Good morning, ladies and gentlemen, and welcome to Lifetime Brands Fourth Quarter and Full Year Earnings Conference Call. At this time, I would like to inform all participants that their lines will be in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer period. [Operator Instructions] I would now like to introduce your host for today’s conference, Andrew Squire. Mr. Squire, you may begin.

Thank you. Good morning, everyone, and thank you for joining Lifetime Brands' Fourth Quarter and Full Year 2018 Earnings Call. With us today from management are Rob Kay, Chief Executive Officer; and Larry Winoker, Chief Financial Officer. Before we begin the call, I’ll read the safe harbor statement under the Private Securities Litigation Reform Act of 1995. The statements regarding the Company and its consolidated subsidiaries that are about to be made in this call that are not historical facts are forward-looking statements. Such statements include all statements regarding our current and projected financial and operating performance, results and profitability and all guidance related thereto, as well as our future plans and intentions regarding the Company and its consolidated subsidiaries. Such statements 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; possibility of impairments to the Company’s goodwill; changes in U.S. or foreign trade or tax law and policy; the impact of tariffs on imported goods and materials and whether the actions we are taking will mitigate the impact of tariffs; changes in general economic conditions which could affect customer payment practices or consumer spending; the impact of changes in general economic conditions on the Company’s customers; customer ordering behavior and our expectations relating thereto; the performance of our newer products, expenses and other challenges relating to the integration of the Filament Brands business and future acquisitions; whether the benefits we expect to realize from the acquisition of Filament will materialize; our expectations regarding our cost savings initiatives, whether the reorganization of our European operations will create profitability; whether the actions we are taking will create shareholder value; changes in demand for the Company’s products; changes in the Company’s management team; the significant influence of the Company’s largest stockholder; fluctuations and foreign exchange rate; changes in U.S. trade policy or the trade policies of nations in which Lifetime or its suppliers do business; uncertainty regarding the UK’s exit from the European; shortages of and price volatility for certain commodities; significant changes in the competitive environment and the effect of competition on the Company’s market, including its pricing policies, financing sources and ability to maintain an appropriate level of debt; and other risks detailed in Lifetime’s filings with the SEC. 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. Rob Kay. Please go ahead, Rob.

Thanks, Andrew. Good morning, and thank you for joining us today to discuss Lifetime Brands fourth quarter and full-year financial results -- full-year 2018 financial results. Our fourth quarter and consequently our full-year performance were below our expectations and previously provided guidance. On a pro forma basis, including the Filament results for both 2017 and 2018, the fourth quarter was basically flat with the prior year. However, we had anticipated growth in top and bottom line. While our GAAP results for the full-year showed growth related to the acquisition of Filament Brands, as a result of the fourth quarter performance, we saw noticeable declines for the full-year in both pro forma and net sales and EBITDA. Simply put, we are disappointed in these results and they are not what we expect to deliver to shareholders. We believe this underperformance was due to a combination of factors, but primarily the adverse impact of certain unforeseen macroeconomic events, which I will discuss before turning over the call to Larry, who will go over the numbers. I'll also discuss with you important achievements from throughout 2018, as well as highlight some positive indicators we are seeing in the first couple of months of 2019. It's important for me to emphasize that we are optimistic these macro events, while meaningful in impact, are predominantly singular in nature. They include European softness primarily due to Brexit and the inconsistent implementation of a new U.S. tariff program that hindered our ability to pass along timely price increases. Additionally, our sales were adversely affected by stocking levels and inventory management decisions by retail customers, including our largest ecommerce customer. In Europe, as you know, in the second half of 2018, we announced a plan to reorganize our European base operations, including the consolidation of our European operations…

Thanks, Rob. As we reported this morning, net income for the fourth quarter of 2018 was $10 million or $0.49 per diluted share compared to net income of $1.3 million or $0.08 per diluted share in the 2017 period. Adjusted net income for the quarter was $11.2 million or $0.55 per diluted share, as compared to adjusted net income of $7.1 million, $0.40 per diluted share in 2017. A table which reconciles this non-GAAP measure to reported results was included in this morning's release. Income from operations was $22.9 million for the 2018 quarter compared to $10.9 million for 2017. Adjusted EBITDA, a non-GAAP measure that is reconciled to our GAAP results in the release, was $65.5 million, $64.9 million, reflecting the credit agreement limitation. That's for the year ended 20% -- December 31, 2018. This included permitted pro forma adjustments for Filament and projected unrealized synergies of $8.5 million. As a result of reorganizing certain management responsibilities, the U.S. wholesale segment now includes the U.S. retail direct channel. Therefore, our comments today and in the future will reflect this reorganization, including on a comparable basis with prior periods. Net sales for the quarter increased $45.5 million to $228.3 million. This reflects the acquisition of Filament, which added $51.6 million. Organically, net sales decreased $6 million. The U.S. wholesale organic sales decreased $3.4 million. This decrease reflects, as Rob noted, retailer inventory reductions and transportation difficulties due to tariff concerns. A decline in kitchenware and tableware products was offset partially by an increase for home solution products. In international, sales declined by approximately $2.6 million, but that's $1.8 million decline in constant U.S. dollars. This reflected retailer inventory reductions and consumer concerns about the potential impact of Brexit. Gross margin was 37.2% in 2018 compared to 39% in the comparable…

[Operator Instructions] Our first question comes from the line of Frank Camma of Sidoti.

Hey, guys. Good morning. Thanks for taking the questions. I know, Larry, you called out the organic, but could you just give us, if you have handy, the numbers for Filament for the quarter and for the year, the revenue?

Yes. It was $51.7 million; last year, it was about $49 million. And so, that’s…

There was the revenue in the quarter.

Yes. As I said, 51, last year approximately $49 million. So, it was up $2.5 million. For the year, it was about -- for the year that we -- it's on a full year basis -- we only had 10 months, but it was 154.5.

Okay. And how much of that 154.5 did you actually book...

Yes. So, that’s 12 months. So, it's for -- 10 months, it was about $129 million.

So, Filament, I mean, year-over-year in the quarter actually did, okay, correct? I mean, because last quarter, that was actually down year-over-year?

The same trends we saw across the business were related to all of our lines of business equally. But, yes, Filament had a good fourth quarter.

Yes. I guess, where I’m going with that is -- I mean I know you’re not…

But, it was lower than our expectations, Frank.

Sure.

It was good year-over-year quarter, but it was lower. So, as we said, the fourth quarter year-over-year, we’re flat on a pro forma basis. But our expectations were for more growth. And that's what we were addressing, but we were -- Filament was a bit up as Larry pointed.

Okay. No, my concern though was with Filament was the fact, and I know you didn’t name customers but you did say the largest the foodservice, so we know who that is. Now, so, what can we expect -- I know you are not giving guidance here but what can we expect from that customer going forward? Does that mean you lose that customer or does it mean they greatly scale back? Can you give us like some color on that?

So, we did not lose that customer but year-over-year there was a noticeable decline as they dramatically changed what their merchandise strategy and therefore their purchases. So, now, it's just a decline, not -- it's still a big customer.

But that will flow into -- I guess, where I’m going is that will flow into next year, right, I'm assuming. And is foodservice -- is Q1 typically a decent quarter for foodservice? Is that not as seasonal I guess…

That is not as seasonal as the retail business, Frank. As we mentioned, some of the transportation issues, both on getting containers out of China, and then actually getting goods out of port, in this case what you're referring to is only out of China that was also impact because it's all DI out of China. So, some of that rolled over into the first quarter.

So, you would actually benefit from that in Q1 now because this is sort of a timing issue?

You would.

And then, I guess, the other item and I know you didn’t call the customer again, but like you said, 20 weeks for ecommerce customer down to 6 weeks. That sounds like they almost -- they didn’t order in the quarter at all. I mean, given that dramatic of a decline, destocking...

This is across the industry, everyone -- and the matter of fact, this is a big customer of us in Europe as well and did the same thing, so they operated globally along those lines. As we pointed out, we're able to track sell-through to consumer which is quite good, which is also contributing to why the in-stocks went down so much. It happened, and there's a lot of press on it -- not for the full quarter but it started in November, a lot of analysis and press in it. Again, that is a customer, which you can -- six weeks is too low. So, we've seen some nice order flow year-over-year so far in 2019.

But, aren’t they changing their business model so much so that they don't actually hold the inventory? Isn’t that the whole point like they want you to sort of be -- they just want to pick scan, I mean it's sort of their shop-in-a-shop model, if you will? I mean, can you address that, like does that change your model…?

Yes. I mean, two things. First of all, if there is -- if anyone, doesn't matter brick-and-mortar, ecommerce, changes their inventory strategies and it happens, can’t last forever because as you know, in this case, you can't run out of stock, right? You need inventory. So, the impacts are finite. That being said, you're talking about someone who changes strategies often. So, it's really hard to comment on that. And I think what you're referring to would really impact people that are smaller than us.

Right. Because you have the ability to hold the inventory and ship direct, right?

Sure, we do and we can drop ship and we're certified appropriately. So, there is all of that which creates a different relationship. But also, if you look at the press, the sort of eliminations are focused on people doing smaller amounts because we're not near where those cutoffs are.

Okay. So, the biggest shock to me still is the gross margin. Larry, excuse me, if I missed this, but you mentioned 2.4 million purchase accounting. Now, did that flow through to the gross margin, lowering your gross margin or was that through somewhere else?

No, the purchase accounting amortization just goes through SG&A.

So, that's SG&A, so that would have no impact there.

I mean, there was…

Go ahead. I'm sorry.

I was just going to comment, it is down for the quarter but it's -- it was more pronounced in the quarter than it was to the year.

Yes. It's a bit of a mix issue and of course in the quarter, as Larry pointed out, we had an impact on the tariffs that would be a fourth quarter impact.

Okay. So, it was really more the tariffs. Now, have you consequently in Q1 started to push through those price increases?

So, the tariff situation, as I tried to explain, Frank, we have reacted, and as part of that as we mentioned, you can't mitigate all of the tariff without a price increase. So, we implemented a proportion and then we had implemented price increases. But, unfortunately, when the government started moving the target of the tariffs from potentially 10% to 25% to 10%, and the timing of the implementation of that, it was impossible for us to get a price increase through in the fourth quarter because there was flip flopping and uncertainty. As of now, we have been able to do that subject to change if the tariffs change percentage and implementation dates or if they go away.

Okay, fair enough. And just my -- as I'm looking at these adjustments that you put in the release just as housekeeping, so like the continuing consideration fair value adjustment that I assume is an SG&A issue, correct?

Correct.

Okay. So, the only one that does -- it looks like to me that of the ones up top that don't flow through SG&A is probably the warehouse relocation, is that distribution?

Yes.

And the bottom three, I assume are to affect the tax, they flow directly to your tax rate?

Yes.

Okay. So, then, looking at that -- and this will be my last one, I'll hop off. But, it looks like your effective tax rate is still pretty high. And is that just because your jurisdictions? I mean, it comes about -- and it's after I adjust it to about like 42% for the year, is that just because of where you book the income?

It's an anomaly. You still have this small numerator that hurts, but there is nothing that is let's say is persistent that would cause it to be that high, going forward.

Okay. Yes, because I have modeled about much less, like I think 27.5 going forward, does that sound like a more realistic modeling number?

Yes.

Your next question comes from the line of Justyn Putnam of Talanta Investment Group.

My first question is a clarification question. The foodservice customer that you discussed on the call, is that the same customer that you mentioned on the last call where you may have sales from that customer going into the New Year?

Correct, Justyn.

Okay. So, now, the update is, not only do they get pushed into New Year, they are also a lot less than we were expecting. Is that right?

They ended up for the first time in our relationship over 15 years, cancelling some orders, but there was some orders that got pushed off.

Okay. And my next question is, I guess, Larry, this is for you. I was wondering if I could get maybe a more updated net debt balance. And the reason is because I think we’ve talked about in the last call a lot of cash flow comes in after the first of the year. I was wondering, would you give any update on a net debt figure.

Yes, I’ll -- Justyn, I’ll give them to you as of obviously end of the year. So, net debt at the end of the year was approximately $307 million.

What about say January 31st?

I don’t -- we're not going to comment on going forward but we did say and this is typical for the Company year-after-year that because we sell so much in fourth quarter, our debt balance does significantly decline in the first quarter. But, I can't -- I'm not prepared here, but we generally don’t give that information. We will at the end of the quarter.

Okay. Then, my next question is, I mean, obviously, you have a lot of moving parts in the business right now, the transition and macro issues and so forth. But, just taking a trip down memory lane here, looking back at the December 22, 2017, when the stock price was about to the extent higher than it is now, I think you announced the acquisition was accepting company to have around $770 million in net sales and EBITDA of $85 million. Once the dust settles in this acquisition, is that still fundamentally your expectation for the business or going through this integration process to realize perhaps…

Yes. No, our expectations are -- Justyn, it's a fair question. The expectations are to get there the same -- it's just we didn't get there as fast as we thought.

Justyn, just one thing, maybe you have this but just clarification, I think you’re referring to with Filament on a 12-month basis, there's another $25 million that Filament had in sales in the first month of 2018 that are not in our numbers. So, the 700 and change of what reported is 730 on a 12-month basis. Still off what we protected but just wanted to point that out.

Yes. The sales figure, but the EBITDA is still, even with your adjustments, 20 million below that I guess, right, so below that expectation.

Yes.

[Operator Instructions] At this time, there are no further questions. I'll now return the call to Rob Kay for any additional or closing remarks.

Thank you, operator. For everyone on the call, thank you again for joining us today. We are looking forward for our improving results and profitability throughout 2019 and our confident that the steps we're taking will help us achieve our goal of becoming a powerhouse in the housewares industry across all channels. As always, we appreciate your continued support of Lifetime Brands. Have a good day.

Thank you. That does conclude the Lifetime Brands fourth quarter and full-year earnings conference call. You may now disconnect your lines, and have a wonderful day.