These price increases will take effect in the third and fourth quarters of the year, when we record a significant majority of our sales.

“Despite the ongoing challenges in the retail environment, Lifetime’s ongoing commitment to innovation, our unique portfolio of national brands and the roll-out of new products and programs should enable us to achieve both top line growth and an increase in profitability for the full year 2011.”

On March 4, 2011, the Board of Directors declared a quarterly dividend of $0.025 per share payable on May 16, 2011, to shareholders of record on May 2, 2011.

Conference Call

Lifetime has scheduled a conference call for Thursday, May 5, 2011 at 11:00 a.m. ET to discuss its first quarter 2011 results. The dial-in number for the call is 706-679-7464; the conference ID is #62217873. A live webcast of the call will be broadcast at the Company’s web site, www.lifetimebrands.com.

A replay of the call will also be available through Thursday, May 12, 2011 and can be accessed by dialing 706-645-9291, conference ID #62217873. 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 maintaining and evaluating the Company's on-going financial results and trends. Management uses this non-GAAP information as an indicator of business 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 North America’s leading resource for nationally branded kitchenware, tabletop and home décor products. The Company markets its products under many of the industry’s best known brands, including Farberware®, KitchenAid®, Mikasa®, Pfaltzgraff®, Elements®, Melannco®, Cuisinart®, Wallace®, Towle® Silversmiths, Pedrini®, International® Silver, Gorham®, Sabatier®, Hoffritz®, Vasconia®, Calvin Klein®, CasaMōda®, Sasaki®, Tuttle®, Kirk Stieff®, Nautica® and Roshco®. Lifetime’s products are distributed through most major retailers in North America.
   

LIFETIME BRANDS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands - except per share data)

(unaudited)
 
Three Months Ended

March 31,
2011     2010
 
Net sales $ 91,773 $     88,736

Cost of sales 58,383 53,952
Distribution expenses 10,940 10,133
Selling, general and administrative expenses   22,473         22,124  
 
Income (loss) from operations (23 ) 2,527
 
Interest expense   (1,979 )       (2,429 )
 
Income (loss) before income taxes and equity in earnings of Grupo Vasconia, S.A.B. (2,002 ) 98
 
Income tax benefit (provision) 588 (39 )
Equity in earnings of Grupo Vasconia, S.A.B., net of taxes   465         670  
 
NET INCOME (LOSS) $ (949 ) $     729  
 
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE $ (0.08 ) $     0.06  
 

Cash dividends declared per common share

$

          0.025

$

       

LIFETIME BRANDS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands - except share data)
 
March 31, December 31,
2011 2010
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,534 $ 3,351
Accounts receivable, less allowances of $8,403 at 2011 and $12,611 at 2010 60,964 72,795
Inventory 103,904 99,935
Deferred income taxes 1,124 1,124
Prepaid expenses and other current assets 5,257 5,048
Income taxes receivable   745    
TOTAL CURRENT ASSETS 173,528 182,253
 
PROPERTY AND EQUIPMENT, net 35,296 36,093
INTANGIBLE ASSETS, net 30,667 30,818
INVESTMENT IN GRUPO VASCONIA, S.A.B. 25,738 24,068
OTHER ASSETS   4,197     4,354  
 
TOTAL ASSETS $ 269,426   $ 277,586  
 

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Revolving Credit Facility $ 7,000 $ 4,100
Accounts payable 21,846 19,414
Accrued expenses 22,595 31,962
Income taxes payable   5,036  
TOTAL CURRENT LIABILITIES 51,441 60,512
 
DEFERRED RENT & OTHER LONG-TERM LIABILITIES 14,452 14,482
DEFERRED INCOME TAXES 1,408 1,429
REVOLVING CREDIT FACILITY 10,000 10,000
TERM LOAN 40,000 40,000
4.75% CONVERTIBLE SENIOR NOTES 23,786 23,557
 
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: 12,066,543 in 2011 and 12,064,543 in 2010
121 121
Paid-in capital 132,108 131,350
Retained earnings 62 1,312
Accumulated other comprehensive (loss)   (3,952 )   (5,177 )
TOTAL STOCKHOLDERS’ EQUITY   128,339     127,606  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 269,426   $ 277,586  
 

LIFETIME BRANDS, INC.

Supplemental Information

(In thousands)
 

Consolidated EBITDA – Four Quarters Ended

March 31, 2011
 
Consolidated EBITDA for the three months ended:
March 31, 2011 $   2,720
December 31, 2010 17,544
September 30, 2010 13,529
June 30, 2010     6,117
Consolidated EBITDA $   39,910
 

Consolidated EBITDA – Four Quarters Ended

March 31, 2010
 
Consolidated EBITDA for the three months ended:
March 31, 2010 $ 5,728
December 31, 2009 15,558
September 30, 2009 11,611
June 30, 2009     4,258
Consolidated EBITDA $   37,155
   

Reconciliation of GAAP to Non-GAAP Operating Results
 
Three Months Ended
March 31,     December 31,     September 30,     June 30,
  2011     2010     2010   2010  
Net income (loss) reported $ (949 ) $ 13,928 $ 6,585   $ (981 )
Less:

Undistributed earnings of Grupo Vasconia, S.A.B.
(465 ) (733 ) (836 ) (82 )
Extraordinary item

(2,477 )

Add:
Income tax (benefit) provision (588 ) 1,600 2,390 573
Interest expense 1,979 2,188 2,090 2,644
Depreciation and amortization 1,995 2,292 2,518 2,458
Stock compensation expense 748 746 782 741
Loss on early retirement of debt  

   

   

    764  
Consolidated EBITDA $ 2,720   $ 17,544   $ 13,529   $ 6,117  
 
Three Months Ended
March 31, December 31,

September 30,

 

June 30,
  2010     2009     2009   2009  
Net income (loss) reported $ 729 $ 5,048 $ 4,879 $ (1,253 )
Less:

Undistributed earnings of Grupo Vasconia, S.A.B.
(670 ) (534 ) (703 ) (294 )
Add:
Income tax provision 39 1,311 153 281
Interest expense 2,429 4,124 3,294 2,894
Depreciation and amortization 2,542 3,214 2,770 2,810
Restructuring expenses

1,784 671 (663 )
Stock compensation expense   659     611     547     483  
Consolidated EBITDA $ 5,728   $ 15,558   $ 11,611   $ 4,258  

Copyright Business Wire 2010

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