LCUT - Earnings call transcript Q4 2019

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Operator

Good morning, ladies and gentlemen, and welcome to Lifetime Brands' Fourth Quarter and Full Year 2019 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 our host for today's conference, Andrew Squire. Mr. begin. may you Squire

Andrew Squire

Winoker, morning XXXX you today earnings Kay, and are Good Brands' from joining fourth Rob Larry Officer; Executive quarter call. Chief Financial and you. Officer. for thank Lifetime management Chief Thank With us

I'd begin by statements to you forward-looking that to we and intended established to relate harbor for the this Before the of like may these the are remarks company, morning remind qualify safe call, the contain the Reform performance are factors press results that Litigation Securities our future are Private guarantees performance liability that not Exchange the in with others highlighted and our statements Securities contained Commission. such Any Act. filings in influence of today's and future and are our release statements could

turn introduction, call Go I'd Rob Kay. to Rob. that to like ahead over the With

Rob Kay

Thank us joining and you you. today fourth and year to XXXX morning, Good quarter thank Brands' results. financial full Lifetime for everyone discuss

of in that pleased expectations we are number full than quarter greater cash for We and year deliver the our and continue growth generate flow, the significant a key XXXX. to segments

However European as result operational in the despite quarter in performance our conference of impact four three our business, our call. a which quarters three and we difficulties of quarter of short in those the achievement, fell positive expectation this discussed

detailed. and cost in previously which share year expected realization the Importantly, our strong our market the core channel efficiencies US in results with business as for plan the and fourth driven mortar by full growth as ecommerce outperformed and for the in of we quarter well both in brick combined revenues

need commitment expectations net ahead we to full for fourth during we notwithstanding in cash third performance and losses year our placing temporarily guided resulted operations, European our which generated to challenges this quarters. guided our of in the debt achieved is invest position working favorable cash We to targets. leverage what capital As this our to from the fund flow operational flow the us and on lower quarter,

core from our business an offset higher cost, business -- resulted to the These for resulting which positive some were unit challenges well financial in in business shipments on as that as losses operational business by operational results that impact these US for challenges. newly penalties reorganized had all UK operational

our We've taken further that these created we report and track XXXX business as strategy advancing we operations can challenges reorganization the steps levels. of have European remain in of the January enhancing to backlog second all of our half stabilize by on continue to address eliminated restore European our and our for and normal operations the shareholders Further to value and international XXXX.

In and decisive XXXX we deliberate value. to create actions took shareholder

broaden our digital to fruition adjacent ecommerce our are continue on our in seeing efforts organic opportunities and market emphasis we growth in focus We renewed categories categories, pursuing those and come to

on a focused initiatives remain and food sales the in commercial market expanding and presence. direct We international capability service building

growth. a industry cycles I to result, achieve today believe are weather company as a organic only to better and positioned As meaningful trends we but not that

drive existing to the is lines. performance the for our bottom-line expand product results with and in market core effectively pleased strategy business, innovation in year. quarter are we our as the full to increase and result product growth which Turning business US This mentioned top and to our US executing of progress contributed our share, I the

our chain marked efficiencies optimization and cost from and quarter by continued XXXX and supply we filament. product product and was The of acquisition continued fourth recognizing development enhancements in

war over Importantly, Lifetime China with we tariff being the was included in XXXX it a for million in achieved responsible that accomplished growth in payments. environment an $XX trade resulting in

for track contributed exclude definitively the represented quarter. of we ecommerce, on to these for fourth sales percentage the this numbers with and note growth quarter, sales significant important Please e-commerce of contributing total total quarter the the where revenue XX.X% omni-channel most sold ecommerce areas cannot retailers a online. e-commerce that amount pure-play our of one expanding XX.X% Further of to

I in the traction last sector. mentioned have grocery value a we quarter, in brands not presence a for represents we've been Lifetime channel, opting as large had Additionally historically as gaining compelling which creation this

with potential grocery We continue performance X% in of in grocery. the remain both to for XXXX of strong e-commerce see confident quarter this an we and and increase

in actively our stocked service, revenue Mikasa sales house and food Hospitality to ramp-up now expanded the and the through Hospitality XXXX front Turning to on begin of upon track efforts based we to We Mikasa product which our of expect and in with launch the XXXX ongoing both in in efforts of US in greatly are Europe. initiative. our fully We date. opportunities pursuing our warehouse shipments remain

investment for Hospitality's We growth have so as we had doing exhibits meaningful conversations and in We marketing and is upon have with out these on track increasing been targeted expectations are serveware, to tools during have cutlery, participating and this strongly been in kitchen equity we product are the focused and and awareness increase in categories tabletop, pleased as the the conversation year. we well on meet our Mikasa Based brand shipment sales a channel smallware believe and market. infrastructure. tradeshows an in

as contributed of business on we mix. US revenue core quarter and to in operational strong EBITDA operations, our shipping a and of UK the impacted our negatively ended Europe for which challenges ongoing we our our part While faced note reorganization

operation quarter reminder business a a our standalone we Birmingham, eight UK the single two As into England. separate in XXXX, operations and in from launched third based consolidated units warehouses

encountered issues with quarter delays operational in fourth into customer restructuring warehouse. challenges [indiscernible] and experienced consolidation process we the the and and with significant unfortunate This cancellation. and carryover connection in personnel where order some experienced shipment We

and incurred workers making of effective temporary cash delayed in needed result management temporary to penalties, This and leadership. changes included use to and productivity As to we long-term shipments, and revenues, missing added operations. and expense order a lost fines hiring additional stabilize ensure

our January and up operations are As we running UK normally XXXX, shipping back again. are of and

needed the Lifetime operations confident stabilize meaningful will we Not difficulties, only despite the to significant activity, situation Europe going and that returned these remain Brands expense see and much we profitability workforce flow cash have improvement have to for We including temporary a eliminated normal headcount. temporary in reduction of forward.

to Now and business. talk of are Virus to seeing the let the me briefly the taken impact believe we to We of virus proactive what and relative on we doing mitigate effects are about Virus. Corona Corona steps our minimize have working

Our employees world. and around the those primary the partners affected our and of well-being concern and is for health

responding public chain travel and kept all up began before lunar on the year restrictions As other for China, Year situation of to holiday for soon set employees restricted and as travel, concern the to orders international to Corona Virus placed channels the closed and new work ensure of the china beyond facilities open we New and in uninterrupted for became shipments the prioritize remotely. end near-term to supply took We actions deliveries. Chinese

our of in levels precautions daily daily to As efforts. only normal in team's seen the we operating as place team's XX% a constraints provincial shipments There situation challenges decline China March. with currently are inventory to a of with China remains in from in response ongoing which result the change modest travel such and have

we result impact first virus be there from a Importantly response of currently our should believe timely quarter on noticeable to substantial results. and as a Corona the infrastructure, our not our ability XXXX utilize

monitoring mild are engaged and We a We've disruption. through built would closely we sufficient the basis. up that fully are expect any daily on that situation us inventory get

said, an help response forward. situation impact mitigate may impact we However see see situation get potential have we we impact shipping believe as material team's the proper on our XXXX. significantly our any that if That will worsens into on the to chain and business any to going and yet supply further

track Looking ahead are and we UK as our to drive business get our in unlock growth back excited US about continue business. potential to we our XXXX, to value on

As create we growth business improve and we value profitability model our cash strategic coming on strategy we the shareholder articulated confident significant QX generate enable that and us more are growth our and will Day initiatives continue meaningful focused Investor years. XXXX, flow, advancing during to in that

I'll that, over turn call With to Larry. now the

Larry Winoker

the versus share per the This million a for XXXX $X.XX goodwill. from non-cash diluted sustained loss in decline US quarter fourth capitalization charge of observed other quarter $XX.X a of factors, the charge quarter million or was related share segment's per resulted million the Net in fourth impairment of included to income $X.XX company's The or quarter. $XX the $XX.X of Rob. market XXXX of XXXX. diluted net the among Thanks in XXXX

reported results XXXX results XX, A diluted reconciles XXXX reconciled diluted million in $X.XX EBITDA income that or to December GAAP adjusted included measure non-GAAP as before net for defined compared the our share permitted $XX.X $XX.X Consolidated in was which in million net as the quarter is $XX.X release. limitations XXXX. of was measure to our agreements. certain ended the million share debt release to non-GAAP and year the through adjustments to Adjusted table adjusted or $X.XX effect and per for income in earnings was per giving as

release. was the XXXX the impact $XX.X table year, non-cash from in in to reconciles Filament liability contingent the quarter a Excluding which operations which included reversal impairment last non-GAAP of million versus this assumed results excludes goodwill a charge, of the measure $XX.X million reported was in earnings the acquisition, income

excluding segment declines partially US gadgets Lab I they to XXXX. from from from million from last was segment income increase million XXXX items tools segment The although turning Now Loss segment, quarter. sales $XXX,XXX operations This by just for the million quarter for full-year XXXX in were of up was the the in core from it and quarter $X.X the division and the up but the international the was the $XXX,XXX $XX.X offset US products came million dinnerware in income versus business versus kitchen $XX XXXX year. were noted operations products. XXX $XXX.X products for from

the driven Rob on basis. business segment XXXX by operational on International earlier. in a million in This dollars European was challenge period US decrease constant was XXXX and in sales versus $XX.X reported $XX.X million as commented our

the gross product for XX.X% changes exclusion segment, customer a in XXXX and the versus US of benefit tariff increase classifications. product in refund XX.X% XXXX. certain the mix in reflects margin For The was and

sales of $XX.X the margin UK our The to distribution gross XXXX primarily quarter constructed multiple newly Clarence in partly the inventory facility due related associated is into $XX.X was and to international, reorganization. year's of the locations consolidation last operational and challenges quarter. for For the one to with decrease compared in

respectively. segment, which US ongoing resulted efficiencies. X.X% and distributions and XXXX for was in XXXX percentage sales, labor cost were the the the benefit For programs, expense moving quarters improvement shipments excluding relocation of of the and attributable warehouses a This X.X% as and to realization

warehouses noted. from for shipped For moving new and the international sales XX.X% This excluding the labor distribution percentage expenses XXXX and as a related was the by XX.X% to higher primarily operational facility costs challenges increase segment was XXXX costs respectively. to of distribution driven quarters

US includes quarter The XXXX SG&A million primarily expenses incentive the $X.X $XX.X SG&A the XXXX higher in segment in for to compared expenses liability reversal XXXX employee due as contingent of noted. international million were $XX.X to compared related the excluding XXXX and quarter to million $X.X quarter was in quarter XXXX the compensation. IT in reorganization. to period higher the

of expenses cash year non-deductibility This tax decrease mainly the XXXX the to for goodwill expense other $X.X million impairment period. full $X.X reflects were Unallocated million from lower attributable among XXXX corporate items charges. down Income in adjusting the loyalties. was

expected is rate tax approximately going effective normalized be forward. to XX% Our

net a a we program. by This integrate of offset is by $XX cash our of generated for cash European XXXX, completion it planned million, our XX% was includes to reduce single the cohesive unit. cash used partially our of which debt flow streamline European operations, During negative into portion business the enabled operations skew flow us from which approximately positive rationalization approximately and

of an month At December that $XXX expect plus million. pursuant on debt make million flow million. hand net our $X.X Later facility and our was is to cash excess the to agreement XXXX we was loan liquidity this cash under term payment credit $XXX availability XX, approximately

prepared Operator, questions. the comments. This for concludes please our lines open

Operator

question of Bolton-Weiser first Linda your from Davidson. is And D.A.

Linda Bolton-Weiser

guidance talk can just for something or you I on press that? I guys miss or release Can are -- in mean are did the you or about I you comment giving any you am XXXX something missing not

Rob Kay

in with you No, consistent our Linda the and call call past guidance. is see about will and and year-end talked end on practices didn't we gave we you next as year the when

Linda Bolton-Weiser

Okay.

potential lines investor people think about in Can thinking and States how recession the I and supply think How that and stand that be Sorry your in your in would what within you is business I or in so from little pretty scenario that minds, cyclical, up Mikasa I versus and coming on a just the that bit think recession business to that chain on product a others would the fair better investor's and concerns globally have comment more that about now Hospitality? China fair the would year. moved United would tend thanks.

Rob Kay

Sure on. Corona of the demand virus which terms impact We very we we've Linda, focused on remains excellent would year, this of expectations. It's so we're believe be far of the what question. something see of have yet to ahead any that any been shipping which do

rather tend and in opener and can. take recognizing isn’t our out lines we very to sell, what we up than a People opener, to the buying they If sell open at expense. try are buy hammer you recessions look what business can of that a average can the

lines lot would consumer one at of The really majority be if than the and we the even product actually well. that product and industry other are a as segments area our rebounded do pretty of fair company doesn’t -- the within well XXXX well sell of the as you market. our what dinnerware So fast, industry and lines dinnerware look faster particularly

share In Mikasa for because significantly if be a taking in areas big. them would other that people our share, ability because a against investments hurts as fact of don't there to believe only well in already of of to as because we opportunity opportunity were matter competing not were recession were Hospitality an timely and impacted us there's us market we deliver take help it to making for lot are their and necessary area we that they as going and

you to and border, be you're stuff food have working distributors. In bringing the XXX% someone keep at operators service they it's a your expect the because DC puts an two it's on in the to not the investment from delivery China order and food need not months in you like order, capital service that

we stability So dialogue we that that least far into us more and at than so do thought our would in advance be the the helping we're be. message sending marketplace the is

penetration So we front actually believe nothing initiative the house in the our starting recession would we're it's of help from and incremental. so the all

of anything see positive. don't we impact So any

Linda Bolton-Weiser

your was here I you Thanks, I just helpful and that's can Okay. then ask think flow cash pretty strong.

in initiatives expectations for to that first quarter. our performance your to for you July I strong cash think exceeded target half, or cash expect still Are of that June Am it think in I pretty I high and target generate the the XXXX. we understand on therefore was cash the thanks. flow through would

Rob Kay

we these to we into our that looking was the side some also and is able demand similar due rationalization expectation of initiative partly people where not liquidate with are, the being for we to that our products. seen than we what influences external European operations and supply the inventory the higher this the warehouse were to and also Yeah we've skew same in on did is consolidated something as one

substituting So more channels than different hey we thought it products, have into better getting it's margin and selling than expected. in going we we're we're and that these actually

funded the significantly for One positive XXXX. piece, more yes, performance ahead flow for itself expectations as cash two didn’t XXXX of talk and in Larry did UK. flow things the we because will cash we the operational That so but reverse mentioned also we year in help to year very the have is the of misses have about because

flow notwithstanding what and So expectation XXXX we've above cash out the for XXXX. for in performance we laid are confident the

Linda Bolton-Weiser

in Virus actually know going of companies they maybe pickup felt my they think that who, of situation. store is can and lot that I just I stores seeing in because but that like on mentioned of this of Thanks had were more Corona big benefit to I people from a because other one ask they remember that I e-commerce a Amazon can't think and really one traffic, less

you phenomenon you're it's that know actually e-commerce your say be that? actually big was e-commerce? it said that Are you more seeing but I gotten shifting percentage, quite can seeing toward a it's you where to strong,

Rob Kay

and what ecommerce shipments been seeing play up but we you people from so a got particularly your because is get also has loading sell-through because of substantially are meaningfully lot to pure we're because chain up. that up quarter the our want Substantially data to first sell-through of we -- certain our see are but supply

a we as people robust of shipments don’t environment. know if expect definitely in are Corona but So Virus I seeing online people the one buying are are result online would

Linda Bolton-Weiser

and just see then future some those just then the that I think was of going fund more that lead was some one there the may quarter, And you you kind gross said and a will quarter of benefit. I year forward if tariff for or the Larry repeat Okay. the thanks. margin Can benefits in

Larry Winoker

in so the Yes quarter. that was

Rob Kay

Yeah so lifts then we potentially no as on where and stuff paying we though particularly some tariffs on two excluded items. you lift relief government lift to we got the mainly were those pertain that two we have have and mind changes have and while

a tariffs event that a to with product in a we what's able event we're one-time were not that. on and that So no is higher one-time therefore XXXX get refund now shipping It's but margin.

different a we're So refund. but getting not way in it the

Larry Winoker

sales that quarter classification me classification was product yes Let or in does XXXX. we that during relate but clarify, because to it it in for brought the

Rob Kay

fourth of the out XXXX. It too quarter came in

Linda Bolton-Weiser

out break a benefit specialized correct? you in your included that item And didn’t you as results, it

Rob Kay

Yes.

Linda Bolton-Weiser

much really it. very Thanks Okay. appreciate I

Operator

next you, of & Lebiedzinski Sidoti from is question Anthony Thank the Co.

Anthony Lebiedzinski

for Yes thank taking Good questions. and the morning you

question, December, have it or take any was that the to deal just Phase you that have impact China in as guess I will on late did the as an a far back impact tariff as XXXX? X signed as far first so So on

Rob Kay

as It and substantial $XX for to trying there two we that tariff while List products XXXX. were back. a always of One will tax million of paid was is were of fact positive place, that and four is saw it We impact. amount ways. get that's now you or over We $XX payment didn’t incremental not placed [ph] know that XXXX in part over in mitigate you still we all responsible it's that in the on not in big was we put carve sell there that million a were

that that There were part but benefit it and So of the rollback particular yield. some positive we rollbacks of in phase impact tariffs those half have also those the roughly. in were cut one of a is amount will therefore get because items

for So going pick we will dollars forward. up dollar that

Anthony Lebiedzinski

Got it.

Okay.

So from is quarter operational revenue those? we for you it the back in of to sense so, fourth a hear quarter operational just have you for good had and expense that that's an just you UK might challenges impact as magnitude if as the have of go impact isolate that or terms to could think well the the issues, the to possible do the of

Rob Kay

impact that's and the throw were operationally in $X a was substantial we try and a there were penalties, in substantial fined to million to needed delayed a to combination there of cost headcount -- cancelled The amount bottom are also net that was around line but get of it. shipments shipments there warehouse

XX the at in way that heads So just reduced expense as were February we mentioned and problem. up, January burn I our

all total mixture of $X that of if at look you perspective different impact of stuff but a EBITDA the So things million. a lot

Anthony Lebiedzinski

it. Got

but Thank is that impact impact us updating thoughts Virus that I there chain being for about give on should high Okay. yet mentioned point no you to that you as not we high far know we prepared any yet there level how that and when not broadly provide our know on has I an sales the you. as you supply thoughts models for can like think as think are but speaking about Thank to could you're going precise any said, XXXX that to guidance Corona forward. you demand, so level

Rob Kay

and shut -- and was of really shot unknowns. our all I world the cloud. synthesize ERP actions. SAP there is system a will mean not including we fortunately lot it's Yeah lot have investment to -- major the crazy of Seattle we operations hard of big precautionary but understood to a is XXXX all all a moved the subsystem by We're that I going our everything the Anthony. We Seattle precautions data look on because taking

So it us be able to and to work allows access remotely.

though even example Seattle So the an we're can we is that we the an look lot impact. operation on What quarter, not we're not of report have missing a almost there's today seen we down moving as but parts. first beat a to shut

expectations lot was There sufficiently made and to have still of months. there those next guess exceeded the We that of unknowns our inventory demand Virus. pre and over had analyze the I were couple we a hope Corona is

Anthony Lebiedzinski

of tailwinds with that And far should we XXXX? a anything you other deal operational as Obviously else point any can cost headwinds Corona the than you Virus expense issues other to as or mention like that about have in won't the anything. think view from UK

Rob Kay

-- Yeah back plan player doing didn't expanding that, a while particularly cutlery to are we in rollout we're are terms that of always we're offering, we in doing the we're Mikasa added Hospitality, smallwares it decide our of at significant we we've been ramp -- really to house up in and of that recently. a adding 'XX minimum we on

in we a Investor So Day. there opportunity Europe as well there's bigger about really as didn’t talk which in

the talk that. see pursuing launching are We haven’t that about opportunity but as and we're an in public, we aggressively

have to strategies. now started and roll our implemented out We international

that geographies a play out should which managers as in year distributors live going opposed opportunity. have on this huge agents our of We brands through and we growing we and six with eight go be in the to those So countries and be would China, in. country largest team

we're of lot a Anthony there's think I about. more So on we've the it's talked things, executing things

update you today. Virus on manage and that is talked unknown been of sort given Corona has an how that The we've variable we biggest we since

Operator

Thank you.

of is from Robotti Advisors. Weber next Your Alan question

Alan Weber

I impact. or follow-up on the the think just your lot previous question, for you of in the a it that EBITDA was a was million a the Is what say $X year? Just fourth quarter

Rob Kay

That was year. for the

have You of fourth and in third little substantially the quarter a been the bit quarter.

Alan Weber

the kind in -- you expecting expecting should you you breakeven just that are are stable, of when And plan XXXX? become positive was that a say or

Rob Kay

expecting a swing we're meaningful we've No, January have positive operational normal business. deliveries. up the to so issues we're shipped, solved, been back to of The as

So should this be year in no, there substantial that business. profitability

Alan Weber

of But have? should margin what business that normally kind

Rob Kay

As down is mentioned Larry mid-XXs to and because mid of it's our issues XXs.

Larry Winoker

comparable been and different kitchenware lower-margin is it's there's there, business the and the off-price. should and more is our national of A between more whereas business it Historically independence US but much the products different so as as on instance is big US the forth lot business here presence mix to tableware. little for club not yes types channels

Alan Weber

that then that you're my you XXXX the and is the and of to think other guess on make it that Okay to I when, in question investment terms expect amount profitability? show start you going of the prices was would is to hospitality. What

Rob Kay

it's Yeah great question a Alan.

the in figures our a out return start cost and is XXXX greater, but it's see mean it's a hell capital. to that getting our So where I investment will return of we'll seven yes XXXX, beats

Alan Weber

right That makes thanks lot. great. Okay a well sense. All listen

Operator

this back at Kay time. any are There no questions additional further over Rob for turn the to call closing or Thank I'll remarks. you.

Rob Kay

call. today's on everyone you, for Thank participating

appreciate and great of your support have continued Lifetime Brands a we always As day.

Operator

today's conclude does This call. conference you. Thank

a time wonderful have day. disconnect at this lines may your and You

Lifetime Brands (LCUT) 11 Mar 202019 Q4 Earnings call transcript