Good day, ladies and gentlemen, and welcome to the Q4 2014 Lifetime Brands Earnings Conference Call. My name is Su, and I'll be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session toward the end of this conference. [Operator Instructions] As a reminder, this cal is being recorded for replay purposes. I would now like to turn the call over to Ms. Harriet Fried of LHA. Please proceed.

Good morning, everyone and thank you for joining Lifetime Brands Fourth Quarter 2014 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 me 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 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, and good morning, everyone, and thank you for joining us to go over our fourth quarter 2014 results. As you know, throughout 2014, we made significant investments to expand Lifetime’s business on a global basis. These investments reflected our assessments that there are more promising opportunities to grow internationally than domestically. The benefits of this focus was clear in the third quarter when we posted record sales and EBITDA despite a difficult retail environment in North America and they were demonstrated again in the fourth quarter as our net sales increased by $25 million or 15% to $190 million. The acquisitions we made in the first half of 2014, Kitchen Craft, Built and La Cafetière provided almost $23 million in sales. For the full year, consolidated net sales were $586.0 million, an increase of $83.3 million, or close to 17%. The three acquired businesses contributed almost $78 million to that number. Of course, as I mentioned last quarter, gearing up with many new brands, products and geographies, does counted of course. We’ve been making significant investments including in the international sales team with a 12,000 square foot showroom in Hong Kong in order to build our global business in a way that will over time enable us to leverage our core capabilities and infrastructure. We see many favorable trends that we expect to benefit our business in 2015. These start with the forecast for continued economic growth and stable unemployment rates, which are now at a six year high in the US. Low oil prices are also increasing the purchasing power – and reducing the cost of some of our materials. Let me take a moment to talk about this change and the way it will help us in 2015. As you saw in the release, our margins…

Thanks, Jeff. Just before I get into prepared remarks, we transmitted our earnings release this morning properly and there was some glitch I guess, in how it’s transmitted, how the wire picked it up. So you probably, you’ve looked at the table on EBITDA, you may have noticed that the three months 2014 are the same as the full year 2014, the three month is incorrect, it’s about $20 million. We’ll have that be retransmitted, it’s not already, sometime later this morning. So, as we reported earlier this morning, the net income for the fourth quarter of 2014 was $9.3 million or $0.66 per diluted share, as compared to $9.4 million, or $0.72 per diluted share in the 2013 period. Adjusted net income for the quarter was $8.3 million, $0.59 per diluted share, compared to $10.0 million, or $0.76 per diluted share in 2013. Table which reconciles this non-GAAP measure to report results was included in this morning’s release. Income from operations was $18.3 million for the 2014 quarter compared to $16.6 million in 2013. Included in the current period was a credit to adjust the fair value, the contingent consideration for the 2012 acquisition of Fred & Friends. While the Fred & Friends business remains profitable, it is not expected to achieve the very high hurdle we’ve set in the earn out. Consolidated EBITDA, a non-GAAP measure that is reconciled to our GAAP results in the release was $20.9 million for the current quarter and $21 million for period in 2013. Consolidated EBITDA was $42.5 million for the full year of 2014 and $43.5 million last year. For our wholesale segment, net sales in 2014 quarter increased $1.5 million to $145.1 million. The increase was in Kitchenware as new product offerings and extended programs at certain retailers. The increase…

[Operator Instructions] Your first question comes from the line of Frank Camma of Sidoti. Please proceed.

Good morning guys.

Good morning.

Good morning, Frank.

Couple questions here. Is the Reed & Barton potential acquisition, is that part of your sales guidance of 3% to 6%?

No, it’s not. It’s a 363 auction which means certainly no certainty that we would get at.

Sure, no, I was just wondering if we should be counting on that. So, I guess, the question then bags, 3% to 6% is actually pretty good organic growth for your categories, especially, if you look at what you did last year, I mean, especially in this recent quarter, I am calculating about 1%, if I’ve done that right. So can you kind of – I mean, I know you’ve got some consumer demand, you pointed out some macro issues, but you are talking about basically a three time – three x improvement organic growth. Can you just – and on the low end, I mean, is that reasonable?

Yes, it is. In 2014, the biggest decrease we had was in the Cuisinart cutlery. That was a $6 million decrease. We are now emphasizing more brands that we own or control and especially Farberware and Sabatier in cutlery and it’s a much better thing for us in the long-term though. There was a bit of short-term pain. So if you take that out of the index and alone this $6 million swing, in addition, this team that we put together to improve our online business which is primarily a brick and mortar retailers as well as some online-only retailers. It’s having great results and I think that’s going to be very positive for us. And lastly, some of the businesses that were lagging a bit for us last year have turned around and should become much better in 2015, especially since, we just came from the show, and what happened in the show was very, very positive for us. So, I am confident that we are certainly going to at least hit that – those numbers. I am kind of optimistic that we’ll do a lot better than that, but we’ll see.

Okay. Fair enough. Just to follow-up on the Cuisinart because I am not familiar with. Can you just explain, so did you stop making Cusinart cutlery or is it a license?

Right, we are no longer – it was a license and we are no longer – in 2014, we were not marketing Cusinart cutlery. Like I said, our cutlery business is moving more towards brands that we control.

In-house that you owned, okay.

Farberware is our fastest growing brand within the company by far and followed by Sabatier. So, those are the two that we have really emphasizing.

Okay, and is Farberware still being positively impacted by its rollout in China, is that one of the reasons?

No, that’s a small part of it. It’s actually rolling out into many new customers in the US. One thing that really helped us, the only accurate data that’s available within our industry comes from a company called NPD. And the retailers all buy the NPD data and the data that came out from NPD showed that Farberware was the fastest growing and the number one cutlery brand in America. And some retailers who previously did not carry the brand have added this for 2015.

Okay. And so on the expense side, I mean, obviously you got a couple of things flowing positively in your direction. How long does that take though to actually hit? Is it a quarter, is it two quarters, maybe you got rising, you have still, I mean, do you have existing inventory? So I was just wondering does it…

As I mentioned, we have to work through our inventory, because we think – substantial inventory along the supply chain. It will – we will start getting a benefit in the second quarter. And we will get obviously a much greater benefit in the third and fourth quarters.

Right, which is actually you are more meaningful.

In the second quarter.

Okay, okay and finally, if I can just have a couple just modeling questions here on the adjustments. Contingent consideration comes out of SGA& right, I mean, or we would add that to the SG&A? Okay, so, a question, Larry, I thought you said that there was a meaningful improvement in the SG&A year-over-year, but I did…

What I said was that it’s – that despite year-over-year flat results in the US and with many of the investments and initiatives being passed out during the year and as we said it didn’t hit the beginning of the year the starting of it, starting to hit the – like the businesses we purchased like Built and investing in showroom in Hong Kong. Despite that, SG&A and picking out the Fred and Friends adjustment, picking out acquisition transaction expenses, fuel expenses, the SG&A is up 60 basis points. So I feel that to me, it’s good, I mean, considering, as I mentioned the flat sales and the transaction expense.

Okay, all right. I am sorry, I missed that. Okay, that’s it. Thanks.

Thank you. And your next question comes from the line of John Sullivan of Olstein Capital Management. Please go ahead.

Hi. One of the testament for me being an owner of the business is, that you guys seem to generate a lot of cash relative to your earnings over time and it just seems like this year, you kind of got hit on pretty much every account, both on paying bills early and receivables inventory on that end. And I was just wondering what were some of the impacts in there and if there is some timing things that are going to be reversing out early on in 2015 or what the cash flows might look like going forward?

Well, one obviously, it was a disappointing year, so that obviously hurt the cash flow. The other is timing, you can see – you just see the cash flow our – were up last time and the business hasn’t grown but, the fourth quarter, as you know is a big part of our year and depending on when we ship in the fourth quarter and which customers that we ship to can have impact on receivables. Things like inventory we manage, we’ll bring that back into line. So those are the big things that I think really affected our cash flow.

Okay, and I mean, I would imagine 2015 and we should be positive cash flow to the – better than earnings with the amount of depreciation and amortization you guys have relative to capital spending.

We’ve been pretty consistent over the years, consistently generating as I say cash in excess of the earnings because of the high depreciation.

Okay, great. Thank you.

Thank you. [Operator Instructions] Your next question comes from the line of Brian Freckman of LS Capital. Please proceed.

Hey guys, how are you?

Good morning, Brian.

Quick question. What percent of COGS is resin and steel? I guess, I am trying to understand the target model is.

Okay, it obviously varies by product line. In our most important categories which are kitchen tools and gadgets and cutlery, those are biggest volume categories we have. It’s quite significant and it’s not all significant in tabletops. So, we have two different parts of the business. Again, it also varies by products. So, I can’t give you a really firm answer on this. It’s not quite that simple. The savings could be on a product could be anywhere from a typical kitchenware product or typical kitchen products, could be anywhere from 5% to 20%. And usually more in the range of – the bulk of it will be in the 5% to 10% range in those products. We also have some other savings that are I didn’t mention. The only thing that we source from Europe really is crystal. The Mikasa business, a substantial part of our Mikasa business which our tabletop business is crystal, is somewhere, windless and so forth. They come from Europe and they bought in euros. As you know, right now the Euro is very weak. So we are getting a substantial benefit on that end as well. I just can’t give you a real number. I apologize for that on the cost of products overall, because it varies so much by the different parts of our business.

Okay. I don’t know if I heard this or, that you guys gave typically the kind of go over international Retail Direct wholesale, I think I may have missed that, what was those numbers in the fourth quarter?

We did it, we did it by segment, what’s your question?

What was international?

International sales?

Yes.

For the quarter, they were $37.3 million.

Okay, $37.3 million. Thank you and then just on – just clear there, what was the Fred & Friends adjustment was what number?

$4.2 million

4.2?

Yes.

Okay. And then, just to remind, the financing, that 700, what was that towards?

We were looking to do a big financing, this we’ve talked about on the historical, we’ve been talking about – a lot about grow internationally and where we want to be in terms of size and we have given some serious – obviously serious thought about doing a financing really to have adequate capacity to do the – some significant transactions. And, we went down the path. We weren’t happy with the market, followed it back in the fall, the market was very strong for us. Just generally everyone in the summer. And just as what could happen as we are moving through with the markets were going against us. So, we decided that we wouldn’t do this major financing and we’ll probably for now stick to doing – now we continue to discuss with what we stick to that they doing a transaction-by-transaction. Market improves for single B credits, small size and unseasoned issuers like us.

Okay, so, you guys have sort of – you’ve given us an outlook on 2015 for say, obviously we don’t know the acquisition. It sounds like you are implying that margins will increase, given all the reversals and all the other things, any help there? I mean, I am trying to figure out what kind of EBITDA margin will you think we should be looking at? I mean, you’ve given us revenue?

Yes, well, we have thought about it and we really want to wait until, because that is only – if we get late April, early May.

Yes, at the first quarter call, we’ll give more detail on that.

Well, so you guys are going to give us, some sort of operating income or EBITDA in the first quarter?

We’ll certainly give more guidance than we’ve given, specifically more guidance than we’ve given you today.

All right, thank you.

Thank you for your questions ladies and gentlemen. I would now like to turn the call over to Mr. Jeff Siegel for closing remarks.

Thank you for joining us this morning. In closing, I would like to emphasize that we believe the general trends in the Houseware business saver companies like Lifetime. We are large in the industry. We are financially stable and we have many brands targeted to the different customer groups, consumer groups. Also we have advance design capabilities, which is really helping us right now in many ways and this building of a better internal drop ship distribution capability which will greatly enhance our ability to sell products online through our brick and mortar partners and online-only retailers. We look forward to giving you another report after the first quarter’s finish. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Thank you for joining and have a very good day.