Good morning, ladies and gentlemen, and welcome to Lifetime Brands' First Quarter 2020 Earnings Conference Call. At this time, I would like to inform all participants that their lines will be in listen-only mode. After the speaker’s 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 your conference.

Thank you. Good morning and thank you for joining Lifetime Brands' first quarter 2020 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'd like to remind you that our remarks this morning may contain forward-looking statements that relate to the future performance of the Company, and these statements are intended to qualify for the safe harbor liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission. Our remarks this morning and in today's press release also contain non-GAAP financial measures within the meaning of Regulation G promulgated by the securities and exchange commission. Included in such release is a reconciliation of these non-GAAP financial measures for the comparable financial measures calculated in accordance with GAAP. With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob.

Thank you. Good morning everyone, and thank you for joining us today to discuss Lifetime Brands' first quarter 2020 results. I hope that you, your family, your friends and your colleagues are staying safe during these unprecedented times. Before I begin, I would like to take this opportunity to recognize the exceptional efforts of our associates including our operational teams, who have kept our facilities running safely and productively to ensure we can continue to deliver the products, our customers know and love. I would also like to thank our sales, marketing and administrative teams, who've been professional, productive and highly effective as they work remotely. At Lifetime Brands, we've been working diligently to deliver strong results, while ensuring the safety and wellbeing of our employees. Driven by the impact of our Lifetime 2.0 initiative, combined with the actions we have taken since the onset of the COVID-19 crises, we are pleased that, we delivered solid results in our core U.S. business. These results were achieved with strong performance from several of our major customers and channels, including a significant increase in e-commerce sales, enabling us to generate significant cash flow and meaningfully lower our net debt in the first quarter. This was slightly offset by the anticipated impact from the operational challenges in our European operation, which began in 2019 and was solved by the end of January, 2020. However, we also faced challenges in our international business where there was a more significant impact from the COVID-19 crisis in the first quarter, for the border closers and retail store closures, resulting in shipping delays and lost revenues. Let me start with our core U.S. business. E-commerce represented one of the most important growth areas this quarter, contributing 16.7% of our total revenue for the first quarter. Importantly, that…

Thanks, Rob. As we reported this morning, the net loss for the first quarter of 2020 was 28.2 million or $1.36 per share versus a net loss of $4.9 million or $0.24 per share in the first quarter of 2019. Adjusted net loss was 5.7 million for 2020 or $0.27 per share versus an adjusted net loss of $4 million or $0.19 per share in 2019. A table which reconciles this non-GAAP measure to report results was included in this morning's release. Loss from operations was 25.2 million in 2020 and 2.3 for 2019. The loss from operations for the current period was 5.1 million, excluding the impact of a noncash charge for goodwill and intangible asset payment related to the U.S. business segment. Charge with bad debt reserve of 2.8 million to provide for potential credit problems of certain retail customers who may have financial difficulties caused or increased by the COVID-19 pandemic. Adjusted EBITDA and non-GAAP measure that is reconciled to our GAAP results in the release was 61.2 million for the trailing 12-months ended March 31, 2020 after giving effect to certain adjustments and before limitations as permitted and defined in our credit agreements. Adjusted EBITDA was calculated to include the charge to bad debt reserve of 2.8 million that I just mentioned. Net sales in the 2020 quarter were up 145.1 million compared to 149.9 million for the 2019 quarter. The U.S. segment sales were up 2.2 million to 129.2 million. The increase was primarily led by kitchenware's continued success of programs that commenced in the latter part of 2019 for several product lines, as well as increase in e-commerce sales. This increase is partially offset by a decline for products sold predominantly to customers that were closed due to the pandemic. International segment sales were…

[Operator Instructions] The first question will come from Linda Bolton-Weiser with D.A. Davidson.

So, your operating cash flow was quite impressive in the quarter. Actually, this is the second quarter in a row that you beat our estimates. Can you give us a sense for -- I seem to recall that your target for improving cash flow was mostly through the June 2020 period. So, are we to expect is big improvements in operating cash flow in the second and third quarter? Or will the improvement kind of taper off a little bit as we look to the next few quarters?

Yes, sure Linda. So just to clarify, there were some initiatives that we had announced in 2019, which would supplement our operating cash flow. And that was primarily SKU rationalization and potentially divestiture with small product line the -- whether we pursue the adventure is not huge, but we -- it's not in our cash flow. So obviously that would be supplemental to the future. But, we have pursued this SKU rat and that has are supplemented our cash flow a little bit. But the majority is driving it is just the performance of the core business, and the costs that we've taken out of the business, so we're generating more cash to the bottom line.

Okay. So, it sounds like we can expect to see continuing improvements at least some going forward is that kind of what you're saying?

Yes, Linda. So, it's Larry here. Historically -- and I think you know this, others know this that, we generate cash obviously in the latter part of the fourth quarter well into the first quarter. But generally, that's when it generally stops to let's say, flatten out a lower bit because we've collected most of the receivables that were generated during the holiday season. And now we, generally again, see generally because the world has changed, generally now is when we start to build working capital, and we would see more borrowings. Again, it's hard to say now because of some of the changes in business practices given the pandemic, and what happens with stores reopening, but historically in the second quarter, we would not -- see we would actually see a decline.

Okay. And then when you reported in March, I think it was around March 10th or 11th. You have said that the issues in the UK, operational issues were completely resolved as of January. So, I'm a little surprised that the gross margin in international was so impacted because the issues supposedly were over with in January. So, could you talk about just, why, I mean, did you continue to have some issues in February and March? Or can you explain that saying?

Yes, we will definitely, sorry for the confusion. So, by the end of January and we had solved our operational issues in the UK, that has not changed. As once we solved the operational issue, then we needed to -- we had thrown -- sorry for not articulating well. In advance of solving the operational issues, we started throwing a lot of costs to make sure we can continue to ship and minimize disruption, a lot of that was temporary labor. So, the labor inefficiencies in the warehouse were quite strong or high, and we basically eliminated those by the end of February. So, we did have a hangover in terms of the operational costs would have an impact of margin in the first quarter, which we had anticipated, we may not have articulated that well. But the operational issues were solved continued to remain fine and matter of fact that, I had mentioned in my remarks as a result now with enhanced drop-ship capabilities and speed of doing that we've been able to benefit and capture a lot and if I mentioned there's a 15-fold increase in what we're shipping on a drop-ship basis from 4Q till now.

Okay, and then, I think you said in your remarks that the U.S. ales in April were kind of trending flattish, April and May flattish year-over-year. So, can you just confirm that, that's kind of what you said, was international still down, but improved sequentially, is that kind of what you said?

As we said, we kind of look out for now, you can't tell in any given market we've had a good start in Q2, in the U.S. business and the mix is a lot different. For instance, we had over 28% of our business in April that was the e-commerce, so just a lot is shifting. But the business performed fairly well year-over-year so far, which may not dawn in April in the books.

Okay, I know that that Helen of Troy had mentioned in their OXO business that the business is actually benefiting from people staying at home, buying kitchenwares type stuff. Are you kind of seeing that phenomenon in your business and that's why it's holding up?

Very much so. So, we always joke about can openers. We can't keep them in stock, and we've always joked about that. Well, it's absolutely true. You can't buy them, right? We're trying to accelerate as much as possible, and the demand for all of our kitchenware, KitchenAid, Farberware primarily has greatly exceeded expectations, and both in e-commerce, the omni-channel guys that are working just our websites. But the other major customers that, a lot of our major customers are open in grocery. So kitchenware, cutlery, there are a bunch of categories that have remained actually stronger than what we expected because, there's been a big increase in demand as people are doing more eating at home.

Great. And then, can I just ask one final one, I guess you drew down some on your revolver, so technically your total debt including the revolver increased in the quarter, right. But, do you intend to keep kind of cash on the balance sheet through the rest of the year? Or will we see the debt actually coming down for the year including the revolver?

Yes, that's a good question. I mean, the truth is, we pull down on the revolver and we haven't needed it, but in an abundance of caution because there's so much uncertainty created by COVID-19, the pandemic. We have greatly exceeded our cash flow since we did that. But, we still are appropriately remaining, not re-paying that amount. We have a little negative carry as a result, and we'll continue to evaluate that, right? We still are looking as things reopened, we are looking at, there's a second wave. So, we just think it's abundantly prudent to have that buffer, if everything blows up in the world. We're sitting on $85 million of cash.

The next question will come from Anthony Lebiedzinski with Sidoti & Co. Please go ahead.

Hey, good morning gentlemen. Hope you're both doing well. Thanks for the opportunity to ask questions. So, I know you talked about e-commerce sort of seeing a nice increase in sales. Can you talk about the margin profile whether it's any different when you sell to Amazon or to Wayfair, as far as the margin for the products versus the traditional brick-and-mortar retailers?

What we can say is that, we are seeing an improvement overall in our margin on the year-over-year basis. So, we have -- as the shift has impacted, we haven't seen any deterioration in margin, no.

Got it, okay. Thanks for that. So, I know you've talked about the supply chain disruptions in the UK impacting the results for the first quarter. It sounds like everything has been resolved. So, looking back, so you said the international segment gross margin was 22.9% versus 34.9% a year ago. My notes are correct. So, is there any reason to think that we can't go back to those margins from a year ago now that the issues have been resolved? Or is there a something else that could perhaps prevent you from achieving those margins that you had a year ago before the disruptions?

Yes. This is Larry. No, there's no particular reason why that would be. Remember, we said that, this is somewhat of a hangover from some of the operational issues. The customer service levels that became revealed to us later in first quarter, so there is nothing about the business that will cause it to -- if you go back, there is nothing to cause it to continue as is.

Got it.

The way it was in the first quarter. So, look, call it -- response to say, no, it should be a non-recurring condition.

Okay, great. Thanks for that. And I know you guys are not giving any formal sales or EPS guidance, but I guess as far as and just looking at the other line items, as far as expenses, I know you have done some expense reduction initiatives. Can you perhaps quantify those the expense reductions as to how we should think about how those flow through the P&L through the rest of the year?

Again, it's a flux target. We have been very aggressive looking at all categories of spend, as I mentioned. So, you'd see a positive variance across all categories, but we're also monitoring the situation. For instance, we've been in the position that we've furloughed hundreds of people. And -- but it's not our -- we evaluate in terms of bringing people back. We right sized in the UK in particular when there wasn't volume, we had to right size our operations. As things normalize, there will be increased spend. So, we can't say that its permanent situation is all in flux, but we can say that we are reacting to protect the Company's results as the situation evolves.

The next question will come from Justyn Putnam with Talanta. Please go ahead.

So, obviously, all the turmoil on the back half of the first quarter and so far in the second quarter with everything that's going on with a pandemic, it sounds like first half of the second quarter seen flat in the business sales is maybe a pretty remarkable achievement, so congratulations on that. However, I guess, Rob, it'd be helpful if you get a little bit more information about your -- the sales and expectations for the back half of the year in particular because that is your largest -- your quarter's largest profitability and largest revenues. Would you consider the successful third and fourth quarter, if you maintain a similar pace, similar flat pace in the back half of the year? Or how would you characterize that? Just trying to get a sense of how everything's playing out with the changes made with the Company and what's going on in the in the wider world?

Yes, Justyn, I appreciate the question. I mean, beyond what we've already given, just we think it's prudent and similar to a lot of others companies that, it's there's just so many moving parts that we're not providing any detailed guidance. We can as, we talked about say that, when we reacted, we think very quickly and very aggressively in all fronts in terms of how we manage the business with uncertainties and potentially economic crisis created by this pandemic. And we did that globally and we looked at everything we do, both how we do it, the ability to continue to operate and alike, So fortunately, we haven't had any shipping disruptions both from a supply chain perspective. And we had stress tested in a situation like this, you would and I can say that, we've been pleased that what has happened since is greatly exceeded our expectations of what could have happened in environment, but our products are in demand in recessions, as we've talked about, what's happened in 2008 and you're seeing it here. So, our -- there's been really good demand for a lot of our product categories. But there's a lot that we don't know, which is why we're not getting specific. So, is there going to be a second wave or the impact that will be we can say that the mix has changed a lot. We're doing a lot more e-commerce as I mentioned, 28% over, 28$ of our shipments in April were e-commerce, and that's the big e-commerce guys, but it's also were which included or in addition to that is we're doing a lot of omni-channel. Now, as I mentioned in the UK, we went from 1,000 a week to 3,000 a day drop-ship and that's omni channel. And it is not like Amazon for instance, which is a big customer over there. So, we are benefiting from increased demand. It's been as I said, exceeding our expectations, giving us so far good performance, but we don't know and we are not commenting what the future will hold. The one other point is Lifetime had moved everything to the cloud or complete infrastructure. So, we could do call center, we could everything remote. So, it's been seamless for us. And while our salespeople aren't traveling, they're actively involved in conversations on setting up planograms and working on programs for the fall and the holiday season with our major accounts. That has not stopped.

At this time, there no further questions. I'd like to turn the conference back over to Rob Kay for any closing comments.

Great, and thank you. Thank you everyone as always for joining our call, listening and for your questions, and asking us for clarifications. Everyone stay safe and we appreciate your listening in on our call.

Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect.