Good day, ladies and gentlemen, and welcome to the Q2 2014 Lifetime Brands, Inc. Conference Call. My name is Ian, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I'd like to hand the call over to Ms. Harriet Fried from LHA. Please proceed, ma'am.

Good morning, everyone, and thank you for joining Life 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 the 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, everyone, and thank you for joining us to review our second quarter 2014 results, to get an update on our recent acquisitions and discuss our many other growth initiatives. The numbers we announced this morning reflect the investments we have been making to expand our business aggressively in 2014 and beyond. During the quarter, Lifetime's consolidated net sales grew by 19% to more than $115 million. Most of this growth came from the acquisition of Kitchen Craft, the U.K.-based kitchenware company we acquired in January. Two of the other businesses we acquired during the first quarter also contributed nicely to our sales growth. Those businesses were: Built, a designer and distributor of lunchboxes, wine bags and baby accessories; and La Cafetière, a supplier of products to brew and serve coffee and tea based in the U.K. and Netherlands. We will begin shipping products from our fourth acquisition, Empire Silver, a U.S. manufacturer of sterling silver and pewter gift items in the third quarter. As we discussed in our May conference call, all of these new additions to the Lifetime platform market their products under well-known consumer brands, offer us entrèe into new markets and classifications and, over time, will enable us to leverage our core capabilities and infrastructure. We have been moving through the process of integrating each business; taking the steps needed to ensure that the resources, assets and processes of the acquired companies are combined with our own in a way that achieves our strategic goals. In tandem with those efforts, we have made significant investments to build our global business. As previously noted, we are now supplying Walmart in China. Currently, Walmart has about 400 supercenters in China, which are expected to grow to 1,000 stores. To support that business, we acquired sales…

Thanks, Jeff. As we reported earlier this morning, net loss for the second quarter of 2014 was $3.2 million or $0.24 per diluted share as compared to net loss of $568,000 or $0.04 per diluted share in the 2013 period. Adjusted net loss for the quarter was $3.1 million or $0.23 as compared to adjusted net loss of $1.1 million or $0.08 per diluted share in 2013. A table which reconciles this non-GAAP measure to reported results was included in this morning's release. Loss from operations was $3.2 million for the 2014 quarter compared to income from operations of $12,000 in 2013. Consolidated EBITDA, a non-GAAP measure that is reconciled to our GAAP results in the release, was $1.5 million for the current quarter and $4.3 million for the period in 2013. Consolidated EBITDA for the trailing 4 quarters ended 2014 was $41.2 million compared to $36.8 million. During the second quarter of 2014, the company realigned its reportable business segments and now reports 3 segments, as that are: U.S. wholesale, international; and Retail Direct. The U.S. wholesale segment is comprised of the businesses that are managed from the U.S. and then sell its products to retailers and distributors. The international segment is comprised of our businesses that are managed outside the U.S., which are Creative Tops, including La Cafetière's European business, and Kitchen Craft. The Retail Direct segment, which is unchanged, consists of our U.S.-based business that sells a limited collection of the company's products directly to consumers through its Internet websites. All prior periods reported have been revised to reflect this new segment alignment. This segment alignment reflects the manner in which management assesses performance and allocates resources. The U.S. wholesale segment -- for our U.S. wholesale segment, net sales this 2014 quarter decreased 28% [ph] to $85.1…

[Operator Instructions] Our first question is from the line of Laura Champine at Canaccord.

Could you give us some more information about why you think that gross margins will be flat for the year? They came in below us for this quarter, so any information you've got about improvement of the U.S. wholesale environment later in the year? Or what drives that goal?

Yes. A lot of it was timing of programs. Jeff's made some comments generally of what happened in early part of the quarter, but we think it's the programs that we have in plan in the balance of the year that we expect will recover some of the declines in gross margins that you saw in this quarter.

And can you tell us more about those programs? Whether it's -- which type of retail channel or what categories they're in?

Well, I can give you an example of one. Early -- actually, at the end of last year, we were -- one of our division presidents brought a potential large program to us from one of the of the bigger retailers, and it was a low-margin program. Lower than we normally take. But with that retailer, we knew we had to do that. But the division president assured us that, that was all going to be a plus. It turns out it will be a plus on the annual basis, but it was not a plus in the quarter. So we had a low-margin business in one of the divisions that, on an annual basis, it wouldn't be that way.

And Jeff, is that just because volumes are going to scale up as we move through the year?

Yes, very much so. Volumes scale up and a lot of the -- program timing sometimes affects us quarter-to-quarter. And in this case, it affected us pretty severely.

We have another question for you, this one is from the line of Frank Camma at Sidoti. Frank A. Camma - Sidoti & Company, LLC: A couple of questions. So if I did this right, I'm coming up with organic growth for the quarter of about 2%. And I think for the 6 months, roughly the same here, 2% to 3%, which is kind of in line with category. But your -- for your sales guidance, you're holding steady at about 5% for the year. I was just wondering what gives you the confidence that you're going to see a -- especially in light of kind of a weak retail response here, what gives you confidence?

Well, it's not only in the U.S., our business in the U.K. with Creative Tops, which we've had now for several years, is doing very well. So that's certainly going to add to it. The U.S. rate will be slower than the -- rate of growth would be slower than the rate of the growth we're having in the U.K. But overall, with the programs that we have -- that are already in place and the commitments that we have for the full season, we're pretty confident in the numbers. Frank A. Camma - Sidoti & Company, LLC: Okay. And you mentioned that Walmart right now has 400 centers there in China. Are you in all of those 400 centers today?

Yes, it's actually just a little under 400, and we are in all of them. But we haven't rolled out the full program yet. We've rolled out Kitchenware and kitchen knives, but the Tabletop part of the program is rolling out in this quarter, in the third quarter. I got to tell you, I'm very surprised how well our products are selling at retail. In China, they're all under the Farberware brand, which seems to be embraced by the Chinese people right now. So we're very, very enthused with what's happening right now. Frank A. Camma - Sidoti & Company, LLC: Good, good. And do you have any idea of -- and then you also mentioned that Walmart plans to get to about 1,000 supercenters there over time. Do you have any idea of like what their estimated time frame is for that?

No, I don't. That was -- that really came from a senior executive at Walmart that I met with in China. He told me that their plan is to go to 1,000 Walmart stores plus the Sam's stores, which they currently have only 10 of them, which are doing very, very well for them. So I'm sure they'll expand that. Walmart is nowhere near the largest retailer in China. I believe they're #4. So there's a huge opportunity for us to grow there with other retailers. We're going to concentrate -- in the near term, I'm making sure the Walmart business is really going exactly the way we want it to go. And that -- we should have that well done by -- before the end of this year. And starting in 2015, we will approach the other large retailers in China with programs that we think could do well for them as well. Frank A. Camma - Sidoti & Company, LLC: Okay, great. And just a couple of quick ones. Just on the showroom that's opening up in Hong Kong, you mentioned that that's going to give you access, I think you said to 100 countries where you don't currently don't have offices. Am I correct about that?

That's correct. We currently do business in many countries where we don't have a presence, but we don't have any centralized sales operations to really sell all of our business into those countries. We have identified -- actually, over 100 countries and we've also identified the retailers within those countries that we're interested in doing business with. We have an international sales staff of about 5 now that will funnel customers to the Hong Kong showroom. And we really have high hopes. They're very big investment for us. We believe that this will really pay off, and it will pay off quickly. Frank A. Camma - Sidoti & Company, LLC: Okay, great. And then just the final question is, jumping back to the retail environment here. Were you surprised about that -- I mean, the restocking really -- especially at like Walmart, really began last year, at least for the many of the companies that I cover. Were you surprised -- because I don't think you really experienced that last year, were you surprised by the kind of acceleration in this quarter or was that anticipated? Just kind of get your thoughts on that.

We -- frankly, on the number of retailers, we did not anticipate that they would not be ordering up to retail sales. And they were -- and frankly, in the -- especially in May and June, less so in June, but more so in May that they really did not replenish goods that were sold off the floors of the retail. That, we've seen a marked change in July, so things are gettings back to normal. And whatever the new normal is, but it's -- they're getting back to normal. And so they're now all replacing products that they sell, which is certainly a very good sign for the fall.

[Operator Instructions] And we have another question for you, speakers, this one's from Brian Freckmann at LS Capital.

Just a quick question, kind of looking out further. You guys have taken this business to what looks to be about a $600 million run rate. And looking out into, let's say, FY '15 at whatever growth rate you guys will guide to. Where do you guys see the leverage coming from? It seems like the gross margin side is kind of what it is and probably, it's something you'll battle for. Can you kind of help me understand some of the initiatives you've talked about in order to sort of think about how '15 looks and where you guys kind of leverage this pretty significant top line going forward?

Yes. Well, we expect the top line to continue to grow. Some of the businesses that we acquired were small but have great potential, such as Built and La Cafetière. Even though we expect them to be profitable, they're small and yet they have huge potential to grow. So we're go -- and as -- on a global basis, not only in the U.S. or in Europe, so we do -- we will get a lot of leverage by growing with companies that we've added into our infrastructure, that would include -- that includes the Empire Silver business, which goes into our silver business, which we view as -- is going to be terrific, we believe. We have Built, which has a huge potential. We have La Cafetière and as you know, coffee is one of the hottest categories there are and they are -- they have the right kind of a line to really expand on. They were a cash-soft [ph] company. So we get a lot of synergies and leverage out of making sure those companies grow within our infrastructure, as well as continuing doing what we do and growing into other countries. It's just something we expect.

I'm sorry. Maybe -- I wasn't talking about the revenue growth, I was talking about kind of as you guys grow the revenue, do you guys have sort of a long-term goal you could share with us in regards to sort of, let's call it, EBITDA profitability as a percent or operating income or something where you guys feel that as you grow the revenue from here on, you might incrementally be able to drop incremental dollars to the bottom line versus sort of when you were underscaled at $400 million or something along that line?

Yes, I mean, today -- I mean, our EBITDA is less than 10%. Our goal is certainly to get there and above. And we think we'll get there, and I think we've talked about this in the past and it certainly is difficult -- a little difficult to get in the gross margin line, although, to some degree, you can because we don't run our own factories. But we do get leverage because we have initiative to -- in Asia, to find factories where we can use our buying power. Talk about process [ph], sell a lot of -- like can openers to get savings. So -- but the easiest way for us to get that leverage is on the distribution and the SG&A line because -- I mean, we're getting bigger. And so at some point, we're going to have to increase the infrastructure but we still think we have a fair amount of room. We'll -- we did spend some and we are spending some money in SG&A to help grow the business. But we still think there's a fair amount of leverage there and in our distribution capability to pick up some EBITDA points more easily than certainly we could do on the gross margin line.

Okay. So you guys certainly have a -- the goal to get EBITDA to a 10% number.

That's right.

Yes.

And any -- I mean, sort of big picture, is that 18 months possibility? Is that 24 months? Is there sort of -- as we model these things out, kind of trying to figure out the drop down, is there sort of -- just kind of a roadmap you could give us?

Yes. I mean, we think about that more over, let's say, a 3- to 4-year period to get above 10%.

We have another question for you. This one's from the line of Jeffrey Matthews at RAM Partners.

I just wondered how much of your business is done with retail -- online retail partners versus in-store? And what the trends there are? Are they better trends for you than -- at brick-and-mortar retail?

It's -- online retail is a combination of strictly online retail, like an Amazon, as well as traditional retailer's like the Bed, Bath & Beyond and Macy's that have an online component. We aggressively go after online business. We don't break out the percentage, but I can tell you, the overall online business is absolutely increasing, and it's increasing at a high rate every year. And that includes business we do with only -- with strictly online retailers and business we do with brick-and-mortar retailers that have online components. And it -- with us, it varies greatly by product classification. For instance, it's a -- a very small percentage of our Kitchenware business because not many people go online and buy a peeler. But it's a very big percentage of our Dinnerware business. Consumers go online and purchase dinnerware, which is rather heavy. A service for 8 can weigh up to 60 pounds, and they will buy that online and have it sent to them. So it does vary, but it's something that we do focus on. We have groups within Lifetime that focus specifically on making sure that our business online with retailers is growing.

Got it. And if I could also ask one more about cost of goods and what's happening with China, and are you moving anywhere else to address your cost of goods?

We haven't experienced anything significant in China, but what we do is we try to leverage our strengths. And I'll give you a quick example. Between Lifetime and all of our global partners, we use somewhere between 12 million and 15 million can openers a year. So about 6 months ago, we started working with factories to automate the production of those can openers. We narrowed down the working parts to make it easier for the factories, and we've been able to automate it and eliminate most of the labor. And frankly, we significantly lowered the cost of can openers of the company, which is just starting to come at our inventory now and really more so will be in 2015. We will continue to do that throughout the business. It's a -- one of the key things we're working on now is to, again, use our size, our scale within the world that we're in to help factories to automate production of our products, which, perhaps, our competitors can't do.

There are no further questions at this time, so I'll now hand the call back to Mr. Siegel for closing remarks.

Thank you. As we've said several times, over the next few years, we expect our organic growth in the U.S. to be between the rate of the increase in GDP and perhaps up to double the rate of the increase in GDP. Our experience today has shown us that the potential for growth is exponentially higher for us outside the U.S. By accelerating our investments in global growth, we believe we can more quickly capitalize on this opportunity. We look forward to bringing you up-to-date after the third quarter. Thank you, all.

Thank you, ladies and gentlemen for joining today's conference. That concludes the presentation, and you may now disconnect. Have a good day.