Good morning, ladies and gentlemen, and welcome to Lifetime Brands Fourth Quarter and Full Year 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.

Thank you. Good morning and thank you for joining Lifetime Brands' fourth 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 for 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 to 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' fourth quarter and full year 2020 financial results. We are very pleased with our performance in the fourth quarter, which marks another quarter driving significant value for our stakeholders. Our results this quarter reflect the continued strong demand for our products and our ability to outperform in the majority of our categories in both pure-play and omnichannel e-commerce combined with robust demand in many brick-and-mortar channels and market share gains in many of our categories. On a consolidated basis, we also delivered growth for the full year 2020 with a very strong fourth quarter capping strong revenue and earnings performance for the full year. This was achieved notwithstanding the negative contribution of our international business for the first three quarters of the year and the decline in our commercial foodservice business due to the impacts from the COVID pandemic. Despite the many external challenges we all faced, it was a truly transformative year for Lifetime Brands and I'm incredibly proud of the entire team's performance, whose execution on the opportunities and challenges we faced drove our strong performance. Throughout 2020, our core US business showed strength and in fact has now delivered its sixth consecutive quarter of year-over-year growth, achieving 10.7% growth in the fourth quarter. Similar to prior quarters in 2020, we experienced very strong demand in our kitchenware, cutlery and measurement products. The combination of market share gains and robust demand produced strong growth that in many cases exceeded the underlying growth in our markets. For example, at our largest customer, Walmart, we grew revenues year-over-year 34% in stores and 76% on walmart.com. Both levels which exceeded overall category growth in Walmart [ph]. Moreover, in the fourth quarter, we saw our ongoing…

Thanks, Rob. As we reported this morning, the net income for the fourth quarter 2020 was $15.2 million or $0.70 per diluted share versus net loss of $14.5 million or $0.70 per diluted share in the 2019 quarter. 2019 quarter included a non-cash charge of $33.2 million related to the impairment of the US segment's goodwill. Adjusted net income was $15.2 million for the 2020 quarter or $0.70 per diluted share, compared to an adjusted net income of $11.3 million or $0.54 per diluted share in 2019. A table which reconciles this non-GAAP measure to reported results was included in this morning's release. Income from operations was $24.4 million for the fourth quarter of 2020 as compared to a loss from operations of $15.5 million in the 2019 period. Excluding the non-cash charge for goodwill impairment in 2019, income from operations would have been approximately $17.8 million. Adjusted EBITDA, a non-GAAP measure that is reconciled to our GAAP results in the release, was $77.3 million for the year ended December 31, 2020. This represents a $4.6 million increase over $72.7 million for the trailing 12 months ended September 30, 2020, and an increase of $13.2 million or 21% over the year ended December 31, 2019. Net sales in the fourth quarter were $249.2 million compared to $226.9 million for the 2019 quarter. In the US, segment sales were up $21.4 million to $220.2 million. The increase came from category growth and increased market share in the kitchenware product category, led by tools and gadgets, cutlery, kitchen measurement, and barware products. Category growth reflects a continuation of consumers preparing more meals at home, in addition to market share gains. Market share gains reflect the appeal of our products and brands and our ability to keep retailers in stock. Tableware was mixed…

Thank you. [Operator Instructions] Your first question comes from the line of Linda Bolton-Weiser from DA Davidson.

Hi. How are you?

Good. And yourself?

Good, good. So, you talked about the fact that your foodservice business was impacted by the pandemic in 2020. Is there any way to size that business for us? And I know that you are really just starting. But is there any way to give us some impression? Is it just really tiny revenue in 2020? Or is it 5% of revenue? Is there any way to size it for us?

So just to back up a second, we've been in the foodservice business in back of the house. So in the kitchen for 15 years plus. And that business is approximately a $20 million business for us, which -- it's all US-based and was meaningful down this year. Mikasa hospitality, which represents the big initiative, and I think is where most of your question is geared towards. We have de minimis sales of less than seven figures, but we are, as I mentioned, having meaningful progress and part of that's things we just shut down, right. So people weren't ordering new plates and dinnerware and the like and cutlery and so forth. That is starting to pick up and we are actually now in some major distributors were in their catalogs into two-step distribution process in foodservice. So as people reopen, we have share that will be utilized and results in revenues in 2020 and beyond, most in the second half and [indiscernible].

Thank you. That's helpful. And then I think that investors are looking at companies who were affected by the pandemic, either positively or negatively. And then looking at comparisons going forward for revenue growth, I guess one could argue that you've maybe been helped by the pandemic in some ways because you're selling kitchen goods and people are cooking more at home. Do you think there's been any unusual benefit that you've had that will be hard to lap those comparisons? Or are you changing your business enough so that you can still grow against growth when we get up against those comparisons?

Yes. That's basically everyone's question, right. We were a beneficiary of more people working from home and the demand for our products and home products. We also though as a result of what we've been doing and I think we accelerated that in the conditions of the pandemic to noticeably increased our market share. And if you look at NPD data, in many categories, we increased our market share. So that's a sustainable advantage and we think we can continue on that. And there were a lot of headwinds that we faced in 2020 that won't be there. And that's also why we've invested significantly in inventory and supply chain. And we -- realizing a lot of things going on in implementing our plan, we started investing heavily in 2020, but 2021 is going to be a significant investment year for us to grow for the future. So net, we believe we won't get lapped by some extraordinary tailwinds will give more guidance in the first quarter, but we think this is sustainable, and the first quarter, so far, is very strong to support that as well as our order book. So the market shares, new product introductions, other initiatives like Year & Day will just start really paying off in 2022. New products such as the Walmart, celebrity-backed brand that will announce -- will launch, we mentioned at the last call, will launch this year but will get the full benefit also next year. So, the second half of this year and next year. There is a lot of things going on which will give us ongoing financial momentum in 2021, but again, it will be an invest year so that we grow in 2022 and beyond. So we're not expecting to grow 21% in 2021 again.

Okay. And then your cash flow in 2020 benefited from working capital improvement. Is it fair to say the cash flow will be a little less robust in 2021?

We -- that's different [ph] that until we give our guidance in the first quarter.

We probably will have a little incremental -- not tremendously, but little incremental CapEx in 2021. We'll also have more cash flow at debt level right, there is some good gives and puts which Larry will elaborate on in our guidance [ph].

I will and I think we spoke about it, there were some deferrals we were able to take advantage of related to the pandemic, things like deferring some employer payroll taxes as well as in the UK, deferring payment of VAT tax, so -- and also, we negotiated some rents. So some of that -- a lot of that will begin to have to get paid in '21 is actually some into 2022.

Okay. Thank you very much.

You're welcome.

Thank you, Linda. I guess we'll see you tomorrow.

Yes.

Okay. Thank you. Your next question comes from Brian Nagel from Oppenheimer.

Hi, good morning. Thanks for taking my questions. So a couple here. First off, with regard, you called out your -- in your prepared comments just the shipping issues and we're hearing this from a lot of companies across the consumer landscape. So I guess the question I have is, till these sort of -- see naturally abate; are there leverage you can pull to help the company contend with them better or is it just a matter of basically accepting these disruptions in the nearer term?

Yes, it's a great question. I mean, we're doing everything we can, and I think an organization like us versus a lot of our competition, they can't do anything. So there's two shipping issues in terms of two general buckets. One is freight-in, getting things in from overseas -- really Asia, where there is an availability and price in terms of container costs [ph]. And the second is freight-out. So, -- but if you look at Walmart, Amazon, I mean, they've had major issues getting enough truckers to move things around and they have a little bit more weight than us. But we have been doing things to mitigate and also working with our customers as well as shippers on the freight-in side of things. We accelerate a lot of inventory into the fourth quarter and first quarter to meet what we saw very strong demands and that supersedes the availability of containers because we worked and we do have a tremendous weight with our third-party factories because we control a lot of those factories and therefore, we can get our goods meet quicker and then we ship for instance a lot pre-Chinese new year, Lunar New Year, which has just passed. And it's an investment in inventory. We have the balance sheet to do that and we've got things in faster. So there are things you can do, but a lot of it is beyond your control and we've been facing this for six months, it will continue. Fortunately, it's a quality problem that part of it is our demand is also very strong.

Got it. This was helpful. And then the second question I wanted to ask, it's somewhat of a follow-up to the prior question, but I agree with your comment. We were all looking at this to see how demands trend or what could or might shift is the COVID headwinds path. So, recognizing that it's extraordinarily fluid [ph] and I apologize for it's been a relatively near term question but you add some markets that started to open up more, certain parts of within the United States, are you seeing any early indications of demand trends for your products beginning to change?

No, except on the foodservice side where we're seeing demand increase. The -- in Europe, we are -- there is a tremendous lockdown starting in last December and that had a negative impact. The lockdown hasn't really been as extensive and we haven't seen that in United States. But we haven't seen that and there is -- it's not worth -- we're getting into a debate in terms of the sustainability of the move towards home cooking, which we believe in and there's been a lot of data, which you can view on your own, but if you look at a lot of categories, if you look at cookware for example, people -- it benefited tremendously, right. You go into many retailers and you couldn't find cookware on the shelves. But you're not going to buy another set [indiscernible] next year. Our goods are renewable and people use them and replace them. It's a different ticket item and so we think that sustainable. We're not relying on that as explained in Linda's question and there's a lot we're doing that is plus one for 2021 and beyond.

All right. I appreciate all the color. Thank you.

Thank you. [Operator Instructions] Your next question comes from the line of Anthony Lebiedzinski from Sidoti & Company.

Good morning and thank you for taking the questions. So we're hearing from more companies about they're seeing inflation. Just wondering if you could comment on the -- are you seeing that and kind of what's your outlook for that as to how you think you'll manage that?

Inflation, did you say?

Yes.

We are definitely seeing a cost input inflation and we've been putting strategies to mitigate that, whether that be labor costs in our distributions, which has been up on average $2 for almost a year and a half already. Fortunately, where labor wage rate where if they go to $15 minimum wage, it doesn't impact us. That's the good news. But we've been experiencing -- But the cost inputs, whether it's materials, PP, polypropylene, sorry, which is a big input for us. If you look at, I mean, they're records highs. So a lot of the material cost, labor cost, a lot of the inputs, so there is cost inflation that we've been working for a while now and we will continue to do to mitigate that through various channels, but it is the reality.

Okay. So taking up testing or how exactly are you going to set some of these higher input costs – like, as -- labor costs as well?

Yes. On the labor cost, we've -- basically, we've been experiencing that for most of 2020. So we have mitigated that and you can see in terms of our -- if you look at the, I mentioned the distribution costs. And if you look at our distribution cost, it was down even in 2020 with significant labor cost increases. So we've had strategies to mitigate that, that have been highly effective and we'll continue to do so. The inputs, it's universal, right. This isn't a Lifetime-oriented [ph] thing, that everyone who is making anything similar to us, which will ultimately result in higher prices for the consumer overtime.

Got it, okay. Thanks for that. And Rob, you mentioned that -- so you have a strong outlook first half of the year. Is that both domestic and international? Or is it more skewed? Is it more domestic similar to the fourth quarter trends?

Yes. So just to clarify, we have not given any guidance and we will, with our first quarter call for our normal practice. I did say that, so far we've seen consistent with 2020, we've seen strong demand so far in the first quarter. In our core market, Europe was shut down and the combination of that and Brexit which frankly has been a complete disaster. We were well prepared, I think better than the average bear. But it's very difficult and they kind of hate each other over there. So that's had an impact on our business. So -- but demand still remains strong and we're off to a good start.

Got it. Okay, thanks for that. And then lastly as far as the tax rate is concerned, how should we think about that for '21?

It's in the past. I mean we should be in '21 plus the states; six, seven points 28 [ph] -- just know that the UK is planning to increase their rate legislations out there. So rate may be higher if that were to occur.

Got it. All right. Well, thanks and best of luck.

Thanks, Anthony.

[Operator Instructions] Okay. At this time, while we have no further questions, this concludes this morning's conference call.

Thank you again for joining us today. We appreciate your continued support of Lifetime Brands and we hope that you will tune in tomorrow to listen to our presentation at the D.A. Davidson Consumer Growth Conference. We look forward to discussing first quarter results for fiscal 2021 on our next conference call. Thank you, and have a good day.

This concludes today's session. You may now disconnect.