Welcome to the Lifetime Brands Third Quarter Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a question-and-answer session. (Operator Instructions). As a reminder, this conference call is being recorded today, November 6, 2008. I would now like to turn the conference over to Harriet Fried of LHA. Please go ahead, ma'am. Harriet Fried - IR, Lippert/Heilshorn & Assoc.: Thank you, operator. Good morning, everyone and thank you for joining Lifetime Brands Third Quarter 2008 Conference Call. With us today from management are Jeff Siegel, Chairman, President and Chief Executive Officer; Larry Winoker, Senior Vice President and Chief Financial Officer, and Chris Kasper, Senior Vice President of Corporate Development. Before we begin, I'll read the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995. The statements that are about to made in this conference call that are not historical facts are forward-looking statements and involve risks and uncertainties, including, but not limited to, product demand and market acceptance risks, the effects of economic conditions, the impact of competitive products and pricing, product development, commercialization, technological difficulties, capacity constraints or difficulties, the results of financing efforts, the effects of the Company's accounting policies, and other details contained in its filings with the SEC. The Company undertakes no obligation to update these forward-looking statements. With that short introduction, I'll turn the call over to Mr. Siegel. Please go ahead, Jeff.

Thanks, Harriet. Good morning, everyone. I am pleased to report that Lifetime is weathering the storm. While the global economic slowdown is likely to have a profound and far reaching effect on all businesses, clearly retailers and suppliers like Lifetime Brands have been especially hard hit. As a result, this past quarter has been one of the most difficult that any of us has experienced. Despite the overall gloom, Lifetime's doing okay. More important, we are well positioned to take advantage of this challenging environment by seizing opportunities to grow our market share across all categories. This morning we reported a loss of $674,000, that's $0.06 a share for the quarter. You will have noticed that this reflects a $4.6 million restructuring charge related to the closing of our retail stores and related operations. Moreover, $4.3 million of the restructuring expense is non-cash. Pro forma without the restructuring charge and without the operating losses attributable to the stores, we would have been solidly profitable. In addition, our Dinnerware business, the one wholesale division that has lost a considerable amount of money in 2008, is on a path to solid profitability in 2009. Looking at the components of our business, wholesale was up slightly due mainly to a $17 million sales contribution from Mikasa which we acquired in June. Mikasa has turned out to be every bit as outstanding as we had hoped and we look forward to significantly broadening its product line and to strengthening its placement in key retail accounts. We're having great success with Gourmet Basics by Mikasa, a moderate priced housewares brand, as well as with the Marquis Mikasa brand. The performance of our other wholesale businesses was mixed. Our wholesale food prep business was down about 9% compared to last year's quarter. Kitchenware, the largest component…

Thank you, Jeff. Net sales for the third quarter of 2008 were $140.6 million, a decrease of approximately 2% from the 2007 period. Net loss was $674,000 or $0.06 per diluted share for 2008 compared to net income of $6.8 million or $0.47 per diluted share in the 2007 period. In our wholesale segment, net sales were $124.3 million for the third quarter of 2008, an increase of $1.1 million from the 2007 period. 2008 period includes $17 million of net sales from Mikasa. The inclusion of Mikasa and continued strength in our kitchenware division was offset by lower volume in our other business categories. As Jeff noted, sales volume has been adversely affected by the economic slowdown and lower retail inventory levels. Also as noted, reported sales are lower in the 2008 period as Canadian customers are now served through our alliance with Accent-Fairchild Group. In our direct to consumer segment, net sales were $16.4 million for the 2008 quarter versus $20.3 million in the 2007 period. On a comparable store basis, due to the closing of the 30 outlet stores earlier this year, 2008 period sales were down by approximately 5%. On a consolidated basis, cost of sales for the third quarter of 2008 was 61.2% of net sales compared to 58.9% in 2007. Our wholesale segment cost of sales was 64.1% in 2008 compared to 62.4% in 2007. The reduction of overall gross margin was due primarily to our continued effort to reduce inventory levels as well as higher customer sales allowances. In the direct to consumer segment, cost of sales as a percentage of net sales was 39% in 2008 versus 37.9% in 2007. The increase as a percent of sales primarily resulted from higher freight costs in 2008. Distribution expenses were 10% of net sales…

Thanks, Larry. My remarks today will focus on two areas. First, our DTC restructuring and second, an overview of some of the major initiatives we've undertaken in the last four quarters that should provide some useful information as you think about Lifetime's prospects for 2009. First, as Jeff discussed, we're in the process of restructuring our DTC division, including closing the remaining 53 outlet stores by year-end. We hired the same firm to manage and operate the inventory clearance sales, a joint venture between Gordon Brothers Retail Partners and Hilco Merchant Resources that we retained for the closing of the first set of outlet stores earlier this year. We also have retained RCS Real Estate Advisors which was successful in assisting us with our lease mitigation negotiations earlier this year. We're very pleased with the results to-date. The sales volumes in the stores are currently more than double those of last year and the margins have remained strong. Altogether, we expect to sell more than $20 million of inventory, including inventory that is located in the stores, backup store inventory located in the York, Pennsylvania warehouse, and some additional excess wholesale inventory. We still expect that the cash proceeds from the inventory clearance sales will exceed the cash charges incurred in the store closings. Now, turning to Lifetime's future prospects. I'd like to discuss the reasons we expect the Company's profitability in 2009 to increase significantly, even assuming the economy remains weak and we see no improvement in the overall level of retail sales nationwide. The first reason for that is simply the impact of the DTC restructuring. In the last four quarters, DTC lost approximately $8 million, not including the $9.5 million in restructuring expense. After we close the stores in December this year, exit the York DC prior…

(Operator Instructions). Your first question is from Alvin Concepcion with Citi.

Good morning.

Good morning, Alvin.

Good morning.

I just wanted to get sense for sales trends. Have they changed significantly from in October versus the third quarter?

Not really. You know -- as you know they were weak in the third quarter. They haven't improved greatly. But they certainly haven't gotten worse.

Okay. And then, trying to get a sense how far out do you buy commodities? I guess I am trying to figure out when we should see the lower commodity costs become tailored for you.

We don't -- our sale is by the commodity. We work with the suppliers to do it though and we firm it through our suppliers. There's usually about a six month lag from when prices come down, but it varies, it varies greatly. In some areas it could be a three month lag, but in average I would say five or six months before we see the benefit of the lower prices. And prices started coming down about six weeks ago. And as you probably know there were dramatic reductions in most of the plastics that we buy and the steels that we buy.

Okay, great. And then, you mentioned there were some retailers that had some troubles and were liquidating inventory. What percent of your overall sales were impacted by those retailers?

We've heard through Linens and Mervyns and we've said historically they're --

Historically, Linens and Mervyns are 3% but it varies by quarter so, on an annual basis they're about 3% of our business.

Okay. Were there any other additionals to that or was that just the --

Yes, there are some retailers that we've been careful with. We won't discuss them but there are some.

Okay. And then, looking to 2009, you went through some innovations. Where do you see most opportunity from those innovations in your business right now?

There are number -- with us there's no one single item that really drives our business so it's really lines of business. The biggest improvement to expect in 2009 will come in the dinnerware division. That's a division that lost a considerable amount of money this year. The management was changed at the beginning of the year. They're making phenomenal progress. They're winning the battles for 2009. And that's the division that will see the most dramatic swing. We'll also -- we expect to see very nice growth in just about every other division we have across the board. And we've taken steps to ensure that we have that growth. And most of the growth -- probably almost all of it is going to come at the expense of competitors. It's a market share gain today. So we're gaining market share and we're in the right position to do that.

Thank you very much.

Your next question is from Bill Chappell with SunTrust. Mr. Chappell, your line is open. You may proceed with your question. Mr. Chappell, if you're on a speaker phone please un-mute your line. There was no response from Mr. Chappell's line. Your next question is from Gary Giblen with Goldsmith & Harris. Gary Giblen - Goldsmith & Harris: Good morning, everybody.

Good morning, Gary. Gary Giblen - Goldsmith & Harris: What was the wholesale organic growth? You know the numbers look like minus 13% ex Mikasa but then you have the effect of the Canadian business model changed and the (inaudible) and Mervyns of the world. But if you remove those aspects, what was the wholesale organic growth?

Well, we give you the calculation but as you know Mikasa is $17 million. The Canadian business for the quarter is probably $2.5 million to $3 million, that's (inaudible) of those directly. And Linens represents 3% of our business overall, where on an annual basis I would just provide that a little more than 25% would be attributable to the third quarter that we would have lost. So I haven't done a calculation, but if you put in those factors you can easily calculate the organic. Gary Giblen - Goldsmith & Harris: Okay.

And I think we've made it clear where it was. You know I think we made it pretty clear. Gary Giblen - Goldsmith & Harris: Yes, okay. So $2.5 million to $3 million was sales that weren't there in Canada just because of the layers -- the distributor relationship?

Correct. Gary Giblen - Goldsmith & Harris: Okay. Got it. And then Linens is 3% in itself or I mean what about the other troubled retailers --

That's why we'd rather not quantify the others. But figure Linens at 3% and the others we really don't want to discuss.

I mean we're watching them. We are selling. We're just being -- we're just being prudent and careful about credit. But we haven't -- it hasn't really impacted our sales. Just Linens of course, and Mervyns which is quite small. Gary Giblen - Goldsmith & Harris: Yes. And then just factually, did you have an interruption in shipments to [Bossdogs]? I mean now they're still operating with fewer stores but did that cause a disruption?

We really don't want to discuss each one of them. As you probably know from the recent announcement, they're probably going to be bought by the [Bossco] family which is a very good thing as far as we're concerned because they'll continue as a customer and they were a very good customer at one time. But you know -- Gary Giblen - Goldsmith & Harris: Okay.

We really don't want to comment on any one of the retailers. Gary Giblen - Goldsmith & Harris: Okay. Fair enough. Then it was mentioned in the comments that one of the contributors to gross margins I think less than last year was higher sales allowances, so is that something that continues to be, is that something where the retailers are pressing even more for higher sales allowances? And is it because of slow moving products due to the economy or it is just retailers are hard pressed?

As Chris said we moved quite a bit of slow moving product through this going out of business sale. It's not only product that was destined for our outlets, we took the opportunity to move other products into the going out of business sale. The intent is for us to come out of 2008 with an absolutely clean inventory and the going out of business sale gave us an extra opportunity to mark down some goods to get rid of it. Gary Giblen - Goldsmith & Harris: Okay. So the higher sales allowances pertain to the excess inventory more than just department stores trying to pick your pockets as they --?

We haven't found that the stores are picking our pockets. That has not happened. You know -- I think they're going along as normal. The only retailer that was really abusive in the past was Linens & Things and they're no longer with us so there should be an improvement there. Gary Giblen - Goldsmith & Harris: Okay. That's good news. And then, just finally is the [pantryware] business in Canada affected by the global economy and the decline in raw materials pricing and everything? Or -- I mean is that kind of washed out by other general factors there?

Yes, it is. You know they have some added impact with the exchange rate which was horrible about a month ago. It is getting better now. But in general the business there is not bad. Gary Giblen - Goldsmith & Harris: Okay, good. Thanks and good luck in the fourth quarter.

Thank you.

Your next question is from Neal Goldman with Goldman Capital. Mr. Goldman, your line is open, please proceed with your question.

What is the additional inventory reduction you're looking at?

For 2009?

Yes, 2009.

You know I would say we can probably take up to another 10% out of our inventory. Two years ago as you know we set a goal. We're heading towards the goal. I think we probably will achieve the goal by the end of 2009 to get it exactly where we want to be. It's been a fairly slow process only because we -- if you do it too radically you just don't deliver to the customer and we've been reducing our inventories in a way that we still are able to fulfill at the high 90% level. And we're going to continue to do that. But we have identified a few areas where we could really improve that and take out probably up to another 10% of inventory. And as you know, we haven't made it very clear unfortunately, but remember there is going to be a significant reduction in inventory because we don't have the outlet operation also.

Right.

Right. Just to clarify, Neal, Jeff's comments of those additional inventory reductions are really in the wholesale business. The $20 million of inventory that we talked about moving through the going out of business sales between now and the end of the year will be in addition to that. So when you look at the total net change between now and where we expect to be at the end of the year, it's a very substantial sum.

Okay. What was the size of the loss you're projecting this year in the dinnerware or the tabletop dinnerware?

We haven't put that out, Neal, and we'd rather not do that at this time.

But, I mean --

But it is –

-- is that part of the $17 million that you talked about?

It is a considerable loss but I don't -- we don't want to put a number on it at this point.

But is that included in that $17 million swing?

What do you mean?

Well you talked earlier --

Are you referring to the Mikasa $17 million in sales?

No, you talked about -- I am sorry, $15 million.

Oh! $15 million. The only thing included in that $15 million related to the dinnerware business specifically and not Mikasa relates to the distribution expense that will no longer be borne by that division as we transition it from the York DC to the Fontana facility and that is a very small percentage of that overall $15 million.

Okay.

It'd be less than a $1 million. Let me put it that way.

Since you made the comment, Jeff, that you are now starting to get major placements on the dinnerware with both Pfaltzgraff and increment on Mikasa, do you expect that division overall to be profitable next year, right?

Yes. Absolutely.

And if I remember, in the second quarter I think you said it was almost equal to the retail loss or something? Or was that last year?

You're right.

So there's another incremental $8 million potential swing if you turn that just to breakeven next year?

Yes, but don't double dip because as Chris said part of it is for distribution.

Okay.

There's a small part, but its part of it.

So let's say its $7 million or $6 million?

The potential is there.

So basically what you're saying is assuming you just breakeven on it, not be profitable, you might be talking like $21 million or a $1.00 a share swing in next year's earnings? Just from those swings, forget anything else.

Sounds reasonable.

Okay. Thanks, guys. Good luck.

Your next question is from Robert Nicholson with Pine Cobble Capital.

December quarter -- could you walk me through where you stand relative to the revised bank covenants which were negotiated in September because we're just having a hard time figuring out what trailing 12 months adjusted EBITDA was and how much room you guys have under the new agreement?

We don't specifically give out that information as I noted. We have the borrowing of $31.9 million is now driven off of a borrowing base rather than a leverage test which we had before the amendment.

Yes. And -- but is there -- but there's still a trailing 12 month EBITDA minimum and a leverage ratio covenant, correct?

There's a trailing 12 month EBITDA covenant of $27 million, but currently there is no leverage there.

Okay. And how do you get to -- are you guys above $27 million as of this quarter?

Yes, I think it's important to point out here that when we talk about EBITDA it's not the strict definition of EBITDA in that the bank allows us to add back certain other elements. For example, the non-cash charges associated with stock option expense are added back for the purposes of bank EBITDA which is a very material number.

Okay. And I assume that you break that out when you file your Q?

We don't report the bank EBITDA.

Okay. Okay, and how about the -- I think non-cash comp is it be enough. Do you have depreciation and amortization number for this quarter?

Depreciation and amortization runs a little over $10 million a year, so if you just divide that.

Okay, great. Thank you.

Your next question is from Bill Chappell of SunTrust.

Can you hear me now?

Yes. We can.

We had some technical difficulties so I was off the call for a few second so I apologize if these were already asked. But did you talk about Vasconia and Eco? I was under the impression both of those were going to ship and have an impact on the September quarter in this year, but it sounds like a lot of it has been postponed to 2009?

Yes. In the retail environment, a lot of the retailers postponed rollouts of new things and this has been -- both of those have been postponed, but they have both been confirmed for next year, early next year.

Does that mean you'll be shipping them in the first quarter next year?

We will be shipping them in the first quarter next year.

Got it. And then in terms of the costs and decreases coming, how should we look at that in 2009? Is that you'll see a benefit from lower costs or it's a pass-through so you can lower your prices and get better volume?

It will be both. You know we certainly will give -- we'll use part of it to stimulate sales. With a retailer we roll down the prices or reduce the prices. It certainly does stimulate sales due to reduced retail prices. But part of that will be used for that and part of it will be used to improve our margins wherever it's appropriate.

Okay. And any ideal of this year-to-date what pricing has -- I mean what the benefit has been for sales?

What -- excuse me?

I mean, like if volume was down 5% and pricing was up 5% or anything like that on year-to-date sales?

It really -- very little good price increases. But most of what we've done to maintain margins or keep margins close to where they were last year has been by redesigning products. You know doing things in a way that is beneficial. There's been some price increases but they're very limited.

Now, just actually going back to Eco, I think previously with corn and other agricultural prices higher it looked like Eco costs of goods sold were going to be in line with just your traditional products. Is that now -- I mean is that still the case or will they actually be a lower cost product?

About the same. The price of petroleum has come down also so if the price of polypropylene is down the price of a comparable corn base is also down so it's comparable.

Got it. And just one last thing, on the DTC business. Can you remind us how much that lost in 2007 and have you already had some benefit from the shutdown this year or is it pretty similar in ‘08 versus ‘07?

We reported last year, excluding the restructuring that we put last year, we've got $8 million loss that we reported. And this year-to-date, one second, was approximately $5 million.

So even though you had shut down some stores last year and I guess tweaked the business it really didn't have too much impact on the operating income?

That's correct.

Okay. Alright. Thanks so much.

I am sorry I think I just -- I am sorry it's actually that $4.8 million is not accurate, it's actually closer to $10 million, sorry. I was looking at the consolidated number.

I am sorry, you've lost me.

It's closer to $10 million for the nine months this year.

But Bill your point is valid which is the year-to-date improvements over prior year there was no substantial improvement in that business.

Okay, so now I am actually confused. So, you've lost $10 million year-to-date yet you're only expecting kind of an $8 million benefit going into next year?

Remember, there's typically the fourth quarter we would have some profit.

Bill, my number of saying that we had lost $8 million was a trailing 12 number including the fourth quarter of 2007 prior to restructuring expense.

Okay.

Your next question is from Gary Giblen with Goldsmith & Harris. Gary Giblen - Goldsmith & Harris: Hi. To follow-up on Neal's line of questioning, what have you assumed in your sort of approximate outlook for the growth of -- or the dollars I guess for Vasconia and Eco next year?

Yes, I think at this point, Gary, we're not giving guidance about 2009. You know I think we can talk about placement and talk about where we're heading directionally but I don't know that we want to get into specific numbers for specific product lines at this point in time. I think we're going to come back to that at the end of this year and hopefully give more direction to folks about what we expect for 2009. Gary Giblen - Goldsmith & Harris: Okay, can I understand qualitatively though are you expecting Vasconia and Eco are you optimistic about the obvious vast opportunity there as you were before given the crummy retail environment?

Yes. You know certain parts -- in that case in particular certain parts of the business really are not affected by the environment. As I've said earlier the kitchenware business is substantially up over last year and we expect that to continue very much into next year. And the Vasconia products and the Ecolife products are predominantly kitchenware products. Consumers are buying things that they need. If they need a can opener they buy a can opener. If they need a peeler, they buy a peeler. They're putting off discretionary purchases but not putting off things that they need. Gary Giblen - Goldsmith & Harris: Right, okay. And then a question is your outlook -- intermediate term outlook on the sterling silver initiative as optimistic as it was given the pressures at the higher end of the economy.

Yes. I think you know that the stuff is impacted because it is a discretionary purchase. The part of that business that is bridal is doing fine. The part that's discretionary is suffering. That's a very small business for us, Gary. Keep that in mind. I don't want to go into numbers but the sterling business is a small business. Gary Giblen - Goldsmith & Harris: Yes. No, I know. Small but [exciting] thing. Okay, that does it for me. Thank you.

Your next question is from Rick Fetterman with Fetterman Investment.

Good morning. Is it fair to say that the end of this year that substantially all if not all of the charges will have been taken and you'll be going into ‘09 pretty much starting from scratch in terms of the balance sheet and any one time charges, based on what you know today?

Are you referring to the closing of the stores?

Closing the stores, distribution center, consolidation of distribution centers.

It's planned, yes, that it would all be in place and reflected in the 2008 numbers. Nothing -- it's not planned to be in 2009.

Rick, that's why in fact we're closing all those outlet stores by December 31st so that in fact we can accrue all those restructuring expenses in 2008. You know our goal here is really to go into 2009 very clean, both on the balance sheet and --

With that in mind, and given the changes and refinements that you mentioned earlier in the call that would result in significant savings, is it fair to say that you should be showing a net profit next year with current -- given the -- if revenues were the same next year as they are apparently going to be this year?

Absolutely.

Absolutely. I mean substantial profitability. If revenues remain the same next year and you just look at the impact of all the things that we've discussed on this call in terms of cost reductions alone, the profitability of the company will be dramatically higher next year.

Do you have a handle or would you be willing to share a number that the revenues have to be x in order to be -- for the company to be profitable?

We don't have – I am not ready to share that number right now, frankly. Suffice it to say that with the cost reductions that we've articulated, we have significant room and significant profitability so you know the number that we would give in answer to that question would be below a level that I think we could even conceive of for next year.

Alright. Thank you very much. Good luck.

(Operator Instructions). There are no further questions at this time. Please proceed with your presentation or any closing remarks.

Well I'd like to thank everyone for joining us on this call and I look forward to talking to you again at the end of the year. Thank you.

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your line.