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Lifetime Brands, Inc. Reports Fourth Quarter and Full Year 2019 Financial Results

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Declares Regular Quarterly Dividend

GARDEN CITY, N.Y., March 11, 2020 (GLOBE NEWSWIRE) -- Lifetime Brands, Inc. (LCUT), a leading global designer, developer and marketer of a broad range of branded consumer products used in the home, today reported its financial results for the quarter and full year ended December 31, 2019.

Robert Kay, Lifetime’s Chief Executive Officer, commented, “We are pleased that we continued to deliver growth in our core U.S. business, which led the Company to generate significant cash flow for the fourth quarter and full year 2019; however, despite those positive achievements, our performance this quarter fell short of our expectations driven by the operational issues in our European business in the third and fourth quarters. Our core U.S. business outperformed in the fourth quarter, as a result of strong performance in both brick and mortar retail and e-commerce, which continues to represent a meaningful growth driver for Lifetime. In addition, we continue to make progress on our product initiatives, including the ongoing ramp-up of our Mikasa® Hospitality line, and we remain committed to increasing the brand equity and trend of our best-in-class products and brands. Despite this momentum, operational challenges from our reorganized U.K. operations had an impact on shipments, which offset the Company’s overall results.”

Mr. Kay continued, “As we look ahead toward fiscal 2020, we are confident that we have the right plan in place to stabilize our international business, which we expect will enable us to continue advancing our strategy and ensuring that our business remains on track to capture the market opportunity and drive value for our shareholders. Specifically, as of January 2020, we believe we have addressed the operational issues in our European operations and are back to normal on-time deliveries. As we look forward to 2020, we are pleased with our first quarter results for which we have not seen any noticeable impact from the coronavirus outbreak.”

Fourth Quarter Financial Highlights:

Consolidated net sales for the three months ended December 31, 2019, were $226.9 million, representing a decrease of $1.4 million or 0.6% as compared to $228.3 million for the corresponding period in 2018. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales decreased $1.3 million or 0.5% in the fourth quarter of 2019 as compared to consolidated net sales in the corresponding period in 2018.

Gross margin was $83.9 million, or 37.0%, in 2019 as compared to $84.8 million, or 37.2%, for the corresponding period in 2018.

In the fourth quarter of 2019, the Company incurred a $33.2 million non-cash goodwill impairment charge related to the U.S. reporting unit. The goodwill impairment charge resulted from, among other factors, a sustained decline in the Company's market capitalization observed in the fourth quarter of 2019.

Loss from operations was $(15.5) million, as compared to income from operations of $22.9 million in the prior year's quarter. Income from operations, excluding the impact of certain non-cash charges, was $17.7 million in 2019, as compared to $21.1 million in the prior year's quarter. A table which reconciles this non-GAAP financial measure to (loss) income from operations, as reported, is included below.

Net loss was $(14.5) million, or $(0.70) per diluted share, in the quarter ended December 31, 2019, as compared to net income of $10.0 million, or $0.49 per diluted share, for the corresponding period in 2018.

Adjusted net income was $20.4 million, or $0.99 per diluted share, in the quarter ended December 31, 2019, as compared to adjusted net income of $11.2 million, or $0.55 per diluted share, for the corresponding period in 2018. A table which reconciles this non-GAAP financial measure to net loss, as reported, is included below.

Full Year Financial Highlights:

Consolidated net sales for the year ended December 31, 2019, were $734.9 million, an increase of $30.4 million, or 4.3%, as compared to consolidated net sales of $704.5 million for the corresponding period in 2018. In constant currency, which excludes the impact of foreign exchange fluctuations, consolidated net sales increased $34.0 million, or 4.9%, as compared to consolidated net sales in the corresponding period in 2018.

Gross margin was $255.2 million, or 34.7%, compared to $255.8 million, or 36.3%, for the corresponding period in 2018. Excluding the SKU rationalization of $8.5 million, which was recorded in the second quarter of 2019, and the $1.5 million non-recurring inventory step-up adjustment related to the acquisition of Filament, which was recorded in 2018, gross margin would have been 35.9% and 36.5% in the 2019 and 2018 periods, respectively.

Loss from operations was $(23.4) million, as compared to income from operations of $18.6 million in the prior year. Income from operations, excluding the impact of certain non-cash charges, was $28.1 million, as compared to $20.5 million for the corresponding period in 2018.

Net loss was $(44.4) million, or $(2.16) per diluted share, in the year ended December 31, 2019, as compared to net loss of $(1.7) million, or $(0.09) per diluted share, in the corresponding period in 2018.

Adjusted net income was $9.2 million, or $0.45 per diluted share, as compared to $5.5 million, or $0.28 per diluted share, in the corresponding period in 2018.

Consolidated adjusted EBITDA was $64.1 million in the year ended December 31, 2019. After giving effect to the non-recurring charge limitation permitted under our debt agreements, consolidated adjusted EBITDA was $55.1 million. A table which reconciles this non-GAAP financial measure to net loss, as reported, is included below.

Dividend

On Tuesday, March 10, 2020, the Board of Directors declared a quarterly dividend of $0.0425 per share payable on May 15, 2020 to shareholders of record on May 1, 2020.

Conference Call

The Company has scheduled a conference call for Wednesday, March 11, 2020 at 11:00 a.m. The dial-in number for the conference call is (866) 610-1072 (U.S.) or (973) 935-2840 (International), Conference ID: 8462839.

A live webcast of the conference call will be accessible through:
https://event.on24.com/wcc/r/2212549/2E4F194E6225D21316BDD837D8DE1974.

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

Non-GAAP Financial Measures

This earnings release contains non-GAAP financial measures, including consolidated net sales in constant currency, income from operations excluding certain non-cash charges, adjusted net income, adjusted diluted income per common share, gross margin (excluding non-recurring charges) and consolidated adjusted EBITDA. A non-GAAP financial measure is a numerical measure of a company’s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets, or statements of cash flows of a company; or, includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. As required by SEC rules, the Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. These non-GAAP financial measures are provided because management of the Company uses these financial measures in evaluating the Company’s on-going financial results and trends, and management believes that exclusion of certain items allows for more accurate comparison of the Company’s operating performance by investors and analysts. Management uses these non-GAAP financial measures as indicators of business performance. These non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, GAAP financial measures of performance.

Forward-Looking Statements
In this press release, the use of the words “believe,” “could,” “expect,” “may,” “positioned,” “project,” “projected,” “should,” “will,” “would” or similar expressions is intended to identify forward-looking statements. Such statements include all statements regarding the growth of the Company, our financial outlook, our initiatives to create value, our efforts to mitigate geopolitical factors and tariffs, our efforts to stabilize our international business, our current and projected financial and operating performance, results, and profitability and all guidance related thereto, including forecasted exchange rates and effective tax rates, as well as our future plans and intentions regarding the Company and its consolidated subsidiaries. Such statements represent the Company’s current judgments, estimates, and assumptions about possible future events. The Company believes these judgments, estimates, and assumptions are reasonable, but these statements are not guarantees of any events or financial or operational results, and actual results may differ materially due to a variety of important factors. Such factors might include, among others, the Company’s ability to comply with the requirements of its credit agreements; the availability of funding under such credit agreements; the Company’s ability to maintain adequate liquidity and financing sources and an appropriate level of debt; the possibility of impairments to the Company’s goodwill; the possibility of impairments to the Company’s intangible assets; changes in U.S. or foreign trade or tax law and policy; the impact of tariffs on imported goods and materials; changes in general economic conditions which could affect customer payment practices or consumer spending; the impact of changes in general economic conditions on the Company’s customers; customer ordering behavior; the performance of our newer products; the impact of our SKU rationalization initiative, expenses and other challenges relating to the integration of the Filament Brands business and future acquisitions; warehouse consolidation efforts performed by the business; the ongoing reorganization of our U.K. operations; changes in demand for the Company’s products; changes in the Company’s management team; the significant influence of the Company’s largest stockholder; fluctuations in foreign exchange rates; changes in U.S. trade policy or the trade policies of nations in which we or our suppliers do business; uncertainty regarding the U.K.’s exit from the European Union (the "Brexit"); shortages of and price volatility for certain commodities; global health epidemics, such as the coronavirus outbreak, and significant changes in the competitive environment and the effect of competition on the Company’s markets, including on the Company’s pricing policies, financing sources and ability to maintain an appropriate level of debt. The Company undertakes no obligation to update these forward-looking statements other than as required by law.

Lifetime Brands, Inc.

Lifetime Brands is a leading global designer, developer and marketer of a broad range of branded consumer products used in the home. The Company markets its products under well-known kitchenware brands, including Farberware®, KitchenAid®, Sabatier®, Amco Houseworks®, Chef’n® Chicago™ Metallic, Copco®, Fred® & Friends, Houdini™, KitchenCraft®, Kamenstein®, Kizmos™, La Cafetière®, MasterClass®, Misto®, Mossy Oak®, Swing-A-Way®, Taylor® Kitchen, Rabbit® and Vasconia®; respected tableware and giftware brands, including Mikasa®, Pfaltzgraff®, Fitz and Floyd®, Creative Tops®, Empire Silver™, Gorham®, International® Silver, Kirk Stieff®, Towle® Silversmiths, Wallace®, Wilton Armetale®, V&A® and Royal Botanic Gardens Kew®; and valued home solutions brands, including BUILT NY®, Taylor® Bath, Taylor® Weather and Planet Box®. The Company also provides exclusive private label products to leading retailers worldwide.

The Company’s corporate website is www.lifetimebrands.com.

Contacts:

Lifetime Brands, Inc.
Laurence Winoker, Chief Financial Officer
516-203-3590
investor.relations@lifetimebrands.com

or

Joele Frank, Wilkinson Brimmer Katcher
Ed Trissel / Andrew Squire / Sophie Throsby
212-355-4449


LIFETIME BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands - except per share data)

Three Months Ended
December 31,

Year Ended
December 31,

2019

2018

2019

2018

Net sales

$

226,938

$

228,274

$

734,902

$

704,542

Cost of sales

143,028

143,467

479,711

448,785

Gross margin

83,910

84,807

255,191

255,757

Distribution expenses

22,605

20,340

72,543

69,716

Selling, general and administrative expenses

43,239

40,603

161,618

162,933

Impairment of goodwill

33,242

42,990

2,205

Restructuring expenses

316

971

1,435

2,324

(Loss) income from operations

(15,492

)

22,893

(23,395

)

18,579

Interest expense

(5,590

)

(5,591

)

(20,378

)

(18,004

)

Loss on early retirement of debt

(66

)

(Loss) income before income taxes and equity in earnings

(21,082

)

17,302

(43,773

)

509

Income tax benefit (provision)

5,704

(7,558

)

(1,109

)

(2,889

)

Equity in earnings, net of taxes

862

243

467

660

NET (LOSS) INCOME

$

(14,516

)

$

9,987

$

(44,415

)

$

(1,720

)

Weighted-average shares outstanding—basic

20,660

20,376

20,597

19,452

BASIC (LOSS) INCOME PER COMMON SHARE

(0.70

)

$

0.49

(2.16

)

$

(0.09

)

Weighted-average shares outstanding—diluted

20,660

20,454

20,597

19,452

DILUTED (LOSS) INCOME PER COMMON SHARE

(0.70

)

$

0.49

(2.16

)

$

(0.09

)


LIFETIME BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands - except share data)

December 31,

2019

2018

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

11,370

$

7,647

Accounts receivable, less allowances of $11,591 at December 31, 2019 and $7,855 at December 31, 2018

128,639

125,292

Inventory

173,427

173,601

Prepaid expenses and other current assets

14,140

10,822

Income taxes receivable

1,577

1,442

TOTAL CURRENT ASSETS

329,153

318,804

PROPERTY AND EQUIPMENT, net

28,168

25,762

OPERATING LEASE RIGHT-OF-USE ASSETS

106,871

INVESTMENTS

21,289

22,582

INTANGIBLE ASSETS, net

280,471

338,847

OTHER ASSETS

4,071

1,844

DEFERRED INCOME TAXES

733

TOTAL ASSETS

$

770,023

$

708,572

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Current maturity of term loan

$

8,413

$

1,253

Accounts payable

36,173

38,167

Accrued expenses

52,060

45,456

Current portion of operating lease liabilities

10,661

TOTAL CURRENT LIABILITIES

107,307

84,876

OTHER LONG-TERM LIABILITIES

12,214

23,339

DEFERRED INCOME TAXES

13,685

15,141

OPERATING LEASE LIABILITIES

112,180

INCOME TAXES PAYABLE, LONG-TERM

1,217

949

REVOLVING CREDIT FACILITY

32,822

42,080

TERM LOAN

254,281

262,694

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, $0.01 par value, shares authorized: 50,000,000 at December 31, 2019 and 2018; shares issued and outstanding: 21,255,660 at December 31, 2019 and 20,764,143 at December 31, 2018

213

208

Paid-in capital

263,386

258,637

Retained earnings

7,173

55,264

Accumulated other comprehensive loss

(34,455

)

(34,616

)

TOTAL STOCKHOLDERS’ EQUITY

236,317

279,493

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

770,023

$

708,572


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

Year ended December 31,

2019

2018

2017

OPERATING ACTIVITIES

Net (loss) income

$

(44,415

)

$

(1,720

)

$

2,154

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization

25,115

23,329

14,189

Impairment of goodwill

42,990

2,205

Amortization of financing costs

1,748

1,543

519

Deferred rent

57

(642

)

Non-cash lease expense

1,047

Deferred income taxes

(1,073

)

2,086

1,030

Stock compensation expense

5,041

4,135

3,390

Undistributed equity earnings

(343

)

(545

)

(379

)

Loss on early retirement of debt

66

110

SKU Rationalization

8,500

Contingent consideration fair value adjustment

(1,774

)

Changes in operating assets and liabilities (excluding the effects of business acquisitions)

Accounts receivable

(2,259

)

8,020

1,481

Inventory

(7,455

)

(13,819

)

10,818

Prepaid expenses, other current assets and other assets

(4,257

)

540

(951

)

Accounts payable, accrued expenses and other liabilities

5,108

(3,153

)

(9,778

)

Income taxes receivable

(135

)

(1,442

)

Income taxes payable

260

(353

)

(4,935

)

NET CASH PROVIDED BY OPERATING ACTIVITIES

29,872

19,175

17,006

INVESTING ACTIVITIES

Purchases of property and equipment

(9,169

)

(7,902

)

(6,311

)

Filament acquisition, net of cash acquired

(216,527

)

Fitz acquisition, net of cash acquired

(9,072

)

Net proceeds from sale of property

249

15

NET CASH USED IN INVESTING ACTIVITIES

(9,169

)

(224,180

)

(15,368

)

FINANCING ACTIVITIES

Proceeds from revolving credit facility

345,494

268,912

237,658

Repayments of revolving credit facility

(355,730

)

(320,767

)

(229,696

)

Proceeds from Term Loan

275,000

Repayments of Term Loan

(2,750

)

(2,063

)

Repayments of Credit Agreement term loan

(9,500

)

Proceeds from short term loan

216

187

Payments from short term loan

(278

)

(239

)

Payment of financing costs

(11,171

)

(31

)

Payment of equity issuance costs

(936

)

Cash dividends paid

(3,571

)

(3,273

)

(2,475

)

Payment of capital lease obligations

(92

)

(77

)

(94

)

Proceeds from the exercise of stock options

132

286

2,537

Payments of tax withholding for stock based compensation

(399

)

(561

)

(644

)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

(16,916

)

205,288

(2,297

)

Effect of foreign exchange on cash

(64

)

(236

)

376

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

3,723

47

(283

)

Cash and cash equivalents at beginning of year

7,647

7,600

7,883

CASH AND CASH EQUIVALENTS AT END OF YEAR

$

11,370

$

7,647

$

7,600


LIFETIME BRANDS, INC.
Supplemental Information
(in thousands)

Reconciliation of GAAP to Non-GAAP Operating Results

Consolidated adjusted EBITDA for the year ended December 31, 2019:

Three Months Ended

Year Ended

March 31, 2019

June 30, 2019

September 30, 2019

December 31, 2019

December 31, 2019

(in thousands)

Net loss as reported

$

(4,867

)

$

(11,513

)

(13,519

)

$

(14,516

)

$

(44,415

)

Subtract out:

Undistributed equity losses (earnings), net

116

69

210

(738

)

(343

)

Add back:

Income tax (benefit) provision

(2,458

)

(5,795

)

15,066

(5,704

)

1,109

Interest expense

4,922

4,694

5,172

5,590

20,378

Depreciation and amortization

6,359

6,290

6,122

6,344

25,115

Impairment of goodwill

9,748

33,242

42,990

Stock compensation expense

907

1,193

1,505

1,436

5,041

SKU Rationalization (1)

8,500

8,500

Acquisition and divestment related expenses

151

55

206

Restructuring expenses (1)

608

173

338

316

1,435

Integration charges (1)

174

695

235

159

1,263

Warehouse relocation (1)

215

881

1,689

2,785

Consolidated adjusted EBITDA, before limitation

$

6,127

$

4,306

$

25,758

$

27,873

$

64,064

Permitted non-recurring charge limitation (1)

(8,929

)

Consolidated adjusted EBITDA

55,135


(1)

Permitted non-recurring charges include restructuring expenses, integration charges, warehouse relocation costs, SKU Rationalization. These are permitted exclusions from the Company’s consolidated adjusted EBITDA, subject to limitations, pursuant to the Company’s Debt Agreements.


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


LIFETIME BRANDS, INC.
Supplemental Information
(in thousands - except per share data)

Reconciliation of GAAP to Non-GAAP Operating Results (continued)

Adjusted net income and adjusted diluted income per common share (in thousands - except per share data):

Three Months Ended December 31,

Year Ended December 31,

2019

2018

2019

2018

Net (loss) income as reported

$

(14,516

)

$

9,987

$

(44,415

)

$

(1,720

)

Adjustments:

Acquisition and divestment related expenses

55

523

206

1,766

Restructuring expenses

316

971

1,435

2,324

Integration charges

159

433

1,263

681

Warehouse relocation

1,689

118

2,785

2,725

Loss on early retirement of debt

66

Other permitted non-cash charges

1,510

Unrealized gain on derivative instruments

(402

)

(33

)

(402

)

(1,942

)

Impairment of goodwill

33,242

42,990

2,205

Contingent consideration fair value adjustment

(1,774

)

(1,774

)

Deferred tax for foreign currency translation for Grupo Vasconia

275

SKU Rationalization

8,500

Transition tax on non-U.S. subsidiaries' earnings

675

675

Income tax effect on adjustments

(156

)

69

(3,183

)

(1,009

)

Adjusted net income

$

20,387

$

11,243

$

9,179

$

5,507

Adjusted diluted income per share

$

0.99

$

0.55

$

0.45

$

0.28

Adjusted net income and adjusted diluted income per common share in the three months ended and year ended December 31, 2019 excludes acquisition and divestment related expenses restructuring expenses, integration charges, warehouse relocation expenses, unrealized gains on derivative instruments, goodwill impairment and SKU rationalization expenses. The income tax effect on adjustments reflects the statutory tax rates applied on the adjustments.

Adjusted net income and adjusted diluted income per common share in the three months ended and year ended December 31, 2018 excludes acquisition and divestment related expenses, restructuring expenses, integration charges, warehouse relocation expenses, loss on early retirement of debt, other permitted non-cash charges, unrealized gain on foreign currency contracts, impairment of goodwill and the deferred tax expense related to our equity earnings of Vasconia due to recording the tax benefit of cumulative translation gains through other comprehensive (loss) income. The income tax effect on adjustments reflects the statutory tax rates applied on the adjustments.


LIFETIME BRANDS, INC.
Supplemental Information
(in thousands)

Reconciliation of GAAP to Non-GAAP Operating Results (continued)

Constant Currency:

As Reported
Three Months Ended
December 31,

Constant Currency (1)
Three Months Ended
December 31,

Year-Over-Year
Increase (Decrease)

Net sales

2019

2018

Increase
(Decrease)

2019

2018

Increase
(Decrease)

Currency
Impact

Excluding
Currency

Including
Currency

Currency
Impact

U.S.

$

198,842

$

198,158

$

684

$

198,842

$

198,153

$

689

5

0.3

%

0.3

%

0.0

%

International

28,096

30,116

(2,020

)

28,096

30,035

(1,939

)

81

(6.5

)

%

(6.7

)

%

(0.2

)

%

Total net sales

$

226,938

$

228,274

$

(1,336

)

$

226,938

$

228,188

$

(1,250

)

$

86

(0.5

)

%

(0.6

)

%

(0.1

)

%


As Reported
Year Ended
December 31,

Constant Currency (1)
Year Ended
December 31,

Year-Over-Year
Increase (Decrease)

Net sales

2019

2018

Increase
(Decrease)

2019

2018

Increase
(Decrease)

Currency
Impact

Excluding
Currency

Including
Currency

Currency
Impact

U.S.

$

644,171

$

609,114

$

35,057

$

644,171

$

609,092

$

35,079

22

5.8

%

5.8

%

0.0

%

International

90,731

95,428

(4,697

)

90,731

91,805

(1,074

)

3,622

(1.2

)

%

(4.9

)

%

(3.7

)

%

Total net sales

$

734,902

$

704,542

$

30,360

$

734,902

$

700,897

$

34,005

$

3,644

4.9

%

4.3

%

(0.6

)

%


(1)

“Constant Currency” is determined by applying the 2019 average exchange rates to the prior year local currency sales amounts, with the difference between the change in “As Reported” net sales and “Constant Currency” net sales, reported in the table as “Currency Impact”. Constant currency sales growth is intended to exclude the impact of fluctuations in foreign currency exchange rates.


LIFETIME BRANDS, INC.
Supplemental Information
(in thousands)

Reconciliation of GAAP to Non-GAAP Operating Results (continued)

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

Three Months Ended December 31,

Year Ended December 31,

2019

2018

2019

2018

(Loss) income from operations

$

(15,492

)

$

22,893

$

(23,395

)

$

18,579

Excluded non-cash charges:

Impairment of goodwill

33,242

42,990

2,205

SKU Rationalization

8,500

Inventory step-up adjustment

1,510

Contingent consideration fair value adjustment

$

$

(1,774

)

$

$

(1,774

)

Total excluded non-cash charges

$

33,242

$

(1,774

)

$

51,490

$

1,941

Income from operations excluding certain non-cash charges

$

17,750

$

21,119

$

28,095

$

20,520