Good day, ladies and gentlemen, and welcome to the Q3 2012 Lifetime Brands, Inc.'s Earnings Conference Call. My name is Rachel and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Harriet Fried, company's Investor Relations counsel. Please proceed.

Good morning, everyone, and thank you for joining Lifetime Brands' call. With us today from management are Jeff Siegel, Chairman, President and Chief Executive Officer; and Larry Winoker, Senior Vice President and Chief Financial Officer. 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 be made in this call that are not historical facts are forward-looking statements and involve risks and uncertainties, including the company's ability to comply with the requirements of its credit agreements, the availability of funding under those credit agreements, the company’s ability to maintain adequate liquidity and financing sources and an appropriate level of debt, changes in general economic conditions which could affect customer payment practices or consumer spending, changes in demand for the company's products, shortages of and price volatility for certain commodities, the effect of competition on the company's markets and other risks detailed in Lifetime's filings with the Securities and Exchange Commission. The company undertakes no obligation to update these forward-looking statements. The company's earnings release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the SEC. Included in this morning's release is a reconciliation of these non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. With that introduction, I'd like to turn the call over to Mr. Siegel. Please go ahead, Jeff.

Thanks, Harriet. Good morning, and thank you for joining us to discuss our third quarter 2012 results. Hopefully, you've had a chance to review the earnings release we issued this morning. Joining me on the call today is our CFO, Larry Winoker. I'll begin by giving you an overview of some of the macroeconomic and business trends that impacted the company's financial performance during the quarter and the strategies that we are executing to mitigate and overcome certain specific challenges. I also will share some thoughts on the balance of the year and our plans for 2013. Larry then will provide a detailed breakdown of the quarter by sector. Following Larry's comments, we'll take your questions. Over the past several years, our growth strategy has been premised on building our key brands, increasing our market share, expanding our distribution into large markets in which we -- which have not yet been represented by us and making strategic investments in certain emerging markets. We have productivity, real incomes and discretionary spending are rising. Executing this strategy has allowed Lifetime to become one of the largest and most diversified housewares companies in the world, with 10 domestic business units and an international presence that includes our 100% owned U.K. subsidiary and our partially owned investee and partner companies in Mexico, Canada, Brazil and China. On a consolidated basis, Lifetime's net sales for the third quarter were $128.1 million, an increase of 2.7% over the corresponding period in 2011. This increase includes the net sales of Creative Tops, which we acquired in November 2011, and reflects strong organic growth in sales of Kitchenware products, offset by decreases in net sales of Tabletop and home décor products. The success of our strategy to build our key brands and to increase our market share is…

Thanks, Jeff. As we reported early this morning, net income for the third quarter of 2012 was $3.9 million or $0.30 per diluted share as compared to $7.5 million or $0.60 per diluted share in the 2011 period. Adjusted net income for the quarter was $5.1 million or $0.40 per diluted share, as compared to $6.6 million or $0.52 per diluted share in 2011. Adjusted net income in the 2012 period exclude certain unusual and infrequent items that are detailed in the table included in the earnings release. Income from operations was $7.4 million for the 2012 quarter as compared to $10.3 million for the corresponding 2011 quarter. Consolidated EBITDA, a non-GAAP measure that's defined and reconciled for net income in our earnings release, was $11.6 million in the third quarter of 2012, versus $13.5 million in last year period. And consolidated EBITDA for the trailing 4 quarters ended in the 2012 period was $37.7 million versus $41.3 million last year. For our wholesale segment, net sales in the third quarter of 2012 increased 2.5% to $123.8 million. The increase reflects the inclusion of Creative Tops, our U.K. business acquired last November, and the success of our Kitchenware products programs. These increases were partially offset by a decrease in the Tabletop and Home Solutions product categories. For Tabletop, the decline is attributable to certain sales programs and product offerings in 2011 that were not repeated in 2012 and specific issues for certain retailers that Jeff noted earlier. For Home Solutions, as Jeff also commented, the decline was due to continuing weak consumer demand for home décor products exacerbated by retailer's sharp reduction in allocated floor space, all of which also contributed to pricing pressure. Also, segment gross margin was 33.9% in the current quarter compared to 34.5% last year. The…

[Operator Instructions] Your first question comes from the line of Lee Giordano of Imperial Capital.

Larry, maybe we can start off by talking a little bit about gross margin expectations for the fourth quarter? Are you looking for continued pressure year-over-year on the gross margin line or do you think we could see some leverage on the higher sales?

No. I think, as you know, the fourth quarter, we sell more, proportionately the retail direct business grows a bit. So while we'll be better at wholesale because of Retail Direct has more weight, that's going to -- it will favorably impact. So I think we're going to see comparable gross margins. That's what we see now, as compared to what we achieved during the first 9 months.

Okay. And then looking at the Tabletop business, in the decision to just sell the money of brick-and-mortar retailers, are you expecting to make up those lost sales over the longer term, since there will be less cannibalization online, is that kind of one way to look at it?

Yes, it is. It's very definitely something we expect, and I think the brick-and-mortar retailers have told us that they really appreciate what we're doing. So we do expect it to really have a positive impact in 2013.

Great. And can you just talk about the reactive glaze trend, is that waning in the marketplace or is that still a big part of your business?

It's definitely slowed down from where it was. It's not falling off a cliff, by any means. It's just a little -- it's lower than it was in 2011, which is a natural progression. There's a lot of other things coming online to compensate for that. What happens in -- when a trend like that occurs in the Tabletop business, you ride it as much as you can and then you start testing other things to replace it, which is what we've been doing this year. And we have latched on to several things that will help us to replace that going forward.

Great. And then just lastly. Larry, do you have the average diluted share count for the quarter?

Yes, it's 12.8 million.

Your next question comes from the line of Gary Giblen of GMG Capital.

Jeff, following up on your comment about the slightly improving consumer purchasing confidence in some parts of the world. What about Mexico and Canada, which are Lifetime markets, and also Continental Europe, which is not much of a Lifetime market, but could be a change factor as well?

The business in Canada is strong. Their economy is a strong economy and doing well. Business in Mexico is okay. It's not as robust as it was, but it's okay. The Mexican company, Grupo Vasconia, made a rather large purchase of a competitor in the aluminum smelting business earlier this year, which changes the mix of their business a bit. It weighs it a little more heavily towards the primary aluminum smelting operations, which they are now consolidating plants and making sure that they run in a more efficient manner, but it's a very positive thing going forward for them and we like what they're doing. The Houseware business, it's a little tougher but not -- certainly not bad by any means.

Okay. So you're saying some of Grupo Vasconia's earnings are not -- I mean, a larger portion is not from housewares per se but from smelting.

I think the slightly larger part of the business is in the aluminum smelting business.

Which serves on the rent markets, you mean, having nothing to do with...

Well, it's a very strong market and they're the dominant player in Mexico and Central America.

Okay. And just any feel -- any take on Continental Europe? I realized that's not central to...

It's not really much of -- yes, you're right. It's not much of a market for Lifetime, but I've talked to a number of people who run companies in Continental Europe, that I know, and I'll tell you, business is tough there. It's really tough.

Okay. Then just my only other question is, really the visibility of your Q4 numbers, in other words to what extent can retailers still cancel orders or push out orders if changes occur in the holiday [indiscernible]?

Certainly, there's a proportion of the orders that come in on a daily basis, like from major retailers. From every regular retailer, we get a daily reorder basis. And of course, if that doesn't come in, it would affect us. But haven't heard negatives out there at retail right now. Nothing horrible is falling apart, that's for sure. And there's certain portion of the orders, which would not be canceled because they're already in route or on the way there or done in such a way that on a direct import basis, which they don't cancel, they never cancel those.

Okay. So I guess to sum that up, I mean you have solid visibility, I mean not 100%, but otherwise it would be a pretty major change if you've had significant order cancellation.

As I said, if the consumer confidence falls off a cliff, it certainly is going to affect retail sales. Assuming that doesn't happen, we expect to be up approximately 5%. So as long as nothing horrible happens.

Yes, okay. And then just housekeeping. On the tax rate, I guess, this one's for Larry. I think your comments address the catch-up on the tax rate to 37.7%. So in other words, for ongoing purposes, is 39% to 40% the right tax rate for modeling?

That's right. As we are able to have -- earn more income outside the U.S., that will go down over time as Creative Tops grows, but I would said, for this year, we should stay in that close to 40% range.

Sir, you have no questions at this time. [Operator Instructions] Okay, we have no further questions coming through at this time, so I'd like to turn the call back over to Jeff Siegel for closing remarks.

Thank you, and thanks for joining us for today's update. In summary, while we continue to face business and macroeconomic challenges in some parts of our portfolio, we continue to have good momentum, of course, much of the business, we're also executing plans to mitigate and overcome challenges where they exist. All the while we remain focused on driving sustainable growth by building our key brands, increasing our market share and making strategic investments. I look forward to speaking to you again when our fourth quarter results are in. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.