Good day, ladies and gentlemen, and welcome to the First Quarter 2014 Lifetime Brands Earnings Conference Call. My name is Britney, and I'll be the operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. And at this time, I would now like to turn the presentation over to your host for today, Harriet Fried of LHA. Please proceed.

Good morning, everyone, and thank you for joining Lifetime Brands' conference call. With us today from management are Jeff Siegel, Chairman 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 conference 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 on 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, and good morning, everyone, and thank you for joining us to discuss our first quarter 2014 results. Those results reflect our focus on acquisitions and other investments to grow our business aggressively in 2014 and beyond. During the quarter, Lifetime's consolidated net sales grew by 20% to more than $118 million. Most of this growth came from the acquisition of Kitchen Craft, the U.K.-based kitchenware company we acquired in January. We also acquired 3 other businesses during the quarter: Built, a designer and distributor of lunchboxes, lunch bags, wine bags and baby accessories; Empire Silver, a U.S. manufacturer of sterling silver and pewter gift items, principally baby cups, rattles and hollowware; and La Cafetière, a supplier of products to brew and serve coffee and tea, which is based in the U.K. and the Netherlands. Due to the timing of these 3 acquisitions, very few sales came from the 3 companies that were bought in the first quarter. We began shipping La Cafetière products late in the first quarter, and we'll begin to ship products from Built in the second quarter and Empire Silver in the third quarter. While varying in size, these 4 new additions to the Lifetime platform market their products under well-known consumer brands and offer us entrée into new markets and classifications and allow us to leverage our core capabilities and our infrastructure. Completing 4 acquisitions within a period of 8 weeks necessitated considerable effort and expense, which, combined with higher other SG&A expenses, produced a decline in net results for the quarter versus last year. However, after stripping away acquisition- and financing-related expenses, our EBITDA for the quarter actually increased 19% to $3.7 million as compared to $3.1 million for the corresponding 2013 period. During the second half of 2014, we expect the higher…

Thanks, Jeff. As we reported earlier this morning, net loss for the first quarter of 2014 was $2.9 million or $0.22 per diluted share as compared to net loss of $600,000 or $0.05 per diluted share in the 2013 period. Adjusted net loss for the 2014 quarter was $1.7 million or $0.13 per diluted share. A table which reconciles this non-GAAP measure to reported results was included in this morning's release. Loss from operations was $2.2 million in the 2014 quarter compared to a loss of $100,000 in 2013 period. The 2014 quarter includes $1.5 million of acquisition-related expenses. Consolidated EBITDA, a non-GAAP measure as defined and reconciled in the results in the release, increased to $3.7 million for the quarter of 2014 versus $3.1 million last year. Consolidated EBITDA for the trailing 4 quarters was $44.1 million versus $38.1 million for the same period in 2013. For our wholesale segment, net sales in the 2014 quarter increased 22.2% to $113.8 million. An increase in kitchenware products of $16.1 million was due to the mid-January acquisition of Kitchen Craft. Tabletop sales increased by $5.2 million from dinnerware and glassware in the U.S., as well as for Creative Tops in the U.K. Home solutions sales had decline of $600,000 from home décor products. Wholesale segment gross margin was 36.2% in 2013 quarter compared to 34.9% for the 2013 period. The increase in gross margin was due to changes in product mix, as well as the inclusion of Kitchen Craft. Wholesale distribution as a percentage of sales shipped from our warehouses was approximately 10.6% and 10.2% in the 2014 and 2013 quarters, respectively. This increase reflects lower volume shipped from our warehouses and higher expenses, including the effects of the especially cold winter. The increase is partially offset by higher volume in…

[Operator Instructions] And your first question comes from the line of Alexander Renker with Sidoti & Company.

So Larry, I just wanted to clarify. You had just said, correct me if I have this wrong, distribution, SG&A, gross margin, you still expect to be flat year-over-year as a percent of sales?

That's correct. As of now, yes.

Okay. But how does that...

Al, just to be clear, excluding the acquisition expenses we incurred.

Okay. Excluding the acquisition expenses, okay. Sure. Okay. So if I back out those acquisition expenses and depreciation and amortization incrementally during the period, I see SG&A up 24% about. Do you guys have a sense of how much of that was attributable to Kitchen Craft versus legacy SG&A efforts?

Their percentage is in line more or less with what we have. What we expect to see is, because we added some support and other things to help grow the business, that those expenses are coming earlier than we'll see actual sales volume, which, as you know, will happen in the second half of the year, but their SG [indiscernible] is comparable to ours.

Okay, great. And then, reaffirming revenue guidance. You had said previously, regarding the Kitchen Craft acquisition, that you expected that to be accretive in 2014. Does that expectation still stand?

Yes, it does.

And your next question comes from the line of Laura Champine with Canaccord.

Of the SG&A expense increase in the quarter and what you expect for the year, how much of that is ongoing and how much of that can you, perhaps, trim as you integrate the acquisitions you just made?

So of course, excluding the acquisition expenses, which is one-time, that's going to continue. Not -- this is not -- we haven't come up with a plan -- what we plan to do is to leverage some of the capabilities we have like sourcing in Asia and other things that we can share with Kitchen Craft and help grow it. So we may see some -- we hope to see some savings along those lines, but the support people and other things we added, we're not going to change it.

Remember that, though, we added also -- we have a staff that we've added for China -- for sales in China, and we haven't received the first dollar's worth of sales yet. We will start this month, actually. And also, the 3 of the companies that we bought, other than Kitchen Craft, we had almost no sales from those 3 companies. And yet, the people have been onboard. So we've added quite a bit of SG&A that hasn't produced any sales and will start producing sales in the second quarter and more heavily in the third and fourth quarter.

[Operator Instructions] And your next question comes from the line of Brian Freckmann with LS.

Just quickly, can you help us maybe get a better sense of the back half of the year? And then, potentially, you're underutilizing. I guess, you have expenses right now and no revenue. As I think about the model heading into, let's say, 2015, what should we be expecting here? I mean, assuming no other further acquisitions, is there a model that you're shooting for, for '15 that we can, sort of, understand how this all plays out when revenues start to cover and match expenses?

So I think that should happen in 2014. We're not waiting for 2015. It will improve going on. But 2014, we'd expect the -- to get leverage from all the expenses and all the SG&A that we've added in the first quarter.

What I was, sort of, looking for is potentially sort of a goal you're shooting for. Is it a 10% EBITDA margin? Is it 10% operating margin, EBIT? I mean, what is the sort of the plan? Obviously, sort of, your exit rate will be higher than your current rate. And so, that's kind of why I'm trying to -- I know you're not trying to give specific guidance. But if I think about, let's say, a '15 number, what kind of margin are you shooting for?

Let me answer it this way, and this is something we've discussed before, but we have fairly adequate infrastructure, more than adequate to support the business. Obviously, we had to add when we bought Kitchen Craft. So we think if we could grow our, let's say, SG&A by inflation, we have capacity in our warehouses, so that we can add volume and yet not grow at that same split because there's a fair amount of fixed cost. We can get fair amount of leverage if we can grow sales at a rate even just above 3%, 5% [ph], we should get leverage. We have goals to be higher. But because we have this supportive infrastructure, we think sales growth will get us a fair amount of bottom line. So don't have a target of, let's say, x percent of operating income margin or EBITDA, but we think we have the structure in place there. If we can grow the sales at a reasonable pace that our expenses will grow much slower.

I'm hearing what you're saying. Maybe a better way to ask it is, is there a way to -- for you to sort of say, hey, our incremental dollar margin above and beyond the fixed cost rate is -- every additional dollar that drops after fixed is 30% -- I mean, help me understand sort of what you might mean by actually you're using inflation?

That is about the number, 30%.

Okay. Perfect. That's kind of what I was going to but...

[indiscernible] the fixed cost of our distribution is about 6% and SG&A -- and on SG&A, we have adequate SG&A, we believe, to support the business. So we should be able to get 30 points for -- on the incremental sales.

[Operator Instructions] And your next question comes from the line of Richard Schuster [ph].

I apologize, I got on the call late. But from what I've heard in the last couple of minutes, what you're basically saying is that the miss in the quarter is just related to acquisition costs for these deals and that everything else is in line. Is that kind of where you are?

Well, it's not only the acquisition costs. It's acquisition costs plus the additional SG&A we've layered on to build the business for this year -- to do business this year...

All right. And you don't have the sales yet from that business?

That's exactly right. We don't have the sales yet, but we have the SG&A.

But there is no disappointment in this number. Obviously, the market doesn't believe that. There's no disappointment in this number. It's just that these costs and the incremental costs are hitting you?

Exactly right. We're not disappointed in the number.

Why -- I don't know how many analysts follow the company anymore and all the rest, but why didn't no one understand this?

We have no idea.

There's no surprise in all of this.

These people see a loss -- this is just my opinion, and they react. But we've always said that and as you know, Richard, you've followed the company for a long time, the first and second quarter is not especially meaningful here. Even a good first quarter doesn't tell you what the year will be like.

It doesn't matter. First quarter is immaterial. And this I apologize since I'm not that close to you in that I own stock. What is your -- what is the estimate for the year that the Street has? Or have you put out an estimate?

We've put a sales estimates out of $600 million for the year, which is about a 20% increase over 2013. But we really haven't put any earnings estimates out, though, but it's a little more [indiscernible]

But presumably, these acquisitions, the 4 acquisitions you made, are accretive?

The acquisitions should be accretive, yes.

And how much did you spend in total for those acquisitions?

Excuse me?

How much did you spend in total for those 4 acquisitions?

For Kitchen Craft, it was just a little over $60 million and the others are about $4 million and change, so $65 million, $66 million. It's actually -- and it's not even in our cash flow.

[indiscernible] so basically, it's $65 million. And last year, if I remember, you made like $1.10 or something?

I'm sorry, what did you say -- earnings?

Earnings last year.

The earnings last year, the EPS last year, was, like, a $1.10?

Well, it was -- yes, it was -- that's right, as adjusted.

Right. And this year, you should get growth plus something from those acquisitions, whatever. If I were -- I'm not an analyst, I don't follow that way. But, like, $1.40 to $1.50 is not a crazy place to be looking?

We don't [indiscernible].

We're not in that business, Richard.

We don't count [indiscernible].

And your next question -- and we have a follow-up question from the line of Alexander Renker.

I just want to clarify more or less a mathematical point. So if SG&A expenses for the year are expected to be flat, do you expect that as a percent of sales in subsequent quarters, they will be lower than the comparable quarter the year prior, right? So like if sales volume is up in -- is up 20% again in the third and fourth quarter, for instance, SG&A as a percent of sales will be lower in those quarters?

Mathematically, you're right. To get to what we were last year, that's obviously mathematically correct, yes. And more than that, I mean, that's what we're saying.

Okay. And that concludes the question-and-answer session. I will now turn the call over to Jeff for further remarks.

Thanks, everyone, for your time today. You can see that we have an extraordinary number of new initiatives on the way, and we really think 2014 will be a very successful year for us and our shareholders. Thank you, and we hope you join us for the next update in August. Thank you.

Ladies and gentlemen, that concludes the presentation for today's conference. You may now all disconnect, and have a wonderful day.