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Related Issuers
Rating Action:

Moody's affirmed Lifetime Brands ratings including B2 CFR; outlook changed to stable

12 Nov 2020

New York, November 12, 2020 -- Moody's Investors Service, ("Moody's") affirmed Lifetime Brands, Inc.'s (Lifetime Brands) Corporate Family Rating (CFR) at B2, Probability of Default Rating (PDR) at B2-PD, and senior secured term loan rating at B3. At the same time Moody's changed the outlook to stable from negative, and upgraded the company's Speculative Grade Liquidity rating to SGL-2 from SGL-3.

"Today ratings and outlook actions reflect Lifetime Brands' strong operating performance year-to-date, resulting in meaningful improvement in financial leverage and free cash flow generation," said Oliver Alcantara, Moody's lead analyst for the company. "Our expectation for good consumer demand for the company's kitchenware and home goods to continue at least through the first half of 2021 because home meal consumption remains elevated during the coronavirus pandemic. Strong gains in e-commerce and the sequential recovery in the company's brick and mortar channel should support stable revenue and earnings next year following a strong fiscal 2020, which will support credit metrics remaining at around current levels." Added Alcantara.

Moody's affirmed the ratings because an uneven economic recovery, uncertainty created by the pandemic until there is a cure, or a pullback from elevated spending levels on kitchen and homewares experience in 2020 could weaken credit metrics. Lifetime Brands also has modest exposure to foodservice channels that continue to experience weaker volumes, and revenue in the company's tableware and home solutions categories continues to contract.

Moody's upgraded the liquidity rating to SGL-2 because increased consumer demand for kitchenware is improving free cash flow and allowed the company to repay revolver drawings.

The following ratings/assessments are affected by today's action:

Ratings Upgraded:

..Issuer: Lifetime Brands, Inc.

.... Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3

Ratings Affirmed:

..Issuer: Lifetime Brands, Inc.

.... Corporate Family Rating, Affirmed B2

.... Probability of Default Rating, Affirmed B2-PD

....GTD Senior Secured Term Loan B, Affirmed B3 (LGD4)

Outlook Actions:

..Issuer: Lifetime Brands, Inc.

....Outlook, Changed To Stable From Negative

RATINGS RATIONALE

Lifetime Brands' B2 CFR broadly reflects its relatively small scale with annual revenue under $1.0 billion, and its elevated debt/EBITDA leverage at around 5.1x for the last twelve months (LTM) period ending September 30, 2020. The company's products are discretionary in nature and susceptible to consumer spending, and a prolonged period of high unemployment or weak economic conditions will negatively impact demand. The rating also reflects Lifetime Brands' relatively low mid-single digits operating profit margins, its geographic and customer concentration, and the mature and highly competitive nature of the kitchenware product category. The company sources its products mostly from China, exposing the company's supply chain to manufacturing issues affecting the region such as the coronavirus outbreak. Production at the company's suppliers has improved following earlier coronavirus-related cutbacks, but supply chain risks remain.

The rating also considers the company's strong market position in the homewares industry with many leading brands in narrowly defined product categories, and its good brand and product diversification. Lifetime Brands' well-diversified retail distribution channel, which includes e-commerce, positions the company well to benefit from the continued shift of consumer spending to online. Ecommerce growth of approximately 66% year-to-date through 3Q-20, has more than offset weakness in brick and mortar stores and foodservice. Moody's expects sequential improvement in brick and mortar as stores continue to reopen, and continued good consumer demand will result in stable revenue and earnings, as well as credit metrics remaining around current levels over the next 12-18 months.

Lifetime Brands SGL-2 liquidity rating reflects its relatively healthy and historically higher cash balance of $42.7 million as of September 30, 2020, as a result of strong operating results and free cash flow generation year-to-date. The company's liquidity is also supported by Moody's expectations for continued positive free cash flow in fiscal 2021, albeit at a lower level relative to fiscal 2020, of around $25 million. Lifetime Brands had about $121.7 available under its $150 asset-based lending (ABL) revolving facility due 2023, which provides the company with financial flexibility to fund working capital seasonality.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The stable outlook reflects Moody's expectations for continued good consumer demand for the company's kitchenware products and sequential recovery in the brick and mortar channel over the next 12-18 months. These factors should support credit metrics remaining around current levels and positive free cash flows on an annual basis.

The ratings could be upgraded if the company consistently reports organic revenue growth with a stable to higher EBITDA margin. Debt/EBITDA sustained below 5.0x and sustained improvement in free cash flow would also be necessary for an upgrade.

The ratings could be downgraded if Lifetime Brands' operating performance deteriorates such that debt/EBITDA leverage is expected to remain above 6.0x or free cash flow is expected to be weak. Additional factors that could lead to a downgrade include a deterioration of liquidity, or if the company's financial policies become more aggressive, in particular regarding a material debt-funded acquisition or shareholder returns.

The principal methodology used in these ratings was Consumer Durables Industry published in April 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1060509. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Lifetime Brands, Inc. designs, sources and sells branded kitchenware, tableware and other products used in the home. Lifetime Brands is publicly traded (ticker: LCUT), and reported revenue of approximately $747 million for the LTM period September 30, 2020.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Oliver Alcantara
Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

John E. Puchalla, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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