Lifetime Brands (LCUT) Q4 2009 earnings summary

Executive summary

• FY09 returned to profitability: net sales were $415.0M, down 14.9% YoY, and net income was $2.7M versus a $47.8M loss in FY08.

• Operating income was $15.6M versus an operating loss of $51.9M; FY08 included $29.4M of non-cash goodwill and intangible impairment charges.

• Demand remained pressured by recession effects and retailer inventory reductions, while expense cuts, inventory reduction and stronger operating cash flow supported a substantial debt paydown.

Financial highlights

• FY09 sales were $415.0M versus $487.9M in FY08; net income was $2.7M versus a $47.8M loss, and diluted EPS was $0.22 versus a $3.99 loss.

• Cost of sales was 62.1% of sales versus 62.2% in FY08; distribution expense was 10.4% versus 11.8%, and SG&A was $95.6M, down 27.1%.

• Q4 net sales were $128.1M and net income $5.0M, versus $156.7M and a $36.8M net loss in Q4 2008; FY09 Q4 operating income was $9.9M.

• Operating cash flow rose to $64.0M from $6.9M, supported by improved working capital, lower inventory and receivables, and an income tax refund.

Outlook and guidance

• Plans called for more than 5,500 new or redesigned products in 2010, following more than 5,000 introductions in 2009.

• Planned 2010 capital expenditures were not expected to exceed $8.0M; restructuring was substantially complete, with no significant charges expected in the foreseeable future.

• A moderate recovery was underway, but sustained demand growth was expected to depend on employment improvement; deteriorating economic conditions could further pressure sales.