☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 11-2682486 | |||||
(State or other jurisdiction of
| (I.R.S. Employer
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Title of each class | Trading
| Name of each exchange
| ||||||||||||
Common Stock, $.01 par value | LCUT | The |
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |||||||||||||
Emerging growth company | ☐ |
Page No. | |||||||||||||
Part I. | |||||||||||||
Item 1. | |||||||||||||
Condensed Consolidated Balance Sheets – June 30, | |||||||||||||
Condensed Consolidated Statements of Operations (unaudited) – Three and Six Months EndedJune 30, 2020 and 2019 | |||||||||||||
Condensed Consolidated Statements of Comprehensive Loss (unaudited) –Three and Six Months Ended June 30, | |||||||||||||
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) | |||||||||||||
Condensed Consolidated Statements of Cash Flows (unaudited) – Six Months Ended June 30, | |||||||||||||
Item 2. | |||||||||||||
Item 3. | |||||||||||||
Item 4. | |||||||||||||
Part II. | |||||||||||||
Item 1. | |||||||||||||
Item 1A. | |||||||||||||
Item | |||||||||||||
Item 6. | |||||||||||||
ASSETS CURRENT ASSETS Cash and cash equivalents Accounts receivable, less allowances of $7,473 at June 30, 2019 and $7,855 at December 31, 2018 Inventory Prepaid expenses and other current assets Income taxes receivable TOTAL CURRENT ASSETS PROPERTY AND EQUIPMENT, net OPERATING LEASE RIGHT-OF-USE ASSETS INVESTMENTS INTANGIBLE ASSETS, net DEFERRED INCOME TAXES OTHER ASSETS TOTAL ASSETS LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Current maturity of term loan Accounts payable Accrued expenses Current portion of operating lease liability TOTAL CURRENT LIABILITIES DEFERRED RENT & OTHER LONG-TERM LIABILITIES DEFERRED INCOME TAXES OPERATING LEASE LIABILITIES INCOME TAXES PAYABLE, LONG-TERM REVOLVING CREDIT FACILITY TERM LOAN 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, 2019 and December 31, 2018; shares issued and outstanding: 21,255,218 at June 30, 2019 and 20,764,143 at December 31, 2018 Paid-in capital Retained earnings Accumulated other comprehensive loss TOTAL STOCKHOLDERS’ EQUITY TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY Inin thousands, except share data) June 30, December 31, 2019 2018 (unaudited) $ 10,535 $ 7,647 91,109 125,292 205,607 173,601 12,724 10,822 10,690 1,442 330,665 318,804 26,563 25,762 109,757 — 20,935 22,582 331,314 338,847 122 733 3,345 1,844 $ 822,701 $ 708,572 $ 13,261 $ 1,253 48,495 38,167 50,966 45,456 11,163 — 123,885 84,876 10,055 23,339 15,103 15,141 114,630 — 949 949 44,913 42,080 250,062 262,694 — — 213 208 260,461 258,637 37,090 55,264 (34,660 ) (34,616 ) 263,104 279,493 $ 822,701 $ 708,572 June 30,
2020December 31,
2019(unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 63,537 $ 11,370 Accounts receivable, less allowances of $13,040 at June 30, 2020 and $9,681 at December 31, 2019 111,361 128,639 Inventory 168,928 173,427 Prepaid expenses and other current assets 12,249 14,140 Income taxes receivable 2,466 1,577 TOTAL CURRENT ASSETS 358,541 329,153 PROPERTY AND EQUIPMENT, net 25,100 28,168 OPERATING LEASE RIGHT-OF-USE ASSETS 99,883 106,871 INVESTMENTS 17,020 21,289 INTANGIBLE ASSETS, net 250,515 280,471 OTHER ASSETS 2,743 4,071 TOTAL ASSETS $ 753,802 $ 770,023 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES Current maturity of term loan $ 13,527 $ 8,413 Accounts payable 66,678 36,173 Accrued expenses 62,114 52,060 Current portion of operating lease liabilities 10,660 10,661 TOTAL CURRENT LIABILITIES 152,979 107,307 OTHER LONG-TERM LIABILITIES 16,159 12,214 INCOME TAXES PAYABLE, LONG-TERM 1,217 1,217 OPERATING LEASE LIABILITIES 106,195 112,180 DEFERRED INCOME TAXES 12,661 13,685 REVOLVING CREDIT FACILITY 27,383 32,822 TERM LOAN 242,337 254,281 STOCKHOLDERS’ EQUITY Preferred stock, $1.00 par value, shares authorized: 100 shares of Series A and 2,000,000 shares of Series B; NaN issued and outstanding — — Common stock, $0.01 par value, shares authorized: 50,000,000 at June 30, 2020 and December 31, 2019; shares issued and outstanding: 21,768,740 at June 30, 2020 and 21,255,660 at December 31, 2019 218 213 Paid-in capital 265,630 263,386 (Accumulated deficit) retained earnings (26,813) 7,173 Accumulated other comprehensive loss (44,164) (34,455) TOTAL STOCKHOLDERS’ EQUITY 194,871 236,317 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 753,802 $ 770,023
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net sales | $ | 142,536 | $ | 148,651 | $ | 292,462 | $ | 266,820 | ||||||||
Cost of sales | 98,517 | 96,573 | 194,122 | 169,655 | ||||||||||||
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Gross margin | 44,019 | 52,078 | 98,340 | 97,165 | ||||||||||||
Distribution expenses | 15,541 | 14,942 | 31,401 | 32,764 | ||||||||||||
Selling, general and administrative expenses | 40,850 | 40,042 | 80,990 | 80,217 | ||||||||||||
Restructuring expenses | 173 | 395 | 781 | 801 | ||||||||||||
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Loss from operations | (12,545 | ) | (3,301 | ) | (14,832 | ) | (16,617 | ) | ||||||||
Interest expense | (4,694 | ) | (4,676 | ) | (9,616 | ) | (6,779 | ) | ||||||||
Loss on early retirement of debt | — | — | — | (66 | ) | |||||||||||
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Loss before income taxes and equity in (losses) earnings | (17,239 | ) | (7,977 | ) | (24,448 | ) | (23,462 | ) | ||||||||
Income tax benefit | 5,795 | 1,765 | 8,253 | 5,575 | ||||||||||||
Equity in (losses) earnings, net of taxes | (69 | ) | 155 | (185 | ) | 232 | ||||||||||
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NET LOSS | $ | (11,513 | ) | $ | (6,057 | ) | $ | (16,380 | ) | $ | (17,655 | ) | ||||
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BASIC LOSS PER COMMON SHARE | (0.56 | ) | $ | (0.30 | ) | (0.80 | ) | $ | (0.96 | ) | ||||||
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DILUTED LOSS PER COMMON SHARE | (0.56 | ) | $ | (0.30 | ) | (0.80 | ) | $ | (0.96 | ) | ||||||
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Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||
Net sales | $ | 150,140 | $ | 142,536 | $ | 295,210 | $ | 292,462 | ||||||||||||||||||||||||||||||
Cost of sales | 95,972 | 98,517 | 188,108 | 194,122 | ||||||||||||||||||||||||||||||||||
Gross margin | 54,168 | 44,019 | 107,102 | 98,340 | ||||||||||||||||||||||||||||||||||
Distribution expenses | 15,192 | 15,541 | 31,749 | 31,401 | ||||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 34,427 | 40,850 | 75,949 | 80,990 | ||||||||||||||||||||||||||||||||||
Restructuring expenses | 253 | 173 | 253 | 781 | ||||||||||||||||||||||||||||||||||
Goodwill and other impairments | — | — | 20,100 | — | ||||||||||||||||||||||||||||||||||
Income (loss) from operations | 4,296 | (12,545) | (20,949) | (14,832) | ||||||||||||||||||||||||||||||||||
Interest expense | (4,230) | (5,044) | (8,966) | (9,966) | ||||||||||||||||||||||||||||||||||
Mark to market (loss) gain on interest rate derivatives | (164) | 350 | (2,415) | 350 | ||||||||||||||||||||||||||||||||||
Loss before income taxes and equity in losses | (98) | (17,239) | (32,330) | (24,448) | ||||||||||||||||||||||||||||||||||
Income tax (provision) benefit | (3,031) | 5,795 | 698 | 8,253 | ||||||||||||||||||||||||||||||||||
Equity in losses, net of taxes | (848) | (69) | (509) | (185) | ||||||||||||||||||||||||||||||||||
NET LOSS | $ | (3,977) | $ | (11,513) | $ | (32,141) | $ | (16,380) | ||||||||||||||||||||||||||||||
BASIC LOSS PER COMMON SHARE | $ | (0.19) | $ | (0.56) | $ | (1.55) | $ | (0.80) | ||||||||||||||||||||||||||||||
DILUTED LOSS PER COMMON SHARE | $ | (0.19) | $ | (0.56) | $ | (1.55) | $ | (0.80) | ||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net loss | $ | (11,513 | ) | $ | (6,057 | ) | $ | (16,380 | ) | $ | (17,655 | ) | ||||
Other comprehensive loss, net of taxes: | ||||||||||||||||
Translation adjustment | (2,953 | ) | (5,489 | ) | (1,647 | ) | (2,109 | ) | ||||||||
Net change in cash flow hedges | 982 | (263 | ) | 1,578 | (277 | ) | ||||||||||
Effect of retirement benefit obligations | 12 | 17 | 25 | 35 | ||||||||||||
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Other comprehensive loss, net of taxes | (1,959 | ) | (5,735 | ) | (44 | ) | (2,351 | ) | ||||||||
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Comprehensive loss | $ | (13,472 | ) | $ | (11,792 | ) | $ | (16,424 | ) | $ | (20,006 | ) | ||||
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Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
Net loss | $ | (3,977) | $ | (11,513) | $ | (32,141) | $ | (16,380) | |||||||||||||||||||||||||||
Other comprehensive loss, net of taxes: | |||||||||||||||||||||||||||||||||||
Translation adjustment | (2,514) | (2,953) | (6,972) | (1,647) | |||||||||||||||||||||||||||||||
Net change in cash flow hedges | 101 | 982 | (2,776) | 1,578 | |||||||||||||||||||||||||||||||
Effect of retirement benefit obligations | 19 | 12 | 39 | 25 | |||||||||||||||||||||||||||||||
Other comprehensive loss, net of taxes | (2,394) | (1,959) | (9,709) | (44) | |||||||||||||||||||||||||||||||
Comprehensive loss | $ | (6,371) | $ | (13,472) | $ | (41,850) | $ | (16,424) | |||||||||||||||||||||||||||
Common stock | Paid-in capital | Retained Earnings | Accumulated other comprehensive loss | Total | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2018 | 20,764 | $ | 208 | $ | 258,637 | $ | 55,264 | $ | (34,616) | $ | 279,493 | |||||||||||||||||||||||||||||||||
Comprehensive (loss) income: | ||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | (4,867) | — | (4,867) | ||||||||||||||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | 1,306 | 1,306 | ||||||||||||||||||||||||||||||||||||||
Net change in cash flow hedges | — | — | — | — | 596 | 596 | ||||||||||||||||||||||||||||||||||||||
Effect of retirement benefit obligations | — | — | — | — | 13 | 13 | ||||||||||||||||||||||||||||||||||||||
Total comprehensive loss | (2,952) | |||||||||||||||||||||||||||||||||||||||||||
Net issuance of restricted shares to employees | 169 | 1 | (1) | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | 900 | — | — | 900 | ||||||||||||||||||||||||||||||||||||||
Net exercise of stock options | 19 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||
Shares effectively repurchased for required employee withholding taxes | (25) | — | (232) | — | — | (232) | ||||||||||||||||||||||||||||||||||||||
Dividends (1) | — | — | — | (898) | — | (898) | ||||||||||||||||||||||||||||||||||||||
BALANCE AT MARCH 31, 2019 | 20,927 | $ | 209 | $ | 259,304 | $ | 49,499 | $ | (32,701) | $ | 276,311 | |||||||||||||||||||||||||||||||||
Comprehensive (loss) income: | ||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | (11,513) | — | (11,513) | ||||||||||||||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | (2,953) | (2,953) | ||||||||||||||||||||||||||||||||||||||
Net change in cash flow hedges | — | — | — | — | 982 | 982 | ||||||||||||||||||||||||||||||||||||||
Effect of retirement benefit obligations | — | — | — | — | 12 | 12 | ||||||||||||||||||||||||||||||||||||||
Total comprehensive loss | (13,472) | |||||||||||||||||||||||||||||||||||||||||||
Restricted shares issued to directors | 61 | 1 | (1) | — | — | — | ||||||||||||||||||||||||||||||||||||||
Net issuance of restricted shares to employees | 250 | 3 | (3) | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | 1,186 | — | — | 1,186 | ||||||||||||||||||||||||||||||||||||||
Net exercise of stock options | 34 | — | 133 | — | — | 133 | ||||||||||||||||||||||||||||||||||||||
Shares effectively repurchased for required employee withholding taxes | (17) | — | (158) | — | — | (158) | ||||||||||||||||||||||||||||||||||||||
Dividends (1) | — | — | — | (896) | — | (896) | ||||||||||||||||||||||||||||||||||||||
BALANCE AT JUNE 30, 2019 | 21,255 | $ | 213 | $ | 260,461 | $ | 37,090 | $ | (34,660) | $ | 263,104 | |||||||||||||||||||||||||||||||||
Common stock | Paid-in capital | Retained Earnings (Accumulated deficit) | Accumulated other comprehensive loss | Total | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2019 | 21,256 | $ | 213 | $ | 263,386 | $ | 7,173 | $ | (34,455) | $ | 236,317 | |||||||||||||||||||||||||||||||||
Comprehensive (loss) income: | ||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | (28,164) | — | (28,164) | ||||||||||||||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | (4,458) | (4,458) | ||||||||||||||||||||||||||||||||||||||
Net change in cash flow hedges | — | — | — | — | (2,877) | (2,877) | ||||||||||||||||||||||||||||||||||||||
Effect of retirement benefit obligations | — | — | — | — | 20 | 20 | ||||||||||||||||||||||||||||||||||||||
Total comprehensive loss | (35,479) | |||||||||||||||||||||||||||||||||||||||||||
Performance shares issued to employees | 62 | 1 | (1) | — | — | — | ||||||||||||||||||||||||||||||||||||||
Net issuance of restricted shares to employees | 220 | 2 | (2) | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | 1,320 | — | — | 1,320 | ||||||||||||||||||||||||||||||||||||||
Shares effectively repurchased for required employee withholding taxes | (52) | (1) | (298) | — | — | (299) | ||||||||||||||||||||||||||||||||||||||
Dividends (1) | — | — | — | (932) | — | (932) | ||||||||||||||||||||||||||||||||||||||
BALANCE AT MARCH 31, 2020 | 21,486 | $ | 215 | $ | 264,405 | $ | (21,923) | $ | (41,770) | $ | 200,927 | |||||||||||||||||||||||||||||||||
Comprehensive (loss) income: | ||||||||||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | (3,977) | — | (3,977) | ||||||||||||||||||||||||||||||||||||||
Translation adjustment | — | — | — | — | (2,514) | (2,514) | ||||||||||||||||||||||||||||||||||||||
Net change in cash flow hedges | — | — | — | — | 101 | 101 | ||||||||||||||||||||||||||||||||||||||
Effect of retirement benefit obligations | — | — | — | — | 19 | 19 | ||||||||||||||||||||||||||||||||||||||
Total comprehensive income | (6,371) | |||||||||||||||||||||||||||||||||||||||||||
Net issuance of restricted shares to employees | 309 | 3 | (3) | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock compensation expense | — | — | 1,415 | — | — | 1,415 | ||||||||||||||||||||||||||||||||||||||
Shares effectively repurchased for required employee withholding taxes | (26) | — | (187) | — | — | (187) | ||||||||||||||||||||||||||||||||||||||
Dividends (1) | — | — | — | (913) | — | (913) | ||||||||||||||||||||||||||||||||||||||
BALANCE AT JUNE 30, 2020 | 21,769 | $ | 218 | $ | 265,630 | $ | (26,813) | $ | (44,164) | $ | 194,871 | |||||||||||||||||||||||||||||||||
(unaudited)
Common stock | Paid-in | Retained | Accumulated other | |||||||||||||||||||||
Six Months Ended June 30, 2018 | Shares | Amount | capital | earnings | comprehensive loss | Total | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2017 | 14,903 | $ | 149 | $ | 178,909 | $ | 60,546 | $ | (29,325 | ) | $ | 210,279 | ||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||
Net loss | — | — | — | (11,598 | ) | — | (11,598 | ) | ||||||||||||||||
Translation adjustment | — | — | — | — | 3,380 | 3,380 | ||||||||||||||||||
Derivative fair value adjustment | — | — | — | — | (14 | ) | (14 | ) | ||||||||||||||||
Effect of retirement benefit obligations | — | — | — | — | 18 | 18 | ||||||||||||||||||
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Total comprehensive loss | (8,214 | ) | ||||||||||||||||||||||
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Issuance of 5,593,116 shares of common stock for acquisition of Filament, net of equity issuance costs | 5,593 | 56 | 75,920 | — | — | 75,976 | ||||||||||||||||||
Restricted shares issued to directors | 3 | — | — | — | — | — | ||||||||||||||||||
Net issuance of restricted shares to employees | 126 | 1 | (1 | ) | — | — | — | |||||||||||||||||
Stock compensation expense | — | — | 838 | — | — | 838 | ||||||||||||||||||
Shares effectively repurchased for required employee withholding taxes | (19 | ) | — | (258 | ) | — | — | (258 | ) | |||||||||||||||
Dividends(1) | — | — | — | (880 | ) | — | (880 | ) | ||||||||||||||||
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BALANCE AT MARCH 31, 2018 | 20,606 | 206 | 255,408 | 48,068 | (25,941 | ) | 277,741 | |||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||
Net loss | — | — | — | (6,057 | ) | — | (6,057 | ) | ||||||||||||||||
Translation adjustment | — | — | — | — | (5,489 | ) | (5,489 | ) | ||||||||||||||||
Derivative fair value adjustment | — | — | — | — | (263 | ) | (263 | ) | ||||||||||||||||
Effect of retirement benefit obligations | — | — | — | — | 17 | 17 | ||||||||||||||||||
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Total comprehensive loss | (11,792 | ) | ||||||||||||||||||||||
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Filament net equity issuance costs adjustment | — | — | (6 | ) | (6 | ) | ||||||||||||||||||
Restricted shares issued to directors | 54 | — | — | — | — | — | ||||||||||||||||||
Net issuance of restricted shares to employees | 93 | 1 | (1 | ) | — | — | — | |||||||||||||||||
Stock compensation expense | — | — | 921 | — | — | 921 | ||||||||||||||||||
Shares effectively repurchased for required employee withholding taxes | (12 | ) | — | (140 | ) | — | — | (140 | ) | |||||||||||||||
Dividends(1) | — | — | — | (885 | ) | — | (885 | ) | ||||||||||||||||
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BALANCE AT JUNE 30, 2018 | 20,741 | 207 | 256,182 | 41,126 | (31,676 | ) | 265,839 | |||||||||||||||||
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Common stock | Paid-in | Retained | Accumulated other | |||||||||||||||||||||
Six Months Ended June 30, 2019 | Shares | Amount | capital | earnings | comprehensive loss | Total | ||||||||||||||||||
BALANCE AT DECEMBER 31, 2018 | 20,764 | $ | 208 | $ | 258,637 | $ | 55,264 | $ | (34,616 | ) | $ | 279,493 | ||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||
Net loss | — | — | — | (4,867 | ) | — | (4,867 | ) | ||||||||||||||||
Translation adjustment | — | — | — | — | 1,306 | 1,306 | ||||||||||||||||||
Net change in cash flow hedges | — | — | — | — | 596 | 596 | ||||||||||||||||||
Effect of retirement benefit obligations | — | — | — | — | 13 | 13 | ||||||||||||||||||
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Total comprehensive loss | (2,952 | ) | ||||||||||||||||||||||
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Net issuance of restricted shares to employees | 169 | 1 | (1 | ) | — | — | — | |||||||||||||||||
Stock compensation expense | — | — | 900 | — | — | 900 | ||||||||||||||||||
Net exercise of stock options | 19 | — | — | — | — | — | ||||||||||||||||||
Shares effectively repurchased for required employee withholding taxes | (25 | ) | — | (232 | ) | — | — | (232 | ) | |||||||||||||||
Dividends(1) | — | — | — | (898 | ) | — | (898 | ) | ||||||||||||||||
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BALANCE AT MARCH 31, 2019 | 20,927 | $ | 209 | $ | 259,304 | $ | 49,499 | $ | (32,701 | ) | $ | 276,311 | ||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||
Net loss | — | — | — | (11,513 | ) | — | (11,513 | ) | ||||||||||||||||
Translation adjustment | — | — | — | — | (2,953 | ) | (2,953 | ) | ||||||||||||||||
Net change in cash flow hedges | — | — | — | — | 982 | 982 | ||||||||||||||||||
Effect of retirement benefit obligations | — | — | — | — | 12 | 12 | ||||||||||||||||||
|
| |||||||||||||||||||||||
Total comprehensive loss | (13,472 | ) | ||||||||||||||||||||||
|
| |||||||||||||||||||||||
Restricted shares issued to directors | 61 | 1 | (1 | ) | — | — | — | |||||||||||||||||
Net issuance of restricted shares to employees | 250 | 3 | (3 | ) | — | — | — | |||||||||||||||||
Stock compensation expense | — | — | 1,186 | — | — | 1,186 | ||||||||||||||||||
Net exercise of stock options | 34 | — | 133 | — | — | 133 | ||||||||||||||||||
Shares effectively repurchased for required employee withholding taxes | (17 | ) | — | (158 | ) | — | — | (158 | ) | |||||||||||||||
Dividends(1) | — | — | — | (896 | ) | — | (896 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
BALANCE AT JUNE 30, 2019 | 21,255 | $ | 213 | $ | 260,461 | $ | 37,090 | $ | (34,660 | ) | $ | 263,104 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
of common stock were $0.085 and $0.085 in the six months ended June 30, 2019 and 2020, respectively.
Six Months Ended | ||||||||
June 30, | ||||||||
2019 | 2018 | |||||||
OPERATING ACTIVITIES | ||||||||
Net loss | $ | (16,380 | ) | $ | (17,655 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 12,649 | 10,731 | ||||||
Amortization of financing costs | 876 | 663 | ||||||
Deferred rent | — | 368 | ||||||
Non-cash lease expense | 1,156 | — | ||||||
Stock compensation expense | 2,100 | 1,759 | ||||||
Undistributed equity in losses (earnings), net of taxes | 185 | (232 | ) | |||||
Loss on early retirement of debt | — | 66 | ||||||
SKU Rationalization | 8,500 | — | ||||||
Changes in operating assets and liabilities (excluding the effects of business acquisitions): | ||||||||
Accounts receivable | 34,184 | 41,441 | ||||||
Inventory | (40,900 | ) | (39,555 | ) | ||||
Prepaid expenses, other current assets and other assets | (1,568 | ) | (185 | ) | ||||
Accounts payable, accrued expenses and other liabilities | 15,587 | 5,170 | ||||||
Income taxes receivable | (9,247 | ) | (4,095 | ) | ||||
Income taxes payable | — | (4,242 | ) | |||||
|
|
|
| |||||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | 7,142 | (5,766 | ) | |||||
|
|
|
| |||||
INVESTING ACTIVITIES | ||||||||
Purchases of property and equipment | (3,867 | ) | (3,168 | ) | ||||
Filament acquisition, net of cash acquired | — | (217,932 | ) | |||||
|
|
|
| |||||
NET CASH USED IN INVESTING ACTIVITIES | (3,867 | ) | (221,100 | ) | ||||
|
|
|
| |||||
FINANCING ACTIVITIES | ||||||||
Proceeds from revolving credit facility | 136,455 | 126,283 | ||||||
Repayments of revolving credit facility | (133,497 | ) | (161,173 | ) | ||||
Proceeds from term loan | — | 275,000 | ||||||
Repayments of term loan | (1,375 | ) | (688 | ) | ||||
Proceeds from short term loan | — | 79 | ||||||
Payments on short term loan | — | (71 | ) | |||||
Payment of financing costs | — | (11,154 | ) | |||||
Payment of equity issuance costs | — | (936 | ) | |||||
Payments for capital leases | (12 | ) | (24 | ) | ||||
Payments of tax withholding for stock based compensation | (390 | ) | (398 | ) | ||||
Proceeds from exercise of stock options | 133 | — | ||||||
Cash dividends paid | (1,786 | ) | (1,535 | ) | ||||
|
|
|
| |||||
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (472 | ) | 225,383 | |||||
|
|
|
| |||||
Effect of foreign exchange on cash | 85 | (118 | ) | |||||
|
|
|
| |||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 2,888 | (1,601 | ) | |||||
Cash and cash equivalents at beginning of period | 7,647 | 7,600 | ||||||
|
|
|
| |||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 10,535 | $ | 5,999 | ||||
|
|
|
|
Six Months Ended June 30, | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
OPERATING ACTIVITIES | |||||||||||||||||
Net loss | $ | (32,141) | $ | (16,380) | |||||||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||||||||
Depreciation and amortization | 12,295 | 12,649 | |||||||||||||||
Goodwill and other impairments | 20,100 | — | |||||||||||||||
Amortization of financing costs | 878 | 876 | |||||||||||||||
Mark to market loss (gain) on interest rate derivatives | 2,415 | (350) | |||||||||||||||
Non-cash lease expense | 2,020 | 1,156 | |||||||||||||||
Provision for doubtful accounts | 2,987 | 386 | |||||||||||||||
Stock compensation expense | 2,746 | 2,100 | |||||||||||||||
Undistributed equity in losses, net of taxes | 509 | 185 | |||||||||||||||
SKU Rationalization | — | 8,500 | |||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||
Accounts receivable | 12,661 | 33,798 | |||||||||||||||
Inventory | 2,398 | (40,900) | |||||||||||||||
Prepaid expenses, other current assets and other assets | 782 | (1,218) | |||||||||||||||
Accounts payable, accrued expenses and other liabilities | 39,430 | 15,587 | |||||||||||||||
Income taxes receivable | (871) | (9,247) | |||||||||||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES | 66,209 | 7,142 | |||||||||||||||
INVESTING ACTIVITIES | |||||||||||||||||
Purchases of property and equipment | (1,380) | (3,867) | |||||||||||||||
NET CASH USED IN INVESTING ACTIVITIES | (1,380) | (3,867) | |||||||||||||||
FINANCING ACTIVITIES | |||||||||||||||||
Proceeds from revolving credit facility | 95,851 | 136,455 | |||||||||||||||
Repayments of revolving credit facility | (99,134) | (133,497) | |||||||||||||||
Repayments of term loan | (7,583) | (1,375) | |||||||||||||||
Payments for finance lease obligations | (50) | (12) | |||||||||||||||
Payments of tax withholding for stock based compensation | (486) | (390) | |||||||||||||||
Proceeds from the exercise of stock options | — | 133 | |||||||||||||||
Cash dividends paid | (937) | (1,786) | |||||||||||||||
NET CASH USED IN FINANCING ACTIVITIES | (12,339) | (472) | |||||||||||||||
Effect of foreign exchange on cash | (323) | 85 | |||||||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 52,167 | 2,888 | |||||||||||||||
Cash and cash equivalents at beginning of period | 11,370 | 7,647 | |||||||||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 63,537 | $ | 10,535 | |||||||||||||
2020
Lifetime Brands, Inc. (the “Company”)
2019.
2020.
Prior to January 1, 2019, depreciation associated with certain tooling used to produce products was classified as selling, general and administrative expenses. The amount recorded in cost
The Company implemented programs to improve the productivity of its inventory and simplify its U.S. business. In connection therewith, it initiated a stock keeping unit rationalization (“SKU Rationalization”) initiative to identify inventory to discontinue from active status, consistent with the objectives of these programs.
- 7 -
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(unaudited)
inventory at June 30, 2019.
Handling costs of products sold are included in cost of sales.
2020 and June 30, 2019. At June 30, 2020 and 2019, $20.8 million and $14.8 million , respectively, of receivables sold were outstanding and due to HSBC from customers.
2020
June 30, | December 31, | |||||||
2019 | 2018 | |||||||
Finished goods | $ | 197,310 | $ | 165,969 | ||||
Work in process | 97 | 375 | ||||||
Raw materials | 8,200 | 7,257 | ||||||
|
|
|
| |||||
Total | $ | 205,607 | $ | 173,601 | ||||
|
|
|
|
June 30, 2020 | December 31, 2019 | ||||||||||
Finished goods | $ | 160,704 | $ | 165,950 | |||||||
Work in process | 442 | 61 | |||||||||
Raw materials | 7,782 | 7,416 | |||||||||
Total | $ | 168,928 | $ | 173,427 | |||||||
- 9 -
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(unaudited)
Long-lived assets, including intangible assets deemed to have finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Impairment indicators include, among other conditions, cash flow deficits, historichistorical or anticipated declines in revenue or operating profit or material adverse changes in the business climate that indicate that the carrying amount of an asset group may be impaired. When impairment indicators are present, the recoverability of the asset group is measured by comparing the carrying value of the asset group to the estimated undiscounted future cash flows expected to be generated by the asset.asset group. If the carrying amount of the asset group is considered to be impaired,not recoverable, the impairment to be recognized is measured by the amount by which the carrying amount of the long-lived asset group exceeds the fair value of the asset.
asset group.
In connection
- 10 -
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(unaudited)
During the three and six months ended June 30, 2019, the Company incurred $0.1 million and $0.4 million of restructuring expense,expenses, primarily related to severance, for the integration of its legal entities operating in Europe. In 2018, the Company finalized its integration plans for its European operations and took further steps to consolidate its operations.
Adoptioneffects of new accounting pronouncements
Effective January 1, 2019, the Company adopted ASU 2016-02,Leases (Topic 842) (“ASC 842”COVID-19 pandemic (the “Question-and-Answer Document”),which requires a lessee, in most leases,. The guidance allows concessions related to initially recognize athe timing of payments, where the total consideration has not changed, to not be accounted for as lease liabilitymodifications. Instead, any such concessions can be accounted for as if no change was made to the obligation to makecontract or as variable lease payments and an ROU asset for the right to use the underlying asset for the lease term.payments. The Company adopted this standard using the cumulative-effect adjustment methodguidance on April 1, 2020 and elected certain practical expedients allowed underto account for COVID-19 related rent concessions that did not result in a substantial increase in the standard. Upon adoption,rights of the Company recognized ROU assets and alessor or the obligations of the lessee not as lease liability of $90.9 million and $104.4 million, respectively.modifications. See Note D3 – Leases for additional information on the Company’s adoption of this standard.
Effective January 1, 2019, the Company adopted ASU 2018-02,Income Statement- Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which addresses the effect on items within accumulated other comprehensive income (loss) of the change in the U.S. federal corporate tax rate due to the enactment of the Tax Cuts and Jobs Act (the “Tax Act”) on December 22, 2017. Upon adoption, the Company did not elect to reclassify the stranded income tax effects of the Tax Act from accumulated other comprehensive income (loss) to retained earnings.
guidance.
- 11 -
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(unaudited)
The following tables present the Company’s net sales disaggregated by segment, product category and geographic region for the three and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended | Six Months Ended | |||||||
June 30, 2019 | June 30, 2019 | |||||||
U.S. Segment | ||||||||
Kitchenware | $ | 65,625 | $ | 134,892 | ||||
Tableware | 28,759 | 55,211 | ||||||
Home Solutions | 28,708 | 60,027 | ||||||
|
|
|
| |||||
Total U.S.Segment | 123,092 | 250,130 | ||||||
|
|
|
| |||||
International Segment | ||||||||
Kitchenware | 12,376 | 26,512 | ||||||
Tableware | 7,068 | 15,820 | ||||||
|
|
|
| |||||
Total International Segment | 19,444 | 42,332 | ||||||
|
|
|
| |||||
Total net sales | $ | 142,536 | $ | 292,462 | ||||
|
|
|
| |||||
United States | $ | 116,683 | $ | 238,092 | ||||
United Kingdom | 14,775 | 30,712 | ||||||
Rest of World | 11,078 | 23,658 | ||||||
|
|
|
| |||||
Total net sales | $ | 142,536 | $ | 292,462 | ||||
|
|
|
|
NOTE C —ACQUISITION
On December 22, 2017, the Company entered into an agreement providing for the acquisition of Filament by the Company. The acquisition was completed on March 2, 2018. The aggregate consideration for Filament, after taking into account certain adjustments, was $294.4 million, consisting of $217.5 million of cash consideration and 5,593,116 newly issued shares of the Company’s common stock, with a value equal to $76.9 million based on the market value of the Company’s common stock as of March 2, 2018.
The purchase price was allocated based on the Company’s final estimate of the fair value of the assets acquired and liabilities assumed, as follows (in thousands):
Accounts receivable | $ | 26,224 | ||
Inventory | 29,044 | |||
Other assets | 5,620 | |||
Other liabilities | (23,018 | ) | ||
Deferred income tax | (13,881 | ) | ||
Goodwill and other intangibles | 270,427 | |||
|
| |||
Total allocated value | $ | 294,416 | ||
|
|
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
U.S. segment | |||||||||||||||||||||||||||||||||||
Kitchenware | $ | 84,418 | $ | 65,625 | $ | 163,692 | $ | 134,892 | |||||||||||||||||||||||||||
Tableware | 23,605 | 28,759 | 47,249 | 55,211 | |||||||||||||||||||||||||||||||
Home Solutions | 24,568 | 28,708 | 50,858 | 60,027 | |||||||||||||||||||||||||||||||
Total U.S. segment | 132,591 | 123,092 | 261,799 | 250,130 | |||||||||||||||||||||||||||||||
International segment | |||||||||||||||||||||||||||||||||||
Kitchenware | 15,360 | 12,376 | 26,314 | 26,512 | |||||||||||||||||||||||||||||||
Tableware | 2,189 | 7,068 | 7,097 | 15,820 | |||||||||||||||||||||||||||||||
Total International segment | 17,549 | 19,444 | 33,411 | 42,332 | |||||||||||||||||||||||||||||||
Total net sales | $ | 150,140 | $ | 142,536 | $ | 295,210 | $ | 292,462 | |||||||||||||||||||||||||||
United States | $ | 128,928 | $ | 116,683 | $ | 253,655 | $ | 238,092 | |||||||||||||||||||||||||||
United Kingdom | 11,673 | 14,775 | 20,772 | 30,712 | |||||||||||||||||||||||||||||||
Rest of World | 9,539 | 11,078 | 20,783 | 23,658 | |||||||||||||||||||||||||||||||
Total net sales | $ | 150,140 | $ | 142,536 | $ | 295,210 | $ | 292,462 | |||||||||||||||||||||||||||
2020
Goodwill results from such factors as an assembled workforce. The total amount of goodwill is not expected to be deductible for tax purposes. The goodwill and other intangible assets are primarily included in the U.S. segment. Customer relationships are amortized on a straight-line basis over their estimated useful lives (see Note F – Intangible Assets).
The three and six months ended June 30, 2018 included the operations of Filament for the period from March 2, 2018, the date of acquisition, to June 30, 2018. The condensed consolidated statements of operations for the three months ended June 30, 2018 include $29.3 million of net sales and $0.4 million of net loss from operations contributed by Filament. The condensed consolidated statements of operations for the six months ended June 30, 2018, include $38.6 million of net sales and $1.5 million of net loss from operations contributed by Filament.
Unaudited Pro forma Results
The following table presents the Company’s pro forma consolidated net sales, loss before income taxes and equity in earnings and net loss for the three and six months ended June 30, 2018. The unaudited pro forma results include the historical statements of operations information of the Company and of Filament, giving effect to the Filament acquisition and related financing as if they had occurred at the beginning of the periods presented.
Three Months Ended | Six Months Ended | |||||||
June 30, 2018 | June 30, 2018 | |||||||
(in thousands, except per share data) | ||||||||
Net sales | $ | 148,651 | $ | 292,631 | ||||
Loss before income taxes and equity in earnings | (6,694 | ) | (22,904 | ) | ||||
Net loss | (5,092 | ) | (17,235 | ) | ||||
Basic and diluted loss per common share | (0.25 | ) | (0.85 | ) |
The unaudited pro forma results do not include any revenue or cost reductions that may be achieved through the business combination or the impact of non-recurring items directly related to the business combination.
The unaudited pro forma results are not necessarily indicative of the operating results that would have occurred if the Filament acquisition had been completed as of the date for which the pro forma financial information is presented. In addition, the unaudited pro forma results do not purport to project the future condensed consolidated operating results of the combined company.
The Company adopted ASC 842 as of January 1, 2019, using the cumulative effective adjustment method wherein the Company applied the new leases standard at the adoption date. Accordingly, all periods prior to January 1, 2019 were presented in accordance with the previous ASC Topic 840 –Leases, and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC 842 resulted in an increase to total assets and liabilities due to the recording of operating lease ROU assets and operating lease liabilities of approximately $90.9 million and $104.4 million, respectively, as of January 1, 2019. Finance leases are not material to the Company and were not impacted by the adoption of ASC 842, as finance lease liabilities and the corresponding assets were already recorded in the balance sheet under the previous guidance, ASC 840. The adoption did not materially impact the Company’s condensed consolidated statements of operations or cash flows.
- 13 -
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(unaudited)
The Company has operating leases for corporate offices, distribution facilities, manufacturing plants, and certain vehicles. Leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheet.
ROU assets represent the Company’s right to use an underlying asset during the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the net present value of fixed lease payments over the lease term. The Company’s lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. ROU assets also include any advance lease payments. As most of the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
current environment.
Three Months Ended | Six Months Ended | |||||||
June 30, 2019 | June 30, 2019 | |||||||
Operating lease costs: | ||||||||
Fixed | $ | 4,907 | $ | 9,131 | ||||
|
|
|
| |||||
Total | $ | 4,907 | $ | 9,131 | ||||
|
|
|
|
Three Months Ended June 30, | Six Months EndedJune 30, | ||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||
Operating lease expenses: | |||||||||||||||||||||||||||||||||||||||||
Fixed | $ | 4,491 | $ | 4,907 | $ | 9,305 | $ | 9,131 |
Three Months Ended | Six Months Ended | |||||||
June 30, 2019 | June 30, 2019 | |||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows for operating leases | $ | 4,295 | $ | 7,975 | ||||
|
|
|
| |||||
Total | $ | 4,295 | $ | 7,975 | ||||
|
|
|
|
Three Months Ended | Six Months Ended | |||||||
June 30, 2019 | June 30, 2019 | |||||||
Right-of-use assets obtained in exchange for new lease obligations: | ||||||||
Operating leases | $ | 20,991 | $ | 115,488 | ||||
|
|
|
| |||||
Total | $ | 20,991 | $ | 115,488 | ||||
|
|
|
|
Six Months Ended June 30, | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||||||
Operating cash flows for operating leases | $ | 7,285 | $ | 7,975 |
Six Months Ended June 30, | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
Right-of-use assets obtained in exchange for new lease obligations: | ||||||||||||||||||||
Operating leases | $ | 12 | $ | 115,488 |
2020
Operating | ||||
2019 (excluding the six months ending June 30, 2019) | $ | 9,952 | ||
2020 | 17,461 | |||
2021 | 17,102 | |||
2022 | 17,178 | |||
2023 | 17,343 | |||
Thereafter | 88,825 | |||
|
| |||
Total lease payments | 167,861 | |||
Less: Interest | (42,068 | ) | ||
|
| |||
Present value of lease liabilities | $ | 125,793 | ||
|
|
Operating | |||||
2020 (excluding the six months ending June 30, 2020) | $ | 8,819 | |||
2021 | 17,795 | ||||
2022 | 17,920 | ||||
2023 | 17,914 | ||||
2024 | 17,585 | ||||
2025 | 17,564 | ||||
Thereafter | 54,209 | ||||
Total lease payments | 151,806 | ||||
Less: Interest | (34,951) | ||||
Present value of lease payments | $ | 116,855 |
June 30, | 2020 | |||||||
Operating leases: | ||||||||
Weighted-average remaining lease term (years) | 8.6 | |||||||
| ||||||||
Weighted-average discount rate | 6.2 | |||||||
| % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||
Average exchange rate (USD to MXN) | 23.31 | 19.11 | 19.91 - 23.31 | 19.11 - 19.24 |
- 15 -
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(unaudited)
Summarized statement of income information for Vasconia in USD and MXN is as follows (in thousands):
Three Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
USD | MXN | USD | MXN | |||||||||||||
Net sales | $ | 37,040 | $ | 707,837 | $ | 48,061 | $ | 931,329 | ||||||||
Gross profit | 9,291 | 177,552 | 9,986 | 193,517 | ||||||||||||
Income from operations | 2,805 | 53,601 | 3,655 | 70,827 | ||||||||||||
Net (Loss) Income | (178 | ) | (3,407 | ) | 2,457 | 47,621 | ||||||||||
Six Months Ended | ||||||||||||||||
June 30, | ||||||||||||||||
2019 | 2018 | |||||||||||||||
USD | MXN | USD | MXN | |||||||||||||
Net Sales | $ | 78,534 | $ | 1,506,175 | $ | 87,630 | $ | 1,671,735 | ||||||||
Gross Profit | 17,229 | 330,273 | 17,105 | 326,724 | ||||||||||||
Income from operations | 4,698 | 90,027 | 4,804 | 92,330 | ||||||||||||
Net (Loss) Income | (511 | ) | (9,813 | ) | 2,095 | 40,845 |
Three Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
USD | MXN | USD | MXN | ||||||||||||||||||||||||||||||||||||||
Net sales | $ | 28,572 | $ | 666,012 | $ | 37,040 | $ | 707,837 | |||||||||||||||||||||||||||||||||
Gross profit | 6,062 | 141,304 | 9,291 | 177,552 | |||||||||||||||||||||||||||||||||||||
Income from operations | 1,414 | 32,948 | 2,805 | 53,601 | |||||||||||||||||||||||||||||||||||||
Net loss | (1,994) | (46,459) | (178) | (3,407) |
Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||
USD | MXN | USD | MXN | ||||||||||||||||||||||||||||||||||||||
Net Sales | $ | 60,367 | $ | 1,299,048 | $ | 78,534 | $ | 1,506,175 | |||||||||||||||||||||||||||||||||
Gross profit | 11,469 | 248,961 | 17,229 | 330,273 | |||||||||||||||||||||||||||||||||||||
Income from operations | 864 | 22,000 | 4,698 | 90,027 | |||||||||||||||||||||||||||||||||||||
Net loss | (572) | (18,156) | (511) | (9,813) |
due from Vasconia (in thousands):
Vasconia due to and due from balances | Balance Sheet Location | June 30, 2020 | December 31, 2019 | ||||||||||||||
Amounts due from Vasconia | Prepaid expenses and other current assets | $ | 91 | $ | 63 | ||||||||||||
Amounts due to Vasconia | Accrued expenses and Accounts payable | (23) | (77) |
2020
June 30, 2019 | December 31, 2018 | |||||||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||||||
Gross | Amortization | Net | Gross | Impairment | Amortization | Net | ||||||||||||||||||||||
Goodwill | $ | 92,637 | $ | — | $ | 92,637 | $ | 93,895 | $ | (2,205 | ) | $ | — | $ | 91,690 | |||||||||||||
Indefinite-lived intangible assets: | ||||||||||||||||||||||||||||
Trade names | 58,216 | — | 58,216 | 58,216 | — | — | 58,216 | |||||||||||||||||||||
Finite-lived intangible assets: | ||||||||||||||||||||||||||||
Licenses | 15,847 | (10,059 | ) | 5,788 | 15,847 | — | (9,825 | ) | 6,022 | |||||||||||||||||||
Trade names | 43,559 | (15,545 | ) | 28,014 | 43,689 | — | (13,965 | ) | 29,724 | |||||||||||||||||||
Customer relationships | 175,396 | (33,691 | ) | 141,705 | 175,482 | — | (27,538 | ) | 147,944 | |||||||||||||||||||
Other | 6,508 | (1,554 | ) | 4,954 | 6,510 | — | (1,259 | ) | 5,251 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Total | $ | 392,163 | $ | (60,849 | ) | $ | 331,314 | $ | 393,639 | $ | (2,205 | ) | $ | (52,587 | ) | $ | 338,847 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gross | Impairment | Accumulated Amortization | Net | Gross | Impairment | Accumulated Amortization | Net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill | $ | 49,371 | $ | (19,100) | — | $ | 30,271 | $ | 92,361 | $ | (42,990) | $ | — | $ | 49,371 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade names | 58,216 | (1,000) | — | 57,216 | 58,216 | — | — | 58,216 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finite-lived intangible assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Licenses | 15,847 | (10,514) | 5,333 | 15,847 | (10,287) | 5,560 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade names | 43,222 | (18,556) | 24,666 | 43,986 | (17,337) | 26,649 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Customer relationships | 174,447 | (45,764) | 128,683 | 176,602 | (40,605) | 135,997 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 6,478 | (2,132) | 4,346 | 6,546 | (1,868) | 4,678 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 347,581 | $ | (20,100) | $ | (76,966) | $ | 250,515 | $ | 393,558 | $ | (42,990) | $ | (70,097) | $ | 280,471 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
At
June 30, 2020 | December 31, 2019 | |||||||||||||
Maximum aggregate principal allowed | $ | 150,000 | $ | 150,000 | ||||||||||
Outstanding borrowings under the ABL Agreement | (27,383) | (32,822) | ||||||||||||
Standby letters of credit | (2,677) | (2,288) | ||||||||||||
Total availability under the ABL Agreement | $ | 119,940 | $ | 114,890 | ||||||||||
At June 30, 2019
Loan facility included in the condensed consolidated balance sheets were as follows (in thousands):
June 30, 2020 | December 31, 2019 | |||||||||||||||||||
Current portion of Term Loan facility: | ||||||||||||||||||||
Term Loan facility payment | $ | — | $ | 2,750 | ||||||||||||||||
Excess Cash Flow principal payment | 15,000 | 7,145 | ||||||||||||||||||
Estimated unamortized debt issuance costs | (1,473) | (1,482) | ||||||||||||||||||
Total Current portion of Term Loan facility | $ | 13,527 | $ | 8,413 | ||||||||||||||||
Non-current portion of Term Loan facility: | ||||||||||||||||||||
Term Loan facility payment, net of current portion | $ | 247,605 | $ | 260,293 | ||||||||||||||||
Estimated unamortized debt issuance costs | (5,268) | (6,012) | ||||||||||||||||||
Total Non-current portion of Term Loan facility | $ | 242,337 | $ | 254,281 | ||||||||||||||||
2020
Agreement.
2020. The Company expects that it will continue to borrow, subject to availability, and repay funds under the ABL Agreement based on working capital and other corporate needs.
2020
currencies. Fluctuations in the value of certain foreign currencies as compared to the USDU.S. dollar may positively or negatively affect the Company’s revenues, gross margins, operating expenses, and retained earnings, all of which are expressed in USD. Where the Company deems it prudent, the Company engages in hedging programs using foreign currency forward contracts aimed at limiting the impact of foreign currency exchange rate fluctuations on earnings. The Company purchases short-term (i.e. 12 months or less) foreign currency forward contracts to protect against currency exchange risks associated with the payment of merchandise purchases to foreign suppliers. The Company does not hedge the translation of foreign currency profits into USD, as the Company regards this as an accounting exposure rather than an economic exposure. The aggregate gross notional values ofCompany's foreign exchange contracts, at June 30, 2019 was $9.0 million. These foreign exchange contracts havethat had been designateddesigned as hedges in to order to apply hedge accounting.
accounting, matured in April 2020. As of June 30, 2020 the Company did not have any outstanding foreign exchange contracts.
Derivatives designated as hedging instruments | Balance Sheet | June 30, 2019 | December 31, 2018 | |||||||
Interest rate swaps | Prepaid Expenses | $ | 460 | $ | 42 | |||||
Other Assets | 1,372 | 157 | ||||||||
Foreign exchange contracts | Prepaid Expenses | 370 | — | |||||||
Derivatives not designated as hedging instruments | Balance Sheet | June 30, 2019 | December 31, 2018 | |||||||
Interest rate swaps | Other Assets | $ | 350 | $ | — |
Derivatives designated as hedging instruments | Balance Sheet Location | June 30, 2020 | December 31, 2019 | ||||||||||||||
Interest rate swaps | Prepaid expenses | $ | — | $ | 427 | ||||||||||||
Other assets | — | 1,267 | |||||||||||||||
Accrued expenses | 711 | — | |||||||||||||||
Other Long-Term Liabilities | 1,425 | — | |||||||||||||||
Foreign exchange contracts | Prepaid expenses | — | 180 | ||||||||||||||
Derivatives not designated as hedging instruments | Balance Sheet Location | June 30, 2020 | December 31, 2019 | ||||||||||||||
Interest rate swaps | Other assets | $ | — | $ | 402 | ||||||||||||
Other Long-Term Liabilities | 2,013 | — |
The fair values of the foreign exchange contracts were based on Level 2 observable inputs using quoted market prices for similar assets in an active market. The counterparties to the derivative financial instruments are major international financial institutions. The Company is exposed to credit risk for the net exchanges under these agreements, but not for the notional amounts. The Company does not anticipate non-performance by any of its counterparties.
2020
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
Derivatives designated as hedging instruments | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Interest rate swaps, net of taxes | $ | 748 | $ | (263 | ) | $ | 1,224 | $ | (277 | ) | ||||||
Foreign exchange contracts, net of taxes | 234 | — | 354 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 982 | $ | (263 | ) | $ | 1,578 | $ | (277 | ) | |||||||
|
|
|
|
|
|
|
|
Gains or
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
Derivatives designated as hedging instruments | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||
Interest rate swaps | $ | 209 | $ | 748 | $ | (2,885) | $ | 1,224 | |||||||||||||||||||||||||||
Foreign exchange contracts | (108) | 234 | 109 | 354 | |||||||||||||||||||||||||||||||
$ | 101 | $ | 982 | $ | (2,776) | $ | 1,578 | ||||||||||||||||||||||||||||
Gains or losses on the foreign exchange contracts will bethat are reported in other comprehensive income (loss) are reclassified into cost of sales as the hedged merchandise purchases areunderlying inventory purchased is sold. The amount recorded as
The amountsmillion related to realized interest rate swap losses and a gain of the gains$0.1 million related to foreign exchange contracts recognized in cost of sales.
Three Months Ended | Six Months Ended | |||||||||||||||||
June 30, | June 30, | |||||||||||||||||
Derivatives not designated as hedging instruments | Location of gain (loss) | 2019 | 2018 | 2019 | 2018 | |||||||||||||
Interest rate swaps | Interest expense | $ | 350 | — | $ | 350 | — | |||||||||||
Foreign exchange contracts | Selling, general and administrative expense | — | $ | 1,468 | — | $ | (47 | ) |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||
Derivatives not designated as hedging instruments | Location of gain (loss) | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||
Interest rate swaps | Mark to market (loss) gain on interest rate derivatives | $ | (164) | 350 | $ | (2,415) | 350 | ||||||||||||||||||||||||||||||||||
Interest expense | (87) | — | (102) | — | |||||||||||||||||||||||||||||||||||||
$ | (251) | $ | 350 | $ | (2,517) | $ | 350 | ||||||||||||||||||||||||||||||||||
Options | Weighted- average exercise price | Weighted- average remaining contractual life (years) | Aggregate intrinsic value | |||||||||||||
Options outstanding, January 1, 2019 | 1,548,825 | $ | 13.87 | |||||||||||||
Grants | 296,500 | 9.21 | ||||||||||||||
Exercises | (75,000 | ) | 4.28 | |||||||||||||
Cancellations | (6,750 | ) | 13.34 | |||||||||||||
Expirations | (68,125 | ) | 15.57 | |||||||||||||
|
| |||||||||||||||
Options outstanding, June 30, 2019 | 1,695,450 | 13.41 | 4.9 | $ | 87,425 | |||||||||||
|
|
|
| |||||||||||||
Options exercisable, June 30, 2019 | 1,212,172 | $ | 14.27 | 3.1 | $ | 87,425 | ||||||||||
|
|
|
|
- 20 -
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(unaudited)
Options Weighted-
average
exercise priceWeighted-
average
remaining
contractual
life (years)Aggregate
intrinsic
value
(in thousands)Options outstanding, January 1, 2020 1,508,325 $ 13.43 Grants 37,500 6.36 Cancellations (3,750) 12.86 Expirations (229,175) 13.14 Options outstanding, June 30, 2020 1,312,900 13.28 5.3 $ 14 Options exercisable, June 30, 2020 999,919 $ 14.28 4.2 $ — Total unrecognized stock option expense remaining (in thousands) $ 903 Weighted-average years expected to be recognized over 1.5
Total unrecognized stock option compensation expense at June 30, 2019, before the effect of income taxes, was $1.7 million and is expected to be recognized over a weighted-average period of 1.8 years.
Restricted Shares | Weighted- average grant date fair value | |||||||
Non-vested restricted shares, January 1, 2019 | 326,545 | $ | 14.63 | |||||
Grants | 437,997 | 9.26 | ||||||
Vested | (145,049 | ) | 14.49 | |||||
Cancellations | (24,362 | ) | 13.99 | |||||
|
| |||||||
Non-vested restricted shares, June 30, 2019 | 595,131 | $ | 10.74 | |||||
|
| |||||||
Total unrecognized compensation expense remaining | $ | 5,904,000 | ||||||
Weighted-average years expected to be recognized over | 1.8 |
Restricted Shares | Weighted- average grant date fair value | ||||||||||
Non-vested restricted shares, January 1, 2020 | 593,341 | $ | 10.70 | ||||||||
Grants | 534,940 | 5.94 | |||||||||
Vested | (288,597) | 10.82 | |||||||||
Cancellations | (5,613) | 9.54 | |||||||||
Non-vested restricted shares, June 30, 2020 | 834,071 | $ | 7.61 | ||||||||
Total unrecognized compensation expense remaining (in thousands) | $ | 5,511 | |||||||||
Weighted-average years expected to be recognized over | 1.4 |
- 21 -
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(unaudited)
A summary of the Company’s performance-based award activity and related information for the six months ended June 30, 20192020 is as follows:
Performance- based stock awards(1) | Weighted- average grant date fair value | |||||||
Non-vested performance-based awards, January 1, 2019 | 339,287 | $ | 14.82 | |||||
Grants | 156,775 | 9.21 | ||||||
Vested | (66,761 | ) | 15.69 | |||||
Cancellations | (25,767 | ) | 15.46 | |||||
|
| |||||||
Non-vested performance-based awards, June 30, 2019 | 403,534 | $ | 12.45 | |||||
|
| |||||||
Total unrecognized compensation expense remaining | $ | 3,037,000 | ||||||
Weighted-average years expected to be recognized over | 1.9 |
|
Performance- based stock awards (1) | Weighted- average grant date fair value | ||||||||||
Non-vested performance-based awards, January 1, 2020 | 405,059 | $ | 12.43 | ||||||||
Grants | 106,275 | 6.36 | |||||||||
Vested | (62,215) | 18.45 | |||||||||
Cancellations | (14,524) | 17.39 | |||||||||
Non-vested performance-based awards, June 30, 2020 | 434,595 | $ | 9.92 | ||||||||
Total unrecognized compensation expense remaining (in thousands) | $ | 1,864 | |||||||||
Weighted-average years expected to be recognized over | 1.7 |
At June 30, 2019, there were 152,342 shares available for awards that could be granted under the Plan, assuming maximum performance of performance-based awards.
as follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||
Stock Compensation Expense Components | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||
Equity based stock option expense | $ | 139 | $ | 100 | $ | 285 | $ | 300 | |||||||||||||||||||||||||||
Restricted and performance-based stock awards expense | 1,276 | 1,086 | 2,450 | 1,786 | |||||||||||||||||||||||||||||||
Stock compensation expense for equity based awards | $ | 1,415 | $ | 1,186 | $ | 2,735 | $ | 2,086 | |||||||||||||||||||||||||||
Liability based stock option expense | 5 | 7 | 11 | 14 | |||||||||||||||||||||||||||||||
Total Stock Compensation Expense | $ | 1,420 | $ | 1,193 | $ | 2,746 | $ | 2,100 | |||||||||||||||||||||||||||
2020
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
Net loss– basic and diluted | $ | (11,513 | ) | $ | (6,057 | ) | $ | (16,380 | ) | $ | (17,655 | ) | ||||
Weighted-average shares outstanding – basic and diluted | 20,545 | 20,327 | 20,527 | 18,474 | ||||||||||||
Basic and diluted loss per common share | $ | (0.56 | ) | $ | (0.30 | ) | $ | (0.80 | ) | $ | (0.96 | ) | ||||
|
|
|
|
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||
(in thousands, except per share amounts) | |||||||||||||||||||||||||||||||||||||||||
Net loss – Basic and Diluted | $ | (3,977) | $ | (11,513) | $ | (32,141) | $ | (16,380) | |||||||||||||||||||||||||||||||||
Weighted-average shares outstanding – Basic and Diluted | 20,824 | 20,545 | 20,784 | 20,527 | |||||||||||||||||||||||||||||||||||||
Basic and Diluted loss per common share | $ | (0.19) | $ | (0.56) | $ | (1.55) | $ | (0.80) | |||||||||||||||||||||||||||||||||
Antidilutive Securities | 2,088 | 2,148 | 2,100 | 1,882 | |||||||||||||||||||||||||||||||||||||
NOTE K— INCOME TAXES
significant permanent items recorded year-to-date, partially offset by the benefit of losses in foreign jurisdictions.
Income tax benefit of $1.8 million and $5.6 million for the three and six months ended June 30, 2018, respectively, represent taxes on both U.S. and foreign earnings at a combined effective income tax benefit rate of 22.1% and 23.8%, respectively. The effective rates for the three and six months ended June 30, 2018 reflects the reduced U.S. corporate income tax rate, partially offset by non-deductible expenses.
2020.
2019.
- 23 -
LIFETIME BRANDS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2019
(unaudited)
The Company has segmented its operations to reflect the manner in which management reviews and evaluates the results of its operations. The U.S. segment includes the Company’s primary domestic business that designs, markets and distributes its products to retailers, distributors and its internet websites. The International segment consists of certain business operations conducted outside the U.S. Management evaluates the performance of the U.S. and International segments based on net sales and lossincome from operations. Such measures give recognition to specifically identifiable operating costs such as cost of sales, distribution expenses and selling, general and administrative expenses. Certain general and administrative expenses, such as senior executive salaries and benefits, stock compensation, director fees, and accounting, legal and consulting fees, are not allocated to the specific segments and are reflected as unallocated corporate expenses.
The Company implemented its SKU Rationalization initiative to improve the productivity of its inventory and simplify its U.S. business. During the three months ended June 30, 2019, the Company recorded an $8.5 million charge to cost of sales associated with the SKU Rationalization initiative, which negatively impacted loss from operations for the U.S. segment.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands) | ||||||||||||||||
Net sales | ||||||||||||||||
U.S. | $ | 123,092 | $ | 128,985 | $ | 250,130 | $ | 224,892 | ||||||||
International | 19,444 | 19,666 | 42,332 | 41,928 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total net sales | $ | 142,536 | $ | 148,651 | $ | 292,462 | $ | 266,820 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Loss from operations | ||||||||||||||||
U.S. | $ | (4,678 | ) | $ | 1,968 | $ | (292 | ) | $ | (3,572 | ) | |||||
International | (2,868 | ) | (204 | ) | (3,915 | ) | (3,424 | ) | ||||||||
Unallocated corporate expenses | (4,999 | ) | (5,065 | ) | (10,625 | ) | (9,621 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Loss from operations | $ | (12,545 | ) | $ | (3,301 | ) | $ | (14,832 | ) | $ | (16,617 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Depreciation and amortization | ||||||||||||||||
U.S. | $ | 5,210 | $ | 5,292 | $ | 10,481 | $ | 8,439 | ||||||||
International | 1,080 | 1,130 | 2,168 | 2,292 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total depreciation and amortization | $ | 6,290 | $ | 6,422 | $ | 12,649 | $ | 10,731 | ||||||||
|
|
|
|
|
|
|
|
June 30, | December 31, | |||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Assets | ||||||||
U.S. | $ | 684,229 | $ | 604,532 | ||||
International | 117,295 | 94,210 | ||||||
Unallocated corporate | 21,177 | 9,830 | ||||||
|
|
|
| |||||
Total Assets | $ | 822,701 | $ | 708,572 | ||||
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||||
Net sales | |||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 132,591 | $ | 123,092 | $ | 261,799 | $ | 250,130 | |||||||||||||||||||||||||||||||||
International | 17,549 | 19,444 | 33,411 | 42,332 | |||||||||||||||||||||||||||||||||||||
Total net sales | $ | 150,140 | $ | 142,536 | $ | 295,210 | $ | 292,462 | |||||||||||||||||||||||||||||||||
Income (loss) from operations | |||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 13,152 | $ | (4,678) | $ | (728) | $ | (292) | |||||||||||||||||||||||||||||||||
International | (3,817) | (2,868) | (10,551) | (3,915) | |||||||||||||||||||||||||||||||||||||
Unallocated corporate expenses | (5,039) | (4,999) | (9,670) | (10,625) | |||||||||||||||||||||||||||||||||||||
Income (loss) from operations | $ | 4,296 | $ | (12,545) | $ | (20,949) | $ | (14,832) | |||||||||||||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||||||||||||||||||||
U.S. | $ | 4,934 | $ | 5,210 | $ | 9,996 | $ | 10,481 | |||||||||||||||||||||||||||||||||
International | 1,127 | 1,080 | 2,299 | 2,168 | |||||||||||||||||||||||||||||||||||||
Total depreciation and amortization | $ | 6,061 | $ | 6,290 | $ | 12,295 | $ | 12,649 | |||||||||||||||||||||||||||||||||
June 30, 2020 | December 31, 2019 | ||||||||||||||||
(in thousands) | |||||||||||||||||
Assets | |||||||||||||||||
U.S. | $ | 592,806 | $ | 639,047 | |||||||||||||
International | 95,036 | 117,935 | |||||||||||||||
Unallocated corporate | 65,960 | 13,041 | |||||||||||||||
Total Assets | $ | 753,802 | $ | 770,023 | |||||||||||||
2020
List due to contamination present in the local drinking water supply.
WSPR never used the primary contaminant of concern and did not take up its tenancy at the Site until after the EPA had discovered the contamination in the local water supply. The EPA has also issued notices of potential liability to a number of other entities affiliated with the Site, which used the contaminants of concern.
On July 19, 2019, WSPR’s counsel received an email from the US Department of Justice attorney representing the
WSPR never used the primary constituents of concern and did not take up its tenancyplume fringe at the Site until after EPA had discovered the damage to the local water supply. EPA has also issued notices of potential liability to numerous other entities affiliated with the Site, which used the constituents of concern. Site. The EPA’s estimated total net present worth cost for its selected remedy is $17.3 million.
2020
Dividend per share | Date declared | Date of record | Payment date | |||||||||||||||||
$0.0425 | ||||||||||||||||||||
$0.0425 |
On August 6, 2019,17, 2020. For the Boardsix months ended June 30, 2020, the Company reduced retained earnings for the accrual of Directors declared a quarterly$1.8 million relating to the dividend of $0.0425 per share payable on November 15, 2019 to shareholders of record on November 1, 2019.
August 17, 2020 and
December 16, 2020.Six Months Ended June 30, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 9,066 | $ | 5,614 | ||||
Cash paid for taxes | 993 | 2,763 | ||||||
Non-cash investing activities: | ||||||||
Translation loss adjustment | $ | (1,647 | ) | $ | (2,109 | ) |
Six Months Ended June 30, | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
(in thousands) | |||||||||||||||||
Supplemental disclosure of cash flow information: | |||||||||||||||||
Cash paid for interest | $ | 8,070 | $ | 9,066 | |||||||||||||
Cash paid for taxes, net of refunds | 173 | 993 | |||||||||||||||
Non-cash investing activities: | |||||||||||||||||
Translation loss adjustment | $ | (7,207) | $ | (1,647) |
2020
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in thousands) | ||||||||||||||||
Accumulated translation adjustment: | ||||||||||||||||
Balance at beginning of period | $ | (32,421 | ) | $ | (24,441 | ) | $ | (33,727 | ) | $ | (27,821 | ) | ||||
Translation loss during period | (2,953 | ) | (5,489 | ) | (1,647 | ) | (2,109 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | (35,374 | ) | $ | (29,930 | ) | $ | (35,374 | ) | $ | (29,930 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Accumulated deferred gains (losses) on cash flow hedges: | ||||||||||||||||
Balance at beginning of period | $ | 757 | $ | — | $ | 161 | $ | 14 | ||||||||
Amounts reclassified from accumulated other comprehensive loss: | ||||||||||||||||
Settlement of cash flow hedge | (52 | ) | — | (23 | ) | (14 | ) | |||||||||
Change in unrealized gains (losses) | 1,034 | (263 | ) | 1,601 | (263 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Net change in cash flow hedges, net of taxes of $306, $88, $495, and $88 | 982 | (263 | ) | 1,578 | (277 | ) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | 1,739 | $ | (263 | ) | $ | 1,739 | $ | (263 | ) | ||||||
|
|
|
|
|
|
|
| |||||||||
Accumulated effect of retirement benefit obligations: | ||||||||||||||||
Balance at beginning of period | $ | (1,037 | ) | $ | (1,500 | ) | $ | (1,050 | ) | $ | (1,518 | ) | ||||
Amounts reclassified from accumulated other comprehensive loss:(1) | ||||||||||||||||
Amortization of actuarial losses, net of taxes | 12 | 17 | 25 | 35 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at end of period | $ | (1,025 | ) | $ | (1,483 | ) | $ | (1,025 | ) | $ | (1,483 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Total accumulated other comprehensive loss at end of period | $ | (34,660 | ) | $ | (31,676 | ) | $ | (34,660 | ) | $ | (31,676 | ) | ||||
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||
(in thousands) | |||||||||||||||||||||||||||||||||||||||||
Accumulated translation adjustment: | |||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | (38,477) | $ | (32,421) | $ | (34,019) | $ | (33,727) | |||||||||||||||||||||||||||||||||
Translation loss during period | (2,749) | (2,953) | (7,207) | (1,647) | |||||||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss (1) | 235 | — | 235 | — | |||||||||||||||||||||||||||||||||||||
Translation Adjustment | (2,514) | (2,953) | (6,972) | (1,647) | |||||||||||||||||||||||||||||||||||||
Balance at end of period | $ | (40,991) | $ | (35,374) | $ | (40,991) | $ | (35,374) | |||||||||||||||||||||||||||||||||
Accumulated deferred gains on cash flow hedges: | |||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | (1,713) | $ | 757 | $ | 1,164 | $ | 161 | |||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss: | |||||||||||||||||||||||||||||||||||||||||
Settlement of cash flow hedge (2) | 240 | (52) | 359 | (23) | |||||||||||||||||||||||||||||||||||||
Change in unrealized (losses) gains | (139) | 1,034 | (3,135) | 1,601 | |||||||||||||||||||||||||||||||||||||
Net change in cash flow hedges, net of taxes of $69, $306, $(929) and $495 | 101 | 982 | (2,776) | 1,578 | |||||||||||||||||||||||||||||||||||||
Balance at end of period | $ | (1,612) | $ | 1,739 | $ | (1,612) | $ | 1,739 | |||||||||||||||||||||||||||||||||
Accumulated effect of retirement benefit obligations: | |||||||||||||||||||||||||||||||||||||||||
Balance at beginning of period | $ | (1,580) | $ | (1,037) | $ | (1,600) | $ | (1,050) | |||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss: (3) | |||||||||||||||||||||||||||||||||||||||||
Amortization of actuarial gains, net of taxes | 19 | 12 | 39 | 25 | |||||||||||||||||||||||||||||||||||||
Balance at end of period | $ | (1,561) | $ | (1,025) | $ | (1,561) | $ | (1,025) | |||||||||||||||||||||||||||||||||
Total accumulated other comprehensive losses at end of period | $ | (44,164) | $ | (34,660) | $ | (44,164) | $ | (34,660) | |||||||||||||||||||||||||||||||||
•General economic factors and political conditions;“forward-looking “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Theseforward-looking statements include information concerning the Company’s plans, objectives, goals, strategies, future events, future revenues, performance, capital expenditures, financing needs and other information that is not historical information. Many of these statements appear, in particular, inManagement’s Discussion and Analysis of Financial Condition and Results of Operations. When used in this Quarterly Report on Form 10-Q, the words “estimates,” “expects,” “anticipates,” “projects,“predicts,” “plans,” “intends,” “believes,” “may,” “should,” “assumes,” “seeks,“would,” and variations of such words or similar expressions are intended to identifyforward-looking statements. Allforward-looking statements, including, without limitation, those based on the Company’s examination of historical operating trends, are based upon the Company’s current expectations and various assumptions. The Company believes there is a reasonable basis for its expectations and assumptions, but there can be no assurance that the Company will realize its expectations or that the Company’s assumptions will prove correct. 2018 Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “2019 Annual Report on Form 10-K”) in Part I, Item 1A under the headingRisk Factors. Such risks, uncertainties and other important factors include, among others, risks related to:
•Exit of the United Kingdom from the European Union;
•Tariffs;
•Indebtedness and compliance with credit agreements;
•Access to the capital markets and credit markets;
•Liquidity;
•Interest;
•Acquisition integration;
•Competition;
•Customer practices;
•Intellectual property, brands and licenses;
•Goodwill;
•International operations;
•Supply chain;
•Foreign exchange rates;
•International trade, and transportation;
•Transportation;
•Regulatory matters;
•Product development;
•Stock keeping unit rationalization (“SKU Rationalization”) initiative;
Reputation;
Technology;
Personnel;
•Price fluctuations;
•Business interruptions;
•Projections;
•Fixed costs;
•Governance; and
•Acquisitions and investments.
On March 2, 2018, the Company completed the acquisition of Taylor Holdco LLC and its subsidiaries (doing business as Filament Brands) (“Filament”). Filament primarily designs, markets and distributes consumer and food service precision measurement products, including kitchen scales, thermometers and timers, bath scales, wine accessories, kitchen tools, hydration products, and select outdoor products. The six months ended June 30, 2018 include the operations of Filament for the period from March 2, 2018 to June 30, 2018.
Effective October 1, 2018, the
- 29 -
The Company accounts for its investment in Vasconia using the equity method of accounting and records its proportionate share of Vasconia’s net income in the Company’s condensed consolidated statements of operations. Accordingly, the Company has recorded its proportionate share of Vasconia’s results of operations as equity in earnings or lossesnet income (reduced for amortization expense related to the customer relationships acquired) for the three and six months ended June 30, 2020 and 2019 in the Company’saccompanying unaudited condensed consolidated statements of operations. Pursuant to a Shares Subscription Agreement, the Company may designate four persons to be nominated as members of Vasconia’s Board of Directors. As of June 30, 2019,2020, Vasconia’s Board of Directors is comprised of twelvefourteen members of whom the Company has designated three members.
In connection
severance.
COVID-19 pandemic. However, in limited instances and categories, increased demand has strained the manufacturing capacity of certain of the Company’s suppliers.
The following is an update to the corresponding critical accounting policies and estimates set forth in the Company’s 2018 Annual Report on Form 10-K. Except as modified below, there
Cost of Sales
The Company implemented programs to improve the productivity of its inventory and simplify its U.S. business. In connection therewith, it initiated a SKU Rationalization initiative to identify inventory to discontinue from active status, consistent with the objectives of these programs. During the three months ended June 30, 2019, the Company recorded an $8.5 million charge to cost of sales associated with the SKU Rationalization initiative. The inventory affected represents approximately 8% of its consolidated inventory.
- 30 -
Leases
The Company determines if an arrangement contains a lease at inception. Operating lease right-of-use (“ROU”) assets are included in operating lease right-of-use assets on the condensed consolidated balance sheets. The current and long-term components of operating lease liabilities are included in the current portion of the operating lease liability and operating lease liabilities, respectively, on the condensed consolidated balance sheets. Finance leases were not material to the Company’s condensed consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized upon commencement of the lease based on the present value of the lease payments over the lease term. As most of the Company’s leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Leases with a lease term of 12 months or less are not capitalized.
The Company has lease agreements with lease and non-lease components, which are generally accounted for as a single lease component.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of sales | 69.1 | 65.0 | 66.4 | 63.6 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross margin | 30.9 | 35.0 | 33.6 | 36.4 | ||||||||||||
Distribution expenses | 10.9 | 10.1 | 10.7 | 12.3 | ||||||||||||
Selling, general and administrative expenses | 28.7 | 26.9 | 27.7 | 30.1 | ||||||||||||
Restructuring expenses | 0.1 | 0.3 | 0.3 | 0.3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Loss from operations | (8.8 | ) | (2.2 | ) | (5.1 | ) | (6.2 | ) | ||||||||
Interest expense | (3.3 | ) | (3.1 | ) | (3.3 | ) | (2.5 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Loss before income taxes and equity in (losses) earnings | (12.1 | ) | (5.3 | ) | (8.4 | ) | (8.7 | ) | ||||||||
Income tax benefit | 4.1 | 1.2 | 2.8 | 2.1 | ||||||||||||
Equity in (losses) earnings, net of taxes | — | 0.1 | (0.1 | ) | 0.1 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Net loss | (8.0 | )% | (4.0 | )% | (5.7 | )% | (6.5 | )% | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||||||||
Cost of sales | 63.9 | 69.1 | 63.7 | 66.4 | ||||||||||||||||||||||||||||||||||
Gross margin | 36.1 | 30.9 | 36.3 | 33.6 | ||||||||||||||||||||||||||||||||||
Distribution expenses | 10.1 | 10.9 | 10.8 | 10.7 | ||||||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 22.9 | 28.7 | 25.7 | 27.7 | ||||||||||||||||||||||||||||||||||
Restructuring expenses | 0.2 | 0.1 | 0.1 | 0.3 | ||||||||||||||||||||||||||||||||||
Goodwill and other impairments | — | — | 6.8 | — | ||||||||||||||||||||||||||||||||||
Income (loss) from operations | 2.9 | (8.8) | (7.1) | (5.1) | ||||||||||||||||||||||||||||||||||
Interest expense | (2.8) | (3.5) | (3.0) | (3.4) | ||||||||||||||||||||||||||||||||||
Mark to market (loss) gain on interest rate derivatives | (0.1) | 0.2 | (0.8) | 0.1 | ||||||||||||||||||||||||||||||||||
Loss before income taxes and equity in losses | — | (12.1) | (11.0) | (8.4) | ||||||||||||||||||||||||||||||||||
Income tax (provision) benefit | (2.0) | 4.1 | 0.2 | 2.8 | ||||||||||||||||||||||||||||||||||
Equity in losses, net of taxes | (0.6) | — | (0.1) | (0.1) | ||||||||||||||||||||||||||||||||||
Net loss | (2.6) | % | (8.0) | % | (10.9) | % | (5.7) | % | ||||||||||||||||||||||||||||||
2019
2019.
2019.
bakeware products.
sales due to higher customer demand in online channels.
2019.
Gross margin for the International segment was $7.3$49.8 million, or 37.6%, for the three months ended June 30, 2019,2020, as compared to $6.6$36.7 million, or 33.4%29.8%, for the corresponding period in 2018.2019. Gross margin in the 2019 period reflects an $8.5 million charge for the SKU rationalization initiative. Excluding the SKU rationalization the gross margin would have been 36.7%. The increase in gross margin, excluding the SKU rationalization change, was primarily attributabledue to changes in product mix.
demand and store closures due to COVID-19.
2019.
volume.
respectively. The increase was primarily attributed to higher labor costs associated with increased e-commerce channel sales.
2019.
Selling, general and administrative expensesa lower interest rate environment.
Unallocated corporate expenses for the three months ended June 30, 20192019. The decrease was primarily driven by mark to market fair value fluctuations on the Company's interest rate derivatives. These derivatives were $5.0 million,entered into for purposes of locking-in a fixed interest rate on the Company's variable interest rate debt. The current period loss was caused by lower interest rates as compared to $5.1 million for the corresponding period in 2018. Lower employee related and acquisition expenses were partially offset by higher professional fees.
Interest expense
Interest expense was $4.7 million for both the three months ended June 30, 2019 and2019. The intent of the corresponding period in 2018. This reflectsCompany is to hold these derivative contracts until their maturity. Therefore, the benefit of lower debt balances offset by higher interest rates, and a benefit from mark to market changes from interest rate swaps not designated as hedges.
Company expects that this loss will reverse over time.
Income
losses
three months ended June 30, 2020, the Company recognized a loss of $0.2 million, relating to cumulative translation foreign currency losses that were recognized to earnings upon the dissolution of Lifetime Brands Do Brasil Participacoes Ltda., a 100% owned foreign subsidiary. The foreign currency translation losses related to the notes receivable due to the company from the 2016 sale of its equity interest in GS International S/A.
2019
Net2019. The decrease in sales, for the U.S. segment for the six months ended June 30, 2019 were $250.1 million, an increase of $25.2 million, or 11.2%, as comparedand sales in constant currency, was driven by several factors including lower sales to net sales of $224.9 million for the corresponding period in 2018.
Net sales for the U.S. segment’s Kitchenware product category were $134.9 million for the six months ended June 30, 2019, an increase of $9.4 million, or 7.5%, as comparedindependent retailers resulting from lower demand and store closures due to $125.5 million for the corresponding period in 2018. The increase was primarily attributable to the inclusion of Filament for a full six months in 2019, which added $11.3 million of net sales. This wasCOVID-19, offset by lowerincreased e-commerce sales for cutlery, bakeware, and pantryware. The reductiondue to higher customer demand in sales of these products were partially offset by increases in tools and gadgets product sales. In addition, volume declines for certain brick and mortar retailers were partially offset by higher e-commerce sales.
Net sales for the U.S. segment’s Tableware product category were $55.2 million for the six months ended June 30, 2019, a decrease of $5.7 million, or 9.4%, as compared to $60.9 million for the corresponding period in 2018. The decrease was primarily attributable to certain retailer programs, including close-outs, not repeating in 2019. In addition, volume declines for certain brick and mortar retailers were partially offset by higher e-commerce sales.
Net sales for the U.S. segment’s Home Solutions product category were $60.0 million for the six months ended June 30, 2019, an increase of $21.5 million, or 55.8%, as compared to $38.5 million for the corresponding period in 2018. The increase was primarily attributable to the inclusion of Filament for a full six months in 2019, which added $16.9 million of net sales. In addition, hydration products volume increased in the 2019 period.
Net sales for the International segment were $42.3 million for the six months ended June 30, 2019, an increase of $0.4 million, or 1.0%, as compared to net sales of $41.9 million for the corresponding period in 2018. In constant currency, which excludes the impact of foreign exchange fluctuations, net sales increased $2.9 million, or 7.4%, as compared to consolidated net sales in the corresponding period in 2018. The International segment increase reflects an increase in sales from the e-commerce retailer channel.
online channels.
2019.
- 34 -
Gross margin for the International segment was $15.3$8.0 million, or 36.2%23.9%, for the six months ended June 30, 2019,2020, as compared to $14.3$15.3 million, or 34.2%36.2%, for the corresponding period in 2018.2019. The increasedecrease in gross margin ispercentage was primarily attributabledue to the de-emphasisadditional allowances to brick-and-mortar customers, higher inventory reserves and a decrease in sales against a period over period comparable amount of lower margin private label tableware product lines.
fixed inventoriable costs.
2019.
synergy savings as well as the leverage benefit of fixed costs on higher sales volume.
temporary labor inefficiencies associated with setting up the new U.K. warehouse but not directly attributable to relocation costs.
2019.
COVID-19 pandemic, as well as lower selling and marketing expenses, offset by higher estimates for bad debt expense related to the economic uncertainties caused by the COVID-19 pandemic.
the economic uncertainties caused by the COVID-19 pandemic.
to the U.S. reporting unit. The impairment charge resulted from, among other factors, more conservative estimated future cash flows in light of the uncertain market conditions arising from the COVID-19 pandemic.
- 35 -
Income tax (provision) benefit
losses
2020, the Company recognized a loss of $0.2 million, relating to cumulative translation foreign currency losses that were recognized to earnings upon the dissolution of Lifetime Brands Do Brasil Participacoes Ltda., a 100% owned foreign subsidiary. The foreign currency translation losses related to the notes receivable due to the company from the 2016 sale of its equity interest in GS International S/A.
The
As a result of the COVID-19 pandemic, there is the potential for reduced demand for the Company's products and limited distribution facility capacity. Consequently, the Company may not be able to generate cash from operations at the levels historically provided while operating under pandemic conditions.
2020.
cash flows from operations are sufficient to fund the Company’s operations for the next twelve months. However, if circumstances were to adversely change, the Company may seek alternative sources of liquidity including debt and/or equity financing. However, there can be no assurance that any such alternative sources would be available or sufficient.
- 36 -
One or more tranches of additional term loans (the “Incremental Facilities”) may be added under the Term Loan if certain conditions are met. The Incremental Facilities may not exceed the sum of (i) $50.0 million plus (ii) an unlimited amount so long as, in the case of (ii) only, the Company’s secured net leverage ratio, as defined in and computed pursuant to the Term Loan, is no greater than 3.75 to 1.00, subject to certain limitations and for the period defined pursuant to the Term Loan.
At
June 30, 2020 | December 31, 2019 | |||||||||||||
Maximum aggregate principal allowed | $ | 150,000 | $ | 150,000 | ||||||||||
Outstanding borrowings under the ABL Agreement | (27,383) | (32,822) | ||||||||||||
Standby letters of credit | (2,677) | (2,288) | ||||||||||||
Total availability under the ABL Agreement | $ | 119,940 | $ | 114,890 | ||||||||||
As of June 30, 2019, $271.6 million was outstanding under the Term Loan. At June 30, 2019, unamortized debt issuance costs of $1.5 million
Loan facility included in the condensed consolidated balance sheets were as follows (in thousands):
June 30, 2020 | December 31, 2019 | |||||||||||||||||||
Current portion of Term Loan facility: | ||||||||||||||||||||
Term Loan facility | $ | — | $ | 2,750 | ||||||||||||||||
Estimated Excess Cash Flow payment | 15,000 | 7,145 | ||||||||||||||||||
Estimated unamortized debt issuance costs | (1,473) | (1,482) | ||||||||||||||||||
Total Current portion of Term Loan facility | $ | 13,527 | $ | 8,413 | ||||||||||||||||
Non-current portion of Term Loan facility: | ||||||||||||||||||||
Term Loan facility payment, net of current portion | $ | 247,605 | $ | 260,293 | ||||||||||||||||
Estimated unamortized debt issuance costs | (5,268) | (6,012) | ||||||||||||||||||
Total Non-current portion of Term Loan facility | $ | 242,337 | $ | 254,281 | ||||||||||||||||
Agreement.
- 37 -
The Company was in compliance with the covenants of the Debt Agreements at June 30, 2019.
2020.
Consolidated adjusted EBITDA for the Four Quarters Ended June 30, 2019 | ||||
(in thousands) | ||||
Three months ended June 30, 2019 | $ | 4,306 | ||
Three months ended March 31, 2019 | 6,127 | |||
Three months ended December 31, 2018 | 30,876 | |||
Three months ended September 30, 2018 | 22,722 | |||
Pro forma projected synergies | 4,763 | |||
|
| |||
Consolidated adjusted EBITDA, before limitation | 68,794 | |||
Permitted non-recurring charge limitation | (8,008 | ) | ||
|
| |||
Consolidated adjusted EBITDA | $ | 60,786 | ||
|
|
Consolidated adjusted EBITDA for the Four Quarters Ended June 30, 2020 | |||||
(in thousands) | |||||
Three months ended June 30, 2020 | $ | 12,388 | |||
Three months ended March 31, 2020 | 3,252 | ||||
Three months ended December 31, 2019 | 27,873 | ||||
Three months ended September 30, 2019 | 25,758 | ||||
Consolidated adjusted EBITDA | $ | 69,271 | |||
Twelve | ||||||||||||||||||||
Three Months Ended | Months Ended June 30, 2019 | |||||||||||||||||||
September 30, 2018 | December 31, 2018 | March 31, 2019 | June 30, 2019 | |||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net income (loss) as reported | $ | 5,948 | $ | 9,987 | $ | (4,867 | ) | $ | (11,513 | ) | $ | (445 | ) | |||||||
Undistributed equity (earnings) losses, net | (185 | ) | (128 | ) | 116 | 69 | (128 | ) | ||||||||||||
Income tax provision (benefit) | 906 | 7,558 | (2,458 | ) | (5,795 | ) | 211 | |||||||||||||
Interest expense | 5,634 | 5,591 | 4,922 | 4,694 | 20,841 | |||||||||||||||
Depreciation and amortization | 6,076 | 6,522 | 6,359 | 6,290 | 25,247 | |||||||||||||||
Impairment of goodwill | 2,205 | — | — | — | 2,205 | |||||||||||||||
Stock compensation expense | 1,268 | 1,108 | 907 | 1,193 | 4,476 | |||||||||||||||
Contingent consideration fair value adjustment | — | (1,774 | ) | — | — | (1,774 | ) | |||||||||||||
Unrealized gain on foreign currency contracts | (190 | ) | (33 | ) | — | — | (223 | ) | ||||||||||||
Other permitted non-cash charges(1) | 307 | — | — | — | 307 | |||||||||||||||
SKU Rationalization | — | — | — | 8,500 | 8,500 | |||||||||||||||
Acquisition related expenses | 43 | 523 | 151 | — | 717 | |||||||||||||||
Restructuring expenses(2) | 552 | 971 | 608 | 173 | 2,304 | |||||||||||||||
Integration charges(2) | 103 | 433 | 174 | 695 | 1,405 | |||||||||||||||
Warehouse relocation(2) | 55 | 118 | 215 | — | 388 | |||||||||||||||
Projected synergies(3) | — | — | — | — | 4,763 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Consolidated adjusted EBITDA, before limitation | $ | 22,722 | $ | 30,876 | $ | 6,127 | $ | 4,306 | $ | 68,794 | ||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Permitted non-recurring charge limitation(2) | (8,008 | ) | ||||||||||||||||||
|
| |||||||||||||||||||
Consolidated adjusted EBITDA | $ | 60,786 | ||||||||||||||||||
|
|
|
|
|
- 39 -
Three Months Ended Twelve Months Ended June 30, 2020 September 30, 2019 December 31,
2019March 31,
2020June 30,
2020(in thousands) Net loss as reported $ (13,519) $ (14,516) $ (28,164) $ (3,977) $ (60,176) Undistributed equity losses (earnings), net 210 (738) (339) 848 (19) Income tax provision (benefit) 15,066 (5,704) (3,729) 3,031 8,664 Interest expense 5,172 5,590 4,736 4,230 19,728 Mark to market loss on interest rate derivatives — — 2,251 164 2,415 Depreciation and amortization 6,122 6,344 6,234 6,061 24,761 Goodwill and other impairments 9,748 33,242 20,100 — 63,090 Stock compensation expense 1,505 1,436 1,326 1,420 5,687 Acquisition and divestment related expenses — 55 47 55 157 Restructuring expenses 338 316 — 253 907 Integration charges 235 159 — — 394 Warehouse relocation 881 1,689 790 303 3,663 Consolidated adjusted EBITDA $ 25,758 $ 27,873 $ 3,252 $ 12,388 $ 69,271
2020 and June 30, 2019. At June 30, 2020 and 2019, $20.8 million and $14.8 million , respectively, of receivables sold were outstanding and due to HSBC from customers.
hedges.
deferral strategies utilized in response to the COVID-19 pandemic.
- 40 -
Financing activities
20182019 Annual Report on Form 10-K.
(a)Evaluation of Disclosure Controls and Procedures2019,2020, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports filed by it under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer of the Company, as appropriate to allow timely decisions regarding required disclosure.(b)Changes in Internal ControlsThe Company implemented the new lease standard under ASC 842 as of January 1, 2019. In connection with these changes, the Company implemented certain modifications to internal controls over financial reporting, including the documentation of the policy regarding the new accounting for leases, implementation of processes to address various judgments and assessments necessary during the life of a lease, as well as implementing new controls to capture the expanded disclosures required under ASC 842.Except as described above, there have been other changes in the Company’s internal controls over financial reporting that occurred during the Company’s most recent fiscal quarter ended June 30, 2019 that havehas materially affected, or areis reasonably likely to materially affect, the Company’s internal controlcontrols over financial reporting.- 41 -
List due to contamination present in the local drinking water supply. WSPR never used the primary contaminant of concern and did not take up its tenancy at the Site until after the EPA had discovered the contamination in the local water supply. The EPA has also issued notices of potential liability to a number of other entities affiliated with the Site, which used the contaminants of concern.List. capital cost for its selected remedy is $7.3 million. The EPA also designated adamagecontamination at and from the Site and to determine the nature of the remedial action needed.needed to address the contamination. The EPA has requested access to the property occupied by WSPR to install monitoring wells and to undertake groundwater sampling as part of this expanded investigation. WSPR has consented to the EPA’s access request, subject toprovided that the EPA receives PRIDCO’s consent, as the property owner.On July 19, 2019, WSPR’s counsel received an email from the US Department of Justice attorney representing thewith respect to the Site providing, as a courtesy, information relating to a public meeting to be held on July 30, 2019, in San German concerning the EPA’sreleased its proposed plan for a second operable unit. The EPA is accepting public comments on the proposed remedy, which is estimated to cost $17.3 million and includesunit in situ treatment and monitored nature attenuation of groundwater.July 2019. The public comment period lasts for the proposed plan ended on September 10, 2019. On September 30, days2019, the EPA issued the ROD for operable unit 2 (“OU-2”), electing to implement its preferred remedy which consists of in-situ treatment of groundwater and ends on August 11, 2019. However, any membera monitored natural attenuation (MNA) program including monitoring of the public can request a mandatory 30 day extension.WSPR never used the primary constituents of concern and did not take up its tenancyplume fringe at the Site until after EPA had discovered the damage to the local water supply. EPA has also issued notices of potential liability to numerous other entities affiliated with the Site, which used the constituents of concern. Site. The EPA’s estimated total net present worth cost for its selected remedy is $17.3 million.definitive claims because of property damage asserted against the Company and adverse determinations related to this matter, it is possible that the ultimate liability resulting from this matter and the impact on the Company’s results of operations could be material.suchof this litigation, individually or collectively, would have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
The following risk factor should be read in conjunction with the risk factors described in the 2019 Annual Report on Form 10-K.There have been no material changesCompany’s risk factors from those disclosed in the Company’s 20182019 Annual Report on Form 10-K.4246 -
and Use of Proceeds
Period | Total number of shares purchased(1) | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs(2) | Maximum approximate dollar value of shares that may yet be purchased under the plans or programs subsequent to end of period(2) | ||||||||||||
April 1 - April 30, 2019 | 2,972 | $ | 9.33 | — | $ | 6,771,467 | ||||||||||
May 1 - May 31, 2019 | 255 | 9.52 | — | 6,771,467 | ||||||||||||
June 1 - June 30, 2019 | 30,021 | 8.73 | — | 6,771,467 |
|
|
Period | Total number of shares purchased(1) | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs(2) | Maximum approximate dollar value of shares that may yet be purchased under the plans or programs subsequent to end of period (2) | |||||||||||||||||||||||||
May 1 - May 31, 2020 | 249 | $ | 4.84 | — | $ | 6,771,467 | |||||||||||||||||||||||
June 1 - June 30, 2020 | 26,348 | 7.07 | — | 6,771,467 | |||||||||||||||||||||||||
Exhibit No. 10.1 Exhibit No.31.110.1Amended and Restated Employment Agreement dated June 27, 2019 between Lifetime Brands, Inc. and Jeffrey Siegel (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 28, 2019)31.131.2 31.232.1 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 The cover page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL and contained in Exhibit 101 4448 -
Lifetime Brands, Inc. | ||||||||
/s/ Robert B. Kay | August 6, 2020 | |||||||
Robert B. Kay | ||||||||
Chief Executive Officer and Director | ||||||||
(Principal Executive Officer) | ||||||||
| ||||||||
/s/ Laurence Winoker | August 6, 2020 | |||||||
Laurence Winoker | ||||||||
| ||||||||
Senior Vice President – Finance, Treasurer and Chief Financial Officer | ||||||||
(Principal Financial and Accounting Officer) |