GlobeNewswire Inc | Nov 5, 2020 07:00AM EST

November 05, 2020

GARDEN CITY, N.Y., Nov. 05, 2020 (GLOBE NEWSWIRE) -- Lifetime Brands, Inc. (NasdaqGS: LCUT), a leading global designer, developer and marketer of a broad range of branded consumer products used in the home, today reported its financial results for the quarter ended September30, 2020.

Robert Kay, Lifetimes Chief Executive Officer, commented, We are pleased with our strong performance in the third quarter, which marks another quarter of sales and earnings growth as we continue to make progress executing on our strategic plan. Highlighting our performance, net income for the quarter was $13.9 million compared with a net loss of $(13.5) million for the quarter a year ago. Correspondingly, EBITDA continues to grow reaching $72.7 million for the last 12 month period or an increase of approximately 5% over the prior quarter and nearly 20% since the first quarter of 2020. Our U.S. business continues to show strength as it delivers its fifth consecutive quarter of year-over-year growth with market share gains. This increase is driven by our household products, led by our kitchenware products category, which continues to experience high consumer demand and gain market share across most of our channels that we sell into. Additionally, our ability to efficiently execute our transformative initiatives, including increasing our drop ship capabilities and digital tools, combined with effectively managing our supply chain, have positioned us well, and allowed us to meet increased demand and gain market share."

Mr. Kay continued, "Consistent with expectations, our operations in Europe have stabilized and end markets have continued to recover. As a result, this quarter we delivered growth of 14.3%, or 9.9% in constant currency, in our international business over the prior year, and the turnaround plan that we implemented for this business remains on track. In terms of cost management, our disciplined focus has created a leaner organization and we remain diligent on maintaining a solid liquidity position and on continuing to deleverage the balance sheet. Looking ahead, we are committed to increasing investments in growth initiatives, including continued enhancement of our digital marketing and e-commerce capabilities, expanding our international business and building out our commercial foodservice business. While we navigate the impact of the ongoing pandemic, we remain confident in our ability to deliver value to our stakeholders through our proven Lifetime 2.0 strategic plan.

Third Quarter Financial Highlights:

Consolidated net sales for the three months ended September30, 2020 were $224.8 million, representing an increase of $9.3 million, or 4.3%, as compared to net sales of $215.5 million for the corresponding period in 2019. In constant currency, a non-GAAP financial measure, which excludes the impact of foreign exchange fluctuations and was determined by applying 2020 average rates to 2019 local currency amounts, consolidated net sales increased by $8.4 million, or 3.9%, as compared to consolidated net sales in the corresponding period in 2019.

Gross margin for the three months ended September30, 2020 was $78.8 million, or 35.1%, as compared to $72.9 million, or 33.8%, for the corresponding period in 2019.

Income from operations was $21.5 million, as compared to income from operations of $6.9 million for the corresponding period in 2019. Excluding a $9.7 million non-cash charge for goodwill impairment, income from operations would have been $16.7 million, for the corresponding period in 2019. A table which reconciles this non-GAAP financial measure to income from operations, as reported, is included below.

Net income was $13.9 million, or $0.65 per diluted share, as compared to a net loss of $(13.5) million, or $(0.66) per diluted share, in the corresponding period in 2019.

Adjusted net income of $13.9 million, or $0.65 per diluted share, as compared to adjusted net loss, of $(3.0) million, or $(0.15) per diluted share, in the corresponding period in 2019. A table which reconciles this non-GAAP financial measure to net income (loss), as reported, is included below.

Nine Months Financial Highlights:

Consolidated net sales for the nine months ended September30, 2020 were $520.0 million, representing an increase of $12.0 million, or 2.4%, as compared to net sales of $508.0 million for the corresponding period in 2019. In constant currency, net sales also increased by $12.0 million, or 2.4%, as compared to consolidated net sales in the corresponding period in 2019.

Gross margin for the nine months ended September30, 2020 was $185.9 million, or 35.8%, as compared to $171.3 million, or 33.7%, for the corresponding period in 2019.

Income from operations was $0.6 million in 2020, as compared to a loss from operations of $(7.9) million for the corresponding period in 2019. Income from operations, excluding the impact of certain non-cash charges, was $23.5 million compared to income from operations, excluding the impact of certain non-cash charges, of $10.3 million in the corresponding period in 2019. A table which reconciles this non-GAAP financial measure to income (loss) from operations, as reported, is included below.

Net loss was $(18.2) million, or $(0.87) per diluted share, as compared to a net loss of $(29.9) million, or $(1.46) per diluted share, in the corresponding period in 2019. This includes a non-cash impairment charges of $20.1 million and $9.7 million incurred in the first quarter of 2020 and the third quarter of 2019, respectively.

Adjusted net income was $5.1 million, or $0.24 per diluted share in 2020, as compared to adjusted net loss of $(11.7) million, or $(0.57) per diluted share in 2019. A table which reconciles this non-GAAP financial measure to net loss, as reported, is included below.

Consolidated adjusted EBITDA, after giving effect to certain adjustments as permitted and defined under our debt agreements, was $72.7 million for the twelve months ended September30, 2020. A table which reconciles thisnon-GAAPfinancial measure to net income (loss), as reported, is included below.

Outlook

As a result of the uncertainty surrounding the COVID-19 pandemic, the Company is not providing outlook for the full fiscal year 2020.

Dividend

On November3, 2020, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on February12, 2021 to shareholders of record on January29, 2021.

Conference Call

The Company has scheduled a conference call for Thursday, November5, 2020 at 11:00 a.m. The dial-in number for the conference call is (866) 610-1072 (U.S.) or (973) 935-2840 (International), Conference ID: 8275007.

A live webcast of the conference call will be accessible through: https://event.on24.com/wcc/r/2796914/9438665109E42AC8135FA95CE5D2DFFE

For those who cannot listen to the live broadcast, an audio replay of the webcast will be available.

Non-GAAPFinancial MeasuresThis earnings release containsnon-GAAPfinancial measures, including consolidated net sales in constant currency, income from operations excluding certain non-cash charges, adjusted net income (loss), adjusted diluted income (loss) per common share, gross margin (excludingnon-recurringcharges) and consolidated adjusted EBITDA. Anon-GAAPfinancial measure is a numerical measure of a companys 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 a 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 thenon-GAAPfinancial measures to the most directly comparable GAAP financial measures. Thesenon-GAAPfinancial measures are provided because management of the Company uses these financial measures in evaluating the Companyson-goingfinancial results and trends, and management believes that exclusion of certain items allows for more accurate period-to-period comparison of the Companys operating performance by investors and analysts. Management uses thesenon-GAAPfinancial measures as indicators of business performance.Thesenon-GAAPfinancial measures should be viewed as a supplement to, and not a substitute for, GAAP financial measures of performance.

Forward-Looking StatementsIn this press release, the use of the words believe, could, expect, intend, may, positioned, project, projected, should, will, would or similar expressions is intended to identify forward-looking statements. Such statements include all statements regarding the growth of the Company, our financial outlook, our ability to navigate the current environment and advance our strategy, our commitment to increasing investments in future growth initiatives, our initiatives to create value, our efforts to mitigate geopolitical factors and tariffs, our efforts to stabilize our international business, our current and projected financial and operating performance, results, and profitability and all guidance related thereto, including forecasted exchange rates and effective tax rates, as well as our future plans and intentions regarding the Company and its consolidated subsidiaries. Such statements represent the Companys current judgments, estimates, and assumptions about possible future events. The Company believes these judgments, estimates, and assumptions 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 Companys ability to comply with the requirements of its credit agreements; the successful implementation of the Company's turnaround plan for its international business; the availability of funding under such credit agreements; the Companys ability to maintain adequate liquidity and financing sources and an appropriate level of debt, as well as to deleverage its balance sheet; the possibility of impairments to the Companys goodwill; the possibility of impairments to the Companys intangible assets; changes in U.S. or foreign trade or tax law and policy; the impact of tariffs on imported goods and materials; changes in general economic conditions which could affect customer payment practices or consumer spending; the impact of changes in general economic conditions on the Companys customers; customer ordering behavior; the performance of our newer products; the impact of our SKU rationalization initiative, expenses and other challenges relating to the integration of any future acquisitions; changes in demand for the Companys products; changes in the Companys management team; the significant influence of the Companys 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; uncertainty regarding the U.K.s exit from the European Union; shortages of and price volatility for certain commodities; global health epidemics, such as the COVID-19 pandemic; social unrest, including related protests and disturbances, and significant changes in the competitive environment and the effect of competition on the Companys markets, including on the Companys pricing policies, financing sources and ability to maintain 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 designer, developer and marketer of a broad range of branded consumer products used in the home. The Company markets its products under well-known kitchenware brands, including Farberware, KitchenAid, Sabatier, Amco Houseworks, Chefn Chicago Metallic, Copco, Fred & Friends, Houdini, KitchenCraft, Kamenstein, Kizmos, La Cafetire, MasterClass, Misto, Swing-A-Way, Taylor Kitchen, and Rabbit; respected tableware and giftware brands, including Mikasa, Pfaltzgraff, Fitz and Floyd, Creative Tops, Empire Silver, Gorham, International Silver, Kirk Stieff, Towle Silversmiths, Wallace, Wilton Armetale, V&A and Royal Botanic Gardens Kew; and valued home solutions brands, including BUILT NY, Taylor Bath, Taylor Kitchen, Taylor Weather and Planet Box. The Company also provides exclusive private label products to leading retailers worldwide.

The Companys corporate website iswww.lifetimebrands.com.

Contacts:

Lifetime Brands, Inc.Laurence Winoker, Chief Financial Officer516-203-3590investor.relations@lifetimebrands.com

or

Joele Frank, Wilkinson Brimmer KatcherEd Trissel / Andrew Squire / Rose Temple212-355-4449

LIFETIME BRANDS, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousandsexcept per share data)(unaudited)

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Net sales $ 224,750 $ 215,502 $ 519,960 $ 507,964 Cost of sales 145,958 142,561 334,066 336,683 Gross margin 78,792 72,941 185,894 171,281 Distribution expenses 18,961 18,537 50,710 49,938 Selling, general and 38,325 37,389 114,274 118,379 administrative expensesRestructuring expenses ? 338 253 1,119 Goodwill and other ? 9,748 20,100 9,748 impairmentsIncome (loss) from 21,506 6,929 557 (7,903 )operationsInterest expense (4,128 ) (5,539 ) (13,094 ) (15,505 )Mark to market gain(loss) on interest rate 99 367 (2,316 ) 717 derivativesIncome (loss) beforeincome taxes and equity 17,477 1,757 (14,853 ) (22,691 )in earnings (losses)Income tax provision (3,711 ) (15,066 ) (3,013 ) (6,813 )Equity in earnings 147 (210 ) (362 ) (395 )(losses), net of taxesNET INCOME (LOSS) $ 13,913 $ (13,519 ) $ (18,228 ) $ (29,899 )BASIC INCOME (LOSS) PER $ 0.66 $ (0.66 ) $ (0.87 ) $ (1.46 )COMMON SHAREDILUTED INCOME (LOSS) PER $ 0.65 $ (0.66 ) $ (0.87 ) $ (1.46 )COMMON SHARE

LIFETIME BRANDS, INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in thousandsexcept share data)

September December 30, 31, 2020 2019 (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 42,675 $ 11,370 Accounts receivable, less allowances of $14,782 at 180,289 128,639 September30, 2020 and $9,681 at December31, 2019Inventory 209,825 173,427 Prepaid expenses and other current assets 9,619 14,140 Income taxes receivable ? 1,577 TOTAL CURRENT ASSETS 442,408 329,153 PROPERTY AND EQUIPMENT, net 23,839 28,168 OPERATING LEASE RIGHT-OF-USE ASSETS 98,126 106,871 INVESTMENTS 17,734 21,289 INTANGIBLE ASSETS, net 247,180 280,471 OTHER ASSETS 2,559 4,071 TOTAL ASSETS $ 831,846 $ 770,023 LIABILITIES AND STOCKHOLDERS? EQUITY CURRENT LIABILITIES Current maturity of term loan $ 18,522 $ 8,413 Accounts payable 109,509 36,173 Accrued expenses 81,167 52,060 Income taxes payable 1,522 ? Current portion of operating lease liabilities 11,329 10,661 TOTAL CURRENT LIABILITIES 222,049 107,307 OTHER LONG-TERM LIABILITIES 16,394 12,214 INCOME TAXES PAYABLE, LONG-TERM 1,217 1,217 OPERATING LEASE LIABILITIES 104,183 112,180 DEFERRED INCOME TAXES 12,829 13,685 REVOLVING CREDIT FACILITY 25,654 32,822 TERM LOAN 237,727 254,281 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 outstandingCommon stock, $0.01 par value, shares authorized:50,000,000 at September30, 2020 and December31,2019; shares issued and outstanding: 21,768,020 at 218 213 September30, 2020 and 21,255,660 at December31,2019Paid-in capital 267,200 263,386 (Accumulated deficit) retained earnings (13,842 ) 7,173 Accumulated other comprehensive loss (41,783 ) (34,455 )TOTAL STOCKHOLDERS? EQUITY 211,793 236,317 TOTAL LIABILITIES AND STOCKHOLDERS? EQUITY $ 831,846 $ 770,023

LIFETIME BRANDS, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)

Nine Months Ended September 30, 2020 2019OPERATING ACTIVITIES Net loss $ (18,228 ) $ (29,899 )Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization 18,385 18,771 Goodwill and other impairments 20,100 9,748 Amortization of financing costs 1,326 1,312 Mark to market loss (gain) on interest rate 2,316 (717 )derivativesNon-cash lease expense 2,915 1,050 Provision for doubtful accounts 3,011 316 Stock compensation expense 4,321 3,605 Undistributed equity in losses, net of taxes 362 395 SKU Rationalization ? 8,500 Changes in operating assets and liabilities: Accounts receivable (55,466 ) (37,659 )Inventory (37,303 ) (66,195 )Prepaid expenses, other current assets and other 3,573 1,473 assetsAccounts payable, accrued expenses and other 100,798 43,465 liabilitiesIncome taxes receivable 1,577 1,442 Income taxes payable 1,521 4,434 NET CASH PROVIDED BY (USED IN) OPERATING 49,208 (39,959 )ACTIVITIESINVESTING ACTIVITIES Purchases of property and equipment (1,645 ) (7,618 )NET CASH USED IN INVESTING ACTIVITIES (1,645 ) (7,618 )FINANCING ACTIVITIES Proceeds from revolving credit facility 107,418 258,647 Repayments of revolving credit facility (113,652 ) (208,737 )Repayments of term loan (7,583 ) (2,063 )Payments for finance lease obligations (75 ) (18 )Payments of tax withholding for stock based (486 ) (390 )compensationProceeds from the exercise of stock options ? 133 Cash dividends paid (1,862 ) (2,693 )NET CASH (USED IN) PROVIDED BY FINANCING (16,240 ) 44,879 ACTIVITIESEffect of foreign exchange on cash (18 ) (188 )INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31,305 (2,886 )Cash and cash equivalents at beginning of period 11,370 7,647 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 42,675 $ 4,761

LIFETIME BRANDS, INC.Supplemental Information(in thousands)

Reconciliation of GAAP toNon-GAAPOperating Results

Consolidated adjusted EBITDA for the twelve months ended September30, 2020:

Consolidated adjusted EBITDA for the Four Quarters Ended September 30, 2020 (inthousands)Three months ended $ 29,228 September 30, 2020Three months ended June 30, 12,388 2020Three months ended March 3,252 31, 2020Three months ended December 27,873 31, 2019Consolidated adjusted $ 72,741 EBITDA

Three Months Ended Twelve Months December September Ended 31, March 31, June 30, 30, September 2019 2020 2020 2020 30, 2020

(in thousands)Net (loss)income as $ (14,516 ) $ (28,164 ) $ (3,977 ) $ 13,913 $ (32,744 )reportedUndistributedequity losses (738 ) (339 ) 848 (147 ) (376 )(earnings),netIncome tax(benefit) (5,704 ) (3,729 ) 3,031 3,711 (2,691 )provisionInterest 5,590 4,736 4,230 4,128 18,684 expenseMark tomarket loss(gain) on ? 2,251 164 (99 ) 2,316 interest ratederivativesDepreciationand 6,344 6,234 6,061 6,090 24,729 amortizationGoodwill andother 33,242 20,100 ? ? 53,342 impairmentsStockcompensation 1,436 1,326 1,420 1,575 5,757 expenseAcquisitionanddivestment 55 47 55 57 214 relatedexpensesRestructuring 316 ? 253 ? 569 expensesIntegration 159 ? ? ? 159 chargesWarehouse 1,689 790 303 ? 2,782 relocationConsolidatedadjusted $ 27,873 $ 3,252 $ 12,388 $ 29,228 $ 72,741 EBITDA

Consolidated adjusted EBITDA is a non-GAAP financial measure which is defined in the Companys debt agreements. Consolidated adjusted EBITDA is defined as net income (loss), adjusted to exclude undistributed equity in (earnings) losses, income tax (benefit) provision, interest expense, mark to market loss (gain) on interest rate derivatives, depreciation and amortization, goodwill and other impairments, stock compensation expense, and other items detailed in the table above that are consistent with exclusions permitted by our debt agreements.

LIFETIME BRANDS, INC.Supplemental Information(in thousandsexcept per share data)

Reconciliation of GAAP toNon-GAAPOperating Results (continued)

Adjusted net income (loss) and adjusted diluted income (loss) per common share (in thousands):

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Net income (loss) as $ 13,913 $ (13,519 ) $ (18,228 ) $ (29,899 )reportedAdjustments: Acquisition and divestment 57 ? 159 151 related expensesRestructuring expenses ? 338 253 1,119 Integration charges ? 235 ? 1,104 Warehouse relocation ? 881 1,093 1,096 Mark to market loss (gain)on interest rate (99 ) (367 ) 2,316 (717 )derivativesGoodwill and other ? 9,748 20,100 9,748 impairmentsSKU Rationalization ? ? ? 8,500 Foreign currencytranslation lossreclassified from ? ? 235 ? Accumulated OtherComprehensive LossIncome tax effect on 11 (330 ) (878 ) (2,848 )adjustmentsAdjusted net income (loss) $ 13,882 $ (3,014 ) $ 5,050 $ (11,746 )Adjusted diluted income(loss) per common share^ $ 0.65 $ (0.15 ) $ 0.24 $ (0.57 )(1)

Adjusted net income (loss) and adjusted diluted income (loss) per common share in the three and nine months ended September30, 2020 and 2019 excludes acquisition and divestment related expenses, restructuring expenses, integration charges, warehouse relocation expenses, mark to market loss on interest rate derivatives, goodwill and other impairments and SKU Rationalization. The income tax effect on adjustments reflects the statutory tax rates applied on the adjustments.

(1) Adjusted diluted income per common share is calculated based on diluted weighted-average shares outstanding of 21,285 and 20,429 for the three month period ended September30, 2020 and 2019, respectively, and 21,015 and 20,494 for the nine month period ended September30, 2020 and 2019, respectively. The diluted weighted-average shares outstanding for the three and nine month period ended September30, 2020 include the effect of dilutive securities of 350 and 180 shares, respectively.

LIFETIME BRANDS, INC.Supplemental Information(in thousands)

Reconciliation of GAAP toNon-GAAPOperating Results (continued)

Constant Currency:

As Reported Constant Currency ^(1) Year-Over-Year Three Months Ended Three Months Ended Increase (Decrease) September 30, September 30,Net sales 2020 2019 Increase 2020 2019 Increase Currency Excluding Including Currency (Decrease) (Decrease) Impact Currency Currency ImpactU.S. $ 201,539 $ 195,199 $ 6,340 $ 201,539 $ 195,208 $ 6,331 $ (9 ) 3.2 % 3.2 % 0.0 %International 23,211 20,303 2,908 23,211 21,126 2,085 (823 ) 9.9 % 14.3 % (4.4 )%Total net $ 224,750 $ 215,502 $ 9,248 $ 224,750 $ 216,334 $ 8,416 $ (832 ) 3.9 % 4.3 % (0.4 )%sales

As Reported Nine Months Ended Constant Currency ^(1) Year-Over-Year Increase (Decrease) September 30, Nine Months Ended September 30,Net sales 2020 2019 Increase 2020 2019 Increase Currency Excluding Including Currency (Decrease) (Decrease) Impact Currency Currency ImpactU.S. $ 463,338 $ 445,329 $ 18,009 $ 463,338 $ 445,331 $ 18,007 $ (2 ) 4.0 % 4.0 % 0.0 %International 56,622 62,635 (6,013 ) 56,622 62,582 (5,960 ) 53 (9.5 )% (9.6 )% 0.1 %Total net $ 519,960 $ 507,964 $ 11,996 $ 519,960 $ 507,913 $ 12,047 $ 51 2.4 % 2.4 % 0.0 %sales

(1) Constant Currency is determined by applying the 2020 average exchange rates to the prior year local currency 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 sales growth is intended to exclude the impact of fluctuations in foreign currency exchange rates.

LIFETIME BRANDS, INC.Supplemental Information(in thousands)

Reconciliation of GAAP toNon-GAAPOperating Results (continued)

Income (loss) from operations excluding certain non-cash charges (in thousands):

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019Income (loss) from operations $ 21,506 $ 6,929 $ 557 $ (7,903 )Excluded non-cash charges: Goodwill and other impairments ? 9,748 20,100 9,748 Bad debt reserve ^(1) ? ? 2,844 ? SKU Rationalization ? ? ? 8,500 Total excluded non-cash charges ? 9,748 22,944 18,248 Income from operations excluding $ 21,506 $ 16,677 $ 23,501 $ 10,345 certain non-cash charges

(1) Bad debt reserve recorded in the first quarter of fiscal 2020 to establish a provision against potential credit problems from certain retail customers who may have financial difficulty that has been caused or increased due to the COVID-19 pandemic. This reflects the Company's assessment of risk of not being able to collect such receivables from certain customers in the U.S. that are at risk of seeking or have already obtained bankruptcy protection and our international customer base which has a higher proportion of small and independent brick-and-mortar retailers. This charge was taken in response to the Company's assessment on the impact of the COVID-19 pandemic on these accounts.