Lifetime Brands (LCUT) Q4 2005 earnings summary

Executive summary

• FY05 net sales rose 62.5% to $307.9M; excluding Pfaltzgraff and Salton, sales grew 24.4% to $235.7M. Net income increased 66% to $14.1M; diluted EPS rose 64% to $1.23.

• Growth reflected strong cutlery, kitchenware and bakeware sales, plus Pfaltzgraff and Salton acquisitions that expanded tabletop and direct-to-consumer operations.

Financial highlights

• Net sales $307.9M vs. $189.5M in 2004; income from operations $25.2M vs. $14.8M; net income $14.1M vs. $8.5M.

• Diluted EPS from continuing operations was $1.23 vs. $0.75; basic EPS was $1.25 vs. $0.77.

• Excluding $1.7M operating income from Pfaltzgraff and Salton, operating income was $23.5M, up 58%; operating margin was 10.0% vs. 7.8%.

• Cost of sales was 57.6% of sales vs. 58.9%; distribution expense was 10.7% vs. 12.1%, while SG&A was 23.5% vs. 21.3%.

Outlook and guidance

• Expected ~1,400 new or redesigned products in 2006, double the prior-year count; organic growth was expected to continue driving higher profits.

• Planned 2006 capital expenditures of $12.0M, including $4.0M for proposed headquarters and showroom expansion.

• Pfaltzgraff’s heavier second-half sales and profit mix was expected to lower first- and second-quarter 2006 earnings YoY.

• March 2006 Syratech acquisition agreement: ~$49.5M purchase price, comprising $37.0M cash and $12.5M stock, subject to working-capital adjustments.