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Edited Transcript of LCUT earnings conference call or presentation 7-Nov-19 4:00pm GMT

Q3 2019 Lifetime Brands Inc Earnings Call

GARDEN CITY Nov 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Lifetime Brands Inc earnings conference call or presentation Thursday, November 7, 2019 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrew Squire

Lifetime Brands, Inc. - Head of IR

* Laurence Winoker

Lifetime Brands, Inc. - Senior VP of Finance, Treasurer & CFO

* Robert Bruce Kay

Lifetime Brands, Inc. - CEO & Director

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Conference Call Participants

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* Frank Anthony Camma

Sidoti & Company, LLC - Senior Research Analyst

* John D. Sullivan

Olstein Capital Management, L.P. - VP, Research Analyst & Portfolio Manager

* Linda Ann Bolton-Weiser

D.A. Davidson & Co., Research Division - Senior Research Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the Lifetime Brands Third Quarter 2019 Earnings Conference Call. (Operator Instructions)

I would now like to introduce your host for today's conference, Andrew Squire. Mr. Squire, you may begin.

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Andrew Squire, Lifetime Brands, Inc. - Head of IR [2]

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Thank you. Good morning, everyone, and thank you for joining Lifetime Brands Third Quarter 2019 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. With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob.

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [3]

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Good morning. Thank you for joining us today to discuss Lifetime Brands Third Quarter 2019 Financial Results. We're pleased with our progress and results for the third quarter. The transformation that we embarked on with the filament acquisition in delivering tangible results as evidenced by the increase in sales and EBITDA compared to the prior year quarter. We remain on track to achieve our strategic priorities to reposition the company for higher growth and increased returns. While we have made progress executing our strategy, in a challenging retail end market, we continue to face significant headwinds from the trade war with China and the impact of Brexit which has temporarily impacted gross margin and revenues.

As previously discussed Lifetime has and continues to pursue a multifaceted strategy to mitigate the financial impacts created by the imposition of these tariffs. We continue to improve profitability and increase investment in our brands and we have taken action this quarter to position us to capture these opportunities as we transition into the fourth quarter and fiscal 2020. We're excited about our prospects and are confident that our strategy will deliver results, drive improved performance and create meaningful value for our shareholders. Our performance for the quarter, saw a consolidated adjusted EBITDA growth of $3 million as we started to see the early results of our product portfolio optimization and rationalization.

We continue to focus on our newly rolled out strategic product development and sales initiative and unlocking the value of the cost efficiency campaign launched in connection with the filament acquisition. Additionally, we remain committed to increasing the brand equity and trend and product relevance of our best-in-class products and brands. In the third quarter, we achieved considerable market share gains in our core U.S. markets. Driven by a combination of new product introductions as well as extensions to some of our existing product lines. Last quarter we mentioned a number of product launches that would begin shipments in the third quarter, most notably in food preparation, wall ware, tabletop and home solutions.

Today, I'm pleased to report that during the past several months, we brought to market a new line of branded kitchenware products, increased our penetration in the grocery sector and partnered with the Scott Brothers of HDG, HGTV theme to introduce a proprietary branded products. These new lines have immediately gained meaningful market share and we are pleased with the positive reception and early adoption trend we are seeing. We also expanded Lifetime legacy build brand through new product introduction of insulated lunch bags and storage containers, as well as a further penetration of the successful built bottle hydration line.

At a macro level, we are beginning to see the benefits from our strategic shift away from our focus on pure sales toward a more strategic focus on product and category. This has been a key performance driver that has enhanced our ability to sell in all channels. As a result, we continue to gain momentum in the company's important retail segments and generate revenue growth. You may recall that in connection with the filament acquisition last year, we announced a number of administrative cost-effectiveness initiatives that we would be implementing as part of Lifetime's transformation. These included reducing cost of goods, costs across the supply chain, administrative costs and discretionary spending and pursuing, product development initiatives to drive the sale of our products to our customers.

As Larry will report on in a couple of minutes. Not only have these initiatives meaningfully started to improve performance. We've also seen the pro forma adjustments that we announced last year, translate into actual results as the add-backs have been substituted with the results achieved by these actions. As we noted in last quarter's call, due to the large magnitude of the implemented and recently announced tariffs on China, we do not anticipate fully implementing all the strategies discussed until the end of 2019. However, we are pleased that we are already seeing the financial benefits of these initial efforts, which were a contributing factor to our improved results in the third quarter. Before turning to a more detailed commentary of our segment results, I want to briefly touch on some of the important growth areas that we're most excited about at Lifetime.

First, we continue to see growth in e-commerce, which was propelled by the restructuring of that organization announced in Q4 of last year. While e-commerce had a brief downturn due to timing of shipments, we remain on track to see meaningful growth year-over-year. To that end, pure-play e-commerce contributed slightly in excess of 12% of total sales for the quarter. In addition, we are starting to gain traction in the grocery channel, which represents a compelling value creation opportunity given lifetime has not historically had a significant presence in the sector. As we work our way through the last quarter of the fiscal year and the transition into fiscal 2020. We remain confident in the potential of both e-Commerce and grocery and we expect that it will be strong performance.

As we've discussed during the past few quarters, the retail industry continues to face temporary down-cycles driven by structural changes in both brick and mortar and e-commerce retail. In this environment, we are pleased to have delivered solid growth during the past quarter in a challenging retail end market. We do know that we continue to see an impact from ongoing geopolitical conditions including tariffs and Brexit uncertainty. Lifetime actively monitors the changing tariff environment and has strategies in place intended to mitigate the impact of such tariffs. Although Lifetime revenues grew in total tariffs negatively impacted revenue opportunities in this quarter, due to loss business in certain channels. We continue to expect to see some temporary negative impact on our margins until our mitigating actions are fully realized. While we anticipate mitigating gross margin dollars, we expect that the tariffs will continue to have a gross margin percentage impact.

As Larry will discuss in his remarks, the imposition of tariffs has been a meaningful driver of higher inventory levels and a decline in gross margin percent. In the meantime, we are focused on maintaining a healthy level of gross margin dollar sales. The key metric that will contribute to our ability to maintain and grow our bottom line.

Turning now to our European operations. The restructuring of our U.K. operations also known as Lifetime Brands Europe is on track and we expect to potentially recognize the benefits in 2020. As a reminder, in the third quarter, we launched our consolidated U.K. operations from 8 standalone warehouses and 2 separate business units, into a single large operation based in Birmingham, England. This will improve our efficiency, reduce our cost infrastructure and create a meaningful competitive advantage. Among other benefits, this move will allow customers to order all products from one business and receive one invoice from one ship point.

This restructuring also included a portfolio realignment as we shifted the product mix away from non-productive low margin goods and toward a focus on brands and our offerings, where we can add value to the consumer and retailer. Unfortunately in the third quarter, we experienced some operational issues in connection with the launch of the consolidated U.K. business. As we encountered challenges with personnel and process in the warehouse. We have addressed those issues with a number of management and personnel changes. As a result of these operational issues, our revenue declined in the quarter for the U.K. operation and there will continue to be an impact on revenues for that operation for the rest of 2019.

Additionally, we are facing some complications, due to over inventory from these delayed shipments to customers. To correct these operational problems and permanently mitigate the issues that arose, we immediately sent an experienced team from the U.S. to temporarily oversee operations and provide leadership to stabilize the business. In addition, we are in the process of implementing a more permanent solution by hiring new personnel to manage ongoing operational tax within the U.K. division. On a geopolitical front, going forward, we expect to face continued headwinds in Europe and particularly the U.K. as a result of the uncertainty surrounding Brexit and related FX challenges. But overall, we are pleased with our turnaround efforts. We are confident that despite these difficulties which we attribute to growing pains given the significance validation initiative. We will still see a dramatic improvement in profitability and cash flow for Lifetime Brands Europe beginning in 2020 through our original plan, which we will outline in further detail at our Investor Day next week.

Moving to e-commerce. We continue to see strong results and profitable growth in this channel with pure-play e-commerce revenues growing nearly 4% year-to-date compared to 2018. As I mentioned earlier, pure-play e-commerce contributed slightly in excess of 12% of total sales for the quarter although we experienced a slight downtick related to the timing of certain shipments. Despite this, we remain on track for meaningful growth year-over-year as e-commerce including Amazon continues to be a significant revenue generator for our products including kitchenware, bakeware and probably recovery.

We're extremely proud of Lifetime's e-commerce team and operational processes which have been reoriented and optimized to expand our reach and it's increasingly critical channel. Another key element of our strategy is our recent expansion into the commercial foodservice industry with the launch of McArthur hospitality, a standalone unit under the Lifetime umbrella that covers dinnerware, flatware, drinkware and table service accessories. We continue to bring these products into our warehouses and expect to begin selling in the fourth quarter with shipments starting in fiscal 2020. While we do not anticipate recognizing revenue from this business until 2020, this expanded line is a logical and attractive growth opportunity in an industry and in product categories where we are already a global leader.

To that end, as we begin selling this full range of table talk product assortment, we will continue to take steps to strengthen our position and the standard for product and service excellence in this exciting industry. Before I turn the call over to Larry to provide more details on our third quarter results, I'll provide an update on our financial outlook for 2019. We are revising financial outlook for 2019 to reflect the non-cash goodwill impairment charge of $9.7 million that we recognized in connection with our European restructuring initiatives. This is a one-time accounting charge related to our 2014 acquisition and has no impact on the benefits to be derived from the reorganization of our European operations. We expect we'll produce a meaningful improvement on profitability. Importantly, we are reaffirming our full year 2019 EBITDA guidance of $66 million to $70 million.

I'll now turn the call over to Larry.

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Laurence Winoker, Lifetime Brands, Inc. - Senior VP of Finance, Treasurer & CFO [4]

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Thanks, Rob. As we reported this morning, the net loss for the third quarter of 2019 was $13.5 million, $0.66 per diluted share compared to net income of $5.9 million or $0.29 per diluted share in the third quarter of 2018. 2019 and 2018 quarters include non-cash charges of $9.7 million and $2.2 million respectively related to the full write-off of the international segments acquisition goodwill. Adjusted net loss was $2.7 million for the 2019 quarter $0.13 per share compared to an adjusted net income of $8.5 million or $0.41 per share in 2018.

The table which reconciles this non-GAAP measure to reported results was included in this morning's release. Excluding the non-cash goodwill impairment charges taken in 2019-2018 periods, income from operations was $16.6 million versus $14.5 million in 2018. Adjusted EBITDA, a non-GAAP measure that was reconciled to our GAAP results in the release but $69.6 million for the trailing 12 months ended September 30, 2019, after giving effect to certain adjustments and before limitations as permitted and buying and our debt agreements. This includes projected unrealized synergies of $2.5 million.

Of note, the projected unrealized synergies continue to decline as these synergies become realized and reflected in our actual operating results. Consolidated net sales in the 2019 quarter was $250.5 million compared to $209.4 million for the 2018 quarter. For the U.S. segment, sales were up $9.1 million. All categories increased led by new programs for home solutions home deco products and kitchenwares rapid products. International segment sales were $20.3 million in the 2019 period versus $23.4 million in 2018, on a reported basis and in constant dollars -- U.S. dollars, which excludes the impact of foreign exchange fluctuations, sales decreased $1.9 million or 8.6%. The decrease was driven by operational issues in connection with the opening of the new distribution facility in Birmingham, England.

Consolidated gross margin was 33.8% in the 2019 quarter compared to 35.2% last year. For the U.S. segment, gross margin was 34.3% in 2019 quarter versus 35.3 last year. The decline was primarily driven by product category customer mix and the impact of tariffs imposed on certain goods sales from China. However, as Rob noted, while the gross margin percent decline, we were able to increase gross margin dollars from $65.7 million to $67 million. For international gross margin was 29.1% in the 2019 quarter compared to 34.6% in the 2018 quarter. The decline is primarily due to the higher proportion of sales to national accounts as the new facility operational issues adversely affect the fulfillment levels to certain other customer classifications, as well as the sale of some clearance goods.

Consolidated distribution expense for the 2019 quarter were $18.5 million or 8.6% of net sales and $16.6 million, 7.9% of net sales for the corresponding period in 2018. For the U.S. segment, distribution expense as a percentage of sales shipped from out the U.S. warehouses was 8.8% and 8.9% for the 2019 and 2018 quarters respectively. This improvement was primarily due to higher shipment volume and realization of labor efficiencies, partially offset by higher freight expenses. For the international segment distribution expense, as a percentage of sales shipped from our U.K. warehouses excluding moving costs to new distribution facility were 19.1% and 11.9% in 2019 and 2018 quarters respectively. This increase also reflects the operational issues noted, including higher labor expense.

Consolidated selling and general and administrative expenses with the $37.4 million in 2019 and $42.1 million in the 2018 period. U.S. segment expenses were $28.7 million in 2019 as compared to $31.4 million in 2018. As a percentage of net sales, SG&A expenses were 14.7% versus 16.9% in the 2018 period. This improvement reflects realized synergy savings from the filament acquisition, which has now been fully implemented. The full run-rate benefit will be realized by the end of 2019. SG&A for international segment was $4.2 million in 2019 quarter compared to $5.5 in the 2018. This improvement reflects as Rob discussed the benefit of improved efficiency of going from 2 separate business units into a single one.

Unallocated corporate were approximately -- unallocated corporate expenses were approximately $4.5 million in the 2019 period versus $5.2 million in 2018 period. The decrease was primarily attributable to lower professional fees. Due to the decline in the results of the European operations, since its acquisition over 5 years ago exacerbated by the economic uncertainties of Brexit negotiations, the company recorded a non-cash charge of $9.7 million to write off the goodwill recorded in the 2004 acquisition of its U.K. based kitchenware business. In the third quarter of 2018, the company wrote off 2.2 million -- $2.2 million of goodwill related to the European tableware business. As a result, the company has now fully written off all goodwill associated with the European kitchen and tableware businesses that were acquired in 2014 and 2011 respectively.

Interest expense was $5.2 million in the 2019 quarter versus $5.6 million in the comparable quarter last year. The 2019 period reflects the benefit from mark-to-mark -- market-to-market changes from interest rate swaps not designated as effective hedges for accounting purposes. Income taxes for the 3 months ended September 30, 2019, reflect the taxes on U.S. earnings, but a limited benefit on foreign losses. The limited benefit on foreign losses was due to the nondeductible $9.7 million goodwill impairment charge. The tax rate was also affected by state and local taxes and certain non-deductible U.S. expenses. Excluding the amortization -- the goodwill impairment charge, the effective tax rate would have been 22.4%, that's compared to a federal statutory rate of 21%. For the full year, we anticipate our effective tax provision rate would be approximately 30%.

At September 30, 2019, our debt was $357.3 million and our leverage ratio was 5.1x. Leverage in the third quarter is normally the highest, because of business seasonality. Leverage ratio was 5.4x at September 30th of last year. It is worthwhile to note that our term loan debt has no negative financial maintenance covenants and minimal required amortization. This concludes our prepared comments. Operator, please open the line for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question is from Frank Camma with Sidoti.

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Frank Anthony Camma, Sidoti & Company, LLC - Senior Research Analyst [2]

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Rob, you both had a bit of description on the gross margin, but I noticed in the press release there is actual line. It says decrease was primarily due to changes in both product and customer mix and you talked about the customer mix more. I think the explanation is more national accounts, which I assume would mean that, maybe those are lower margin. But can you talk about the product mix? I was a little surprised there, but you might benefit when I look at this on a year-over-year basis because of the SKU rationalization. Can you talk about the --

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [3]

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So there are couple of different moving parts, Frank. And a big impact on the margin percent, as we also discussed were the tariffs, right, which have are well are mitigating actions and you see it in the numbers are focused on gross margin dollars. There is a reduction in gross margin percent as a result. And gross margin dollars grew, gross margin percent went down. The National Account comment that Larry had talked about that you picked up upon, deals with the discussion of our European in particular, our U.K. operations. And as we both talked about, we experience -- as we were going live with our single warehouse we experienced operational issues in that distribution center and therefore shipping issues. And as we were triaging that situation, we were able to ship a lot greater percentage of that business to their larger national accounts. The Nationals as opposed to the independents, which is also a big market for them.

There is a noticeable difference in margin between those 2 segments. So the U.K. business is off as a result of this, but also their mix and therefore their margin was dramatically changed. That's just a piece of our business. In the U.S. the big driver and obviously the bigger part of our business was tariffs from a margin percent, and as we said that's why margin dollars grew. But there also was, just channel mix. And there is different profit margin that we experience on different channels and is just the mix was a little different.

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Frank Anthony Camma, Sidoti & Company, LLC - Senior Research Analyst [4]

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Got it. So and then kind of stay a little bit on the tariffs, you gave actually quite a bit of detail. It sounds like from my -- really from my model to the way on the margins were a little longer than I thought. Irrespective of the margins or costs. And then can you talk about what if any impact you're seeing on product demand or customer -- I'm talking about end-user consumer response?

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [5]

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That's a great question. So there's 2 pieces to that and as I referred to in my remarks, while we have grown our business, the tariffs did slightly impact our growth rates, because there is business that as a result of tariffs we lost. Because of the price increases that were passed on and we were not competitive and we just lost the space. To date and it seems there as active movement on this topic as we speak. To date, we've been monitoring and haven't seen a consumer impact on the industry and that's the general retail. We see what you see. But we haven't seen anything specifically related to the end markets. Maybe you could say we will see what the future brings.

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Frank Anthony Camma, Sidoti & Company, LLC - Senior Research Analyst [6]

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And my last one is just, you touched on the new products coming out in foodservice which I think is a pretty big positive over time. And while you didn't say it's going to be anything material. Could you just talk about the long term? Is that -- what is that you from margin basis? Can you talk about that at all?

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [7]

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We'll actually go into Investor Day next week, which you'll be there but for the benefit of everyone on the call, we'll go into a lot more detail. And we want to our staff on our Investor Relations site for everyone on an FT basis to see. But the margins in that business. We've been in the business for a long time. We're launching with cost front of the house in this segment with all of our tabletop products. So we know the industry. In general, your gross margins are higher than what we experience on the consumer side of the business, but there is a lot of complicated. It's multi-step -- I won't go into the details today as we will in Investor Day. Your net margins are similar on the high end but similar. But the gross margin looks better.

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Operator [8]

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And your next question comes from Linda Bolton-Weiser with DA Davidson.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [9]

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So in terms of your initiative to sell through some of the slow-moving and obsolete inventory to generate some cash. Did you do much of that in the quarter? My understanding it would kind of help sales but hurt gross margin as you do that process. If you could quantify if you did any of those sales in the quarter that would be helpful.

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [10]

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Sure, Linda, just as a clarification. We eliminated over 7,000 SKUs, so we did SKU rationalization and eliminated approximately 25% of our SKU count and that's what sort of drove the charge we took and the initiative that we announced last quarter. Specifically addressing your question. We announced it last quarter, we really started shipping those goods preliminarily in September. So the impact on the third quarter was marginal. We ship more in the fourth quarter. But as we said at the time is really going to be a 9-month process for us to liquidate that inventory. But in answer your question, we did. We just started, we sold some but not much in -- for our expectations in September.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [11]

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Right. And so because this is kind of a seasonally strong period for you, do you think that process will ramp up a fair amount in the December quarter.

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [12]

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Do we think that the sales of what we've identified in our skew rationalization will ramp up in the fourth quarter? Was that your question?

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [13]

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Yes.

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [14]

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We'll get definitely more sales in the fourth quarter because we'll be fine for 3 months versus one. So there definitely will be more in the fourth quarter, but the bulk of it will be in 2020.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [15]

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Okay. And then did you -- sorry if I didn't quite see all your statements, but did you give the cash flow statement, if not, can you give operating cash flow in the quarter or year-to-date?

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Laurence Winoker, Lifetime Brands, Inc. - Senior VP of Finance, Treasurer & CFO [16]

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Yes, sure. It was in the release. We did for that, cash flow. We put out all the primary statements in the --

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [17]

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Okay. I think of that. And then just a question on the issues that you talked about in the U.K. It sounds fairly disruptive. When do you -- what's the timing of when you think that will be resolved and back to normal in terms of operations?

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [18]

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Yes. Unfortunately, while we remain and we're very confident in terms of results that our whole reorganization will produce in the end and a lot of -- in terms of consolidation, the works all being done. When we went live with the one solid, one warehouse and went 8 into 1 without going into specifics, there were unforeseen operational issues. It did impact us in this quarter. It will impact us next quarter. As we are already improving and fixing the situation. We're doing that with a lot of help from the U.S. So we'll get it back to normal by Q1 in terms of where we want normal shipment levels. But the other piece of that is we can't run it with U.S. leadership forever. We're putting the right operational leader. We had to replace our operations director in the U.K. unfortunately, and we need to replace that position and that's underway.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [19]

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Okay. And then one last thing, just in terms of your commentary about losing some top phase or markets there due to the price increases, were you able to do a pretty fine-tuned analysis of where to make the price increases? Because certain areas where you're really strong in market share, you should have been able to do it. So I'm just wondering, was it across the board that you thought and that's why unsuccessful or how are you going to kind of be able to correct that?

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [20]

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That's a good question, Linda. So price increases related to tariffs were across the board. Where we lost share -- not share but opportunities, work in the off-price channel. So in most of what we sell is plan ground and what we have to put in a uniform price increase. There is some opportunistic opportunities that you get in off-price because as you know, you think, so our plan ground and they can -- so the shift there shelf space around for different type materials could be any goods and they can replace apparel with hydration. They could put whatever. And so we had some opportunistic opportunities that we sell in that channel that no longer made sense with the tariffs, so we didn't get those opportunistic opportunities. But we didn't lose share in our core listings.

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Operator [21]

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Your next question is from John Sullivan with Olstein Capital Management.

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John D. Sullivan, Olstein Capital Management, L.P. - VP, Research Analyst & Portfolio Manager [22]

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I know you mentioned 30% is what you would think, the tax rate would be for the year, just trying to tease out maybe after the dust settles all the charges are done, what may be a more normalized rate would be? Just looking at the quarter, the adjusted number of negative $0.13 was clearly weighed down by a north of 100% tax rate. So I'm just trying to -- obviously I see the operations improving, but just trying to get an idea as what's a good baseline for the future?

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [23]

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I know it's infrequent but it's not that unusual and it has to do with how we -- for accounting rules to record the tax rates. So it's based on the annualized rate which is 30% and you need to look at the -- you should look at the 9 months and you can see the 30% rate when you have the third quarter is actually the back end to get the 9 months to what it should be versus the 6 months year-to-date. It is all driven by this charge for the goodwill. So 30% is what it is year-to-date in the release and that's based on what we anticipate will be for the full year.

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John D. Sullivan, Olstein Capital Management, L.P. - VP, Research Analyst & Portfolio Manager [24]

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Got you. Okay. And secondly, just wondering on the free cash flow whether or not usually get a nice fourth quarter reversal in working capital, whether that's still anticipated as per normal and whether we should see a decent cash flow for the year leading to some debt pay down. I was wondering if that's still the case?

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Laurence Winoker, Lifetime Brands, Inc. - Senior VP of Finance, Treasurer & CFO [25]

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We haven't put out guidance on that. That is typical we peak generally in October because of seasonality depending on the timing of sales in the quarter and in some cases classification different trade terms might see benefit more in December versus January, and sometimes into February. But that's kind of our (inaudible) flow and we should see significant pay down in this fourth quarter.

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [26]

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The first quarter is historically in a seasonality basis a big collection quarter.

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Operator [27]

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There are no further questions at this time. Mr. Kay, I'll turn the call back over to you for closing remarks.

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Robert Bruce Kay, Lifetime Brands, Inc. - CEO & Director [28]

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Thank you. Thank you, everyone, for participating on the call as always everything is available on our websites and for those who will attend we look forward to seeing people next week at our Investor Day Conference in New York City. Thank you very much.

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Operator [29]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.