Lifetime Brands Inc (LCUT) 2006 Q1 法說會逐字稿

Welcome to the Lifetime Brands First Quarter 2006 Earnings Conference Call. [Operator Instructions]

I would now like to turn the Conference over to Ms. Harriet Fried of LHA.

Please go ahead, ma’am.

Thank you, operator.

Good morning, everyone. And thank you for joining Lifetime Brands’ First Quarter 2006 Conference Call.

With us today from management are Jeffrey Siegal, Chairman, President and Chief Executive Officer; and Robert McNally, Chief Financial Officer.

Before we begin, I’ll read the Safe Harbor statement under the Private Securities Litigation Reform Act of 1995.

The statements that are about to be made in this Conference Call that are not historical facts are forward-looking statements and involve risks and uncertainties including, but not limited to, products demand and market acceptance risks, the effects of economic conditions, the impact of competitive products and pricing, product developments, commercialization, technological difficulties, capacity constraints or difficulties, the results of financing efforts, the effects of the Company’s accounting policies, and other details contained in its filings with the SEC. The Company undertakes no obligation to update these forward-looking statements.

With that introduction, I’d like to turn the call over to Jeffrey Siegal.

Go ahead, please, Jeff.

Thank you, Harriet, and good morning, everyone.

The first quarter of 2006 was a very eventful and successful period for Lifetime.

Starting with our financial results -- as you saw in this morning’s press release, total net sales increased almost 73%. Even excluding the sales attributable to last year’s Pfaltzgraff and Salton acquisitions, net sales increased 28%, reaching a record level for our Company. Bob McNally will review these numbers and our net income results for you in a few minutes.

Lifetime’s sales for the quarter are a result of both the dynamic organic growth in our major product categories as well as the additional volume gained as a result of the Pfaltzgraff and Salton Tabletop acquisitions.

Kitchenware, Lifetime’s biggest and second-oldest category, rose 39% over the prior period, with both our KitchenAid® and Farberware® branded products performing exceedingly well as a result of expanded assortments and increased distribution at key retailers. In the second-largest category and our oldest category, Cutlery -- which includes kitchen cutlery, cutting boards, and scissors and sheers -- sales increased 42% over last year’s first quarter. Here our Farberware® and Cuisinart® branded products performed especially well, and our KitchenAid® brand continued to expand distribution with excellent results.

Bakeware and Cookware, another significant category for Lifetime, achieved a sales increase of 19% for the period. We market bakeware products in metal, ceramic and silicone and have had special success with the latter, establishing Lifetime as the largest single supplier of silicone bakeware over the last several years. In the first quarter of 2006, most of our growth in this Bakeware and Cookware category was under the Roscho® brand. Plus we continue to experience growth under the KitchenAid® brand as well.

As those of you who follow our news know, the first quarter was also an eventful period, due to our acquisition of the business and assets of Syratech Corporation, a leading designer, importer and manufacturer of a diverse portfolio of tabletop, home decor and picture frame products. One of the most important aspects of the acquisition is that it furthers Lifetime’s tabletop strategy by expanding our presence in luxury tabletop.

Since we announced the Syratech acquisition in early March, we have been focused on the integration of the two companies. It’s well underway at this point, and proceeding very smoothly. Our goal is to complete the integration of Syratech in a 90-day timeframe, and we’re confident we can achieve the goal.

During the quarter, we also signed an agreement with PEDRINI, the number-one Italian kitchenware company, for the exclusive rights to market and distribute PEDRINI branded housewares products in the U.S. PEDRINI distributes [a] very high-quality kitchenware and bakeware items and has great consumer recognition in Europe as an upscale brand, but has not yet reached its true potential here in the U.S. We plan to expand the PEDRINI brand to include additional housewares product categories and to add innovative designs using new technologies and materials.

As this quarter’s outstanding organic growth demonstrates, Lifetime [as] business is progressing exceedingly well. And we’re convinced that the Company can continue to grow through the strategies that we have used successfully to date.

Today, I want to take some time really to discuss the three pillars of Lifetime’s strength that have fueled our organic growth, and what we’re doing to even further strengthen each of these pillars. I also want to introduce a fourth pillar, which we’ve developed over the last two years. And that’s consumer-relationship teams.

Our first pillar is the 28 owned or licensed brands, which are the most powerful brands in our industry. For every level of retailer, from mass merchant to the finest specialty stores, we have the aspirational brand the retailers want and need to achieve their goals. The Syratech acquisition has brought us the best brands in flatware including International Silver, Towle, Wallace, and Tuttle. I’ve been in this business for many years, have long envied those brands; and they now belong to Lifetime.

Our second great pillar is innovation. With the Syratech acquisition, we now have -- we’ve grown to 75 in-house designers, which will enable us to introduce over 2,500 new SKUs this year. We now have design centers in Westbury, New York; York, Pennsylvania; New York City and Boston. Each design center has special capabilities that are unique, and each will be doing design work for all of our divisions. We’ve also begun the process of developing a design center in the Far East, which I hope to have fully operational by the end of this year. This will enable Lifetime to have product design functioning 24 hours a day and will enable us to further improve our speed to market.

Our third pillar is sourcing. Lifetime has had two offices in China which have served us well. Syratech had a much larger operation in China, which has been functioning very well for many years. By the end of next month, we will complete the combining of these offices. And we will end up with four sourcing offices, each in a province that is strategic to our ability to source quality products at the lowest possible cost. Our combined staff of over 150 people in China is charged with developing new sources that are capable of producing the increasing number of new products that we are developing. We’ve also begun to leverage the combined size of our businesses to lower our shipping-container costs.

Our fourth and newest pillar is our customer-relationship team approach to doing business with our most important customers. Through a two-year transition, we have successfully abandoned the old method of a salesman calling on an account. We realize that our key customers [are] becoming more and more sophisticated. And if we in turn become sophisticated in how we do business with them, we would both prosper.

Every major customer is now covered with a team that has experts from each of our divisions, as well as a team leader whose job it is to fully understand the needs of the retailer and to identify opportunities for us to work together with the retailer, so that we both grow in a profitable manner. The more successes we bring to our customers, the more they want to do business with us. This is one of the key reasons why our organic growth has been accelerating.

It’s also important to note that we have already integrated the entire Syratech sales force into our customer-relationship team. At the end of last year, we had 25 teams in place. And by the end of this year, we will have teams in place for our top 65 accounts.

Another crucial element to Lifetime’s success is the outstanding management team we have in place. Our Company’s division and product-development leaders have world-class experience and knowhow to grow our business at the same time that we carry out our acquisition plans.

To acquaint you with the management team’s capabilities, we have featured their expertise in our 2005 annual report, which our shareholders will receive shortly. Each individual brings a wealth of product manufacturing, sourcing and retail knowledge to Lifetime’s team. Each is focused on continuing to build Lifetime’s brands and bring to market innovative and exciting products that offer appreciable benefits to the consumer.

With that overview of our first quarter performance, and our many plans for future growth, I’ll turn the call over to Bob McNally, who will review our financial results in more detail.

Bob?

Thank you, Jeff.

Net sales for the first quarter of 2006 were $74.4 million. That’s $31.3 million higher or 72.6% greater than 2005's first quarter sales of $43.1 million. Net income was approximately $900,000, or $0.07 per diluted share for this year’s first quarter; as compared to net income of $1 million, or $0.09 per diluted share recorded for the first quarter of 2005.

These results reflect the net impact of very significant organic growth and improved profitability of our wholesale business, the added sales to the Pfaltzgraff and Salton business that we acquired in the third quarter of 2005, and the expected seasonal operating losses of our expanded direct-to-consumer business. The $31.3 million increase in net sales for the first quarter of 2006 included approximately $19.2 million of combined sales for the Pfaltzgraff and Salton businesses that we acquired during 2005. Excluding the sales attributable to these acquired businesses, net sales totaled $55.2 million. That’s a 28.1% increase over the comparable 2005 quarter sales of $43.1 million.

In our wholesale segment, the Company’s total sales were $57.7 million for the first quarter of 2006. And that was $18.1 million or 45.6% higher than the $39.6 million in wholesale sales for the first quarter of 2005. Excluding sales for Pfaltzgraff and Salton, the Company’s wholesale sales were approximately $52.3 million during the first quarter of this year. And that was 32% higher than the 2005 period.

This sales increase was primarily attributable to significantly higher sales of KitchenAid®, Farberware® and Cuisinart® branded cutlery; and significantly higher sales of KitchenAid® and Farberware® branded kitchen tools and gadgets. Our Bakeware products also contributed very strong sales growth for the quarter.

Our total direct-to-consumer sales, including the Pfaltzgraff Outlet Stores, Internet and Catalog operations, and our own Farberware® Outlet Stores, were $16.7 million for the 2006 quarter. And that compares to $3.5 million for the 2005 quarter. Sales for the Pfaltzgraff direct-to-consumer business were approximately $13.8 million during the first quarter.

Cost of sales for the three months ended March 31, 2006 were $41.5 million; 67.7% higher than the cost of sales of $24.9 million for the comparable 2005 period. For the wholesale segment, cost of sales as a percentage of net sales improved to 57.8% in the 2006 quarter, compared to 58.5% for the 2005 quarter. This improvement was primarily attributable to product mix. In our direct-to-consumer segment, cost of sales as a percentage of sales was slightly better, at 48.7% in the 2006 quarter, compared to 48.8% in the 2005 quarter.

Distribution expenses, which consist primarily of warehousing expenses, handling costs of products sold and freight-out, were approximately $10.6 million in the first quarter of 2006. And that compares to approximately $6.1 million in the first quarter of 2005.

In the wholesale segment, distribution expenses as a percent of net sales was 14.1% in the 2006 quarter. And that compares to 15.3% in the 2005 quarter. This improved relationship primarily reflects the continued benefits of labor savings and efficiencies that are generated by our main distribution center in Robbinsville, New Jersey. Distribution expenses for operating the Pfaltzgraff direct-to-consumer business was approximately $2.5 million for the 2006 period.

Selling, general and administrative expenses for the three months ended March 31, 2006 were $20.6 million. That’s $10.3 million higher, or 99.8% higher, than the $10.3 million of expenses for the comparable 2005 quarter. In our wholesale segment, selling, general and administrative expenses increased by $3.1 million in the first quarter of 2006 and, as a percentage of net sales, was slightly lower, at 17.2% for 2006, compared to 17.4% in the 2005 quarter.

The $3.1 million increase in expenses reflects the building of our internal infrastructure to support future growth -- in particular, in our Tabletop wholesale category -- and the higher selling costs associated with the increased sales volume.

SG&A expenses in our direct-to-consumer business increased by $7.2 million in the 2006 quarter and as a percentage of sales was significantly lower, at 56.3% in the first quarter of 2006, compared to 65.4% in the 2005 quarter. The percentage improvement in the 2006 quarter reflects the benefit of having a larger direct-to-consumer business that includes Outlet Stores, Catalog and Internet operations, all managed by one centralized organization that, in large part, came with the Pfaltzgraff acquisition.

Income from operations for the three months ended March 31, 2006 was $1.8 million, essentially flat in comparison to the first quarter of 2005. The Company measures operating income by segment, excluding certain unallocated corporate expenses. These unallocated corporate expenses totaled $1.2 million in the 2006 quarter, versus $1.1 million in the 2005 quarter.

Income from operations for our wholesale segment was $6.3 million in the first quarter of 2006, as compared to $3.5 million in the 2005 quarter, and as a percentage of net sales dramatically improved to 10.9% from 8.8% in the 2005 period.

As we had previously announced, and consistent with our plans, our direct-to-consumer segment had an operating loss of approximately $3.3 million in the first quarter of 2006. And that compares to a loss of $600,000 in the 2005 quarter.

Sales in the direct-to-consumer business are heavily weighted to the latter part of the year, while the operating expenses are largely fixed throughout the year. This results in operating losses being incurred in the first half of the year.

Moving to our balance sheet -- at March 31, 2006, our financial condition remains very strong, with approximately $141 million in stockholders’ equity. Accounts receivable at the end of the 2006 quarter was approximately $32.2 million. That’s $9.3 million higher than receivables were at the end of the 2005 quarter. This increase is commensurate with the increase in sales that we recorded for the 2006 quarter, including the added volume from the acquisitions of Pfaltzgraff and Salton during 2005.

Inventories at March 31 were approximately $91.4 million. That’s $31.1 million higher than they were at March 31, [2006]. The higher inventory levels primarily reflect a $30 million of added inventory for the Pfaltzgraff and Salton businesses that we acquired during 2005.

Property plant and equipment, net at March 31, 2006 was $23.8 million as compared to $20.1 million a year ago. The increase was primarily related to property and equipment that was acquired with the Pfaltzgraff and Salton acquisitions. Capital spending during the quarter was approximately $1.1 million. And depreciation expense was approximately $1.3 million.

Borrowings under our $100 million secured credit facility at March 31, 2006 were $19.5 million, of which $14.5 million were short-term borrowings and $5 million is a long-term loan due in August 2009. The $19.5 million borrowings were $3.8 million higher than the $15.7 million of debt outstanding at March 31, 2005.

The increase in borrowings primarily reflect the net effect of $48 million of borrowings that we use to fund the acquisitions of Pfaltzgraff and Salton, offset by the paydown of debt using the $35 million of proceeds from the Company’s sale of 1.7 million shares of stock this past November, and by further reductions in debt using cash generated from operations.

As was noted in our press release this morning, we expect that the Syratech business that we acquired last Thursday will contribute approximately $100 million in net sales in 2006. And we expect it to be nominally profitable to the year. As a result, we now expect total sales for 2006 to range between $480 million and $500 million.

While we do not give quarterly earnings guidance, I do want to point out that the seasonality of the Syratech business is heavily weighted toward the second half of the year, which will further increase the negative impact on the Company’s earnings comparison for the second quarter of this year. In addition, we do not expect to begin to realize cost synergies from the Syratech acquisition until the third quarter. As a result, it is likely that we will report a loss for the second quarter of 2006.

However, our outlook for 2006 in total remains extremely positive. And we continue to expect that the earnings -- the Company’s earnings per share will total between $1.45 and $1.70 for the year.

I guess we’ll open it up for questions.

[Operator Instructions] Greg Badishkanian, with Citigroup.

Oh, hey, guys -- two questions.

First one is -- we were modeling improving profitability from 1Q to 2Q. Obviously, you had some upside this quarter. Second quarter’s expected to be a loss. And I’m just wondering, without the most recent Syratech acquisition, what would second quarter EPS guidance have been?

Greg, I think -- as I said, we as a company are avoiding earnings guidance by quarter.

Great.

And I think, frankly, as I read the press, that seems to be what’s happening in Corporate America today.

Sure.

But -- I hesitate to answer that.

Yes. I think what Bob said before -- you have to take note of -- that Syratech is heavily weighted towards the back half of the year. So it certainly is not a plus for us in the second quarter.

See, I’m just trying to understand if my -- what I was modeling in -- and I think I’m close to where the street is -- would it have been similar to that -- we’re ranging $0.07 to $0.10 -- would it have been something like that if it wasn’t for the acquisition? Or would it have -- sort of was there just a -- from a seasonality perspective, maybe -- looking at it differently, maybe first quarter’s a little bit stronger than second quarter, and then it ramps up towards the back half of the year. I just --

You’re right about that. The first quarter’s usually a little better than the second quarter for us. And it does ramp up in the back half of the year.

Right.

But as Bob said, we aren’t going to give quarterly guidance.

Okay, good.

In terms of maybe an organic sales growth in margin target, in order to achieve your EPS target, can you give us some help on just what to expect, maybe in the back half of the year, or in the -- when I think it’s -- that’s obviously a much more important part of the season for you?

Well, Greg, I think we entered this year saying that basically we expected organic growth to be similar to what we had last year, and we stand by that statement.

Okay, good. [So] that’s the organic growth.

And maybe just comment on input prices, and how you’re able to -- how those impacted you in the first quarter. Obviously, profitability was a little bit stronger. So maybe it wasn’t having an impact, or maybe talk about pricing as well.

No, we haven’t had overall price increases of any kind. There are minor ones in different areas, but nothing of significance at this point. We seem to be holding. We’re leveraging our strength. We have a terrific team overseas who’s really finding new sources that are lower-cost producers, to offset anyone who might be increasing costs for whatever reason, whether it be materials or any other reason.

We’re doing pretty well with it. And we have, as I said, leveraged our combined strength, including Syratech, in the number of containers that we import, to be able to lower our cost of containers, starting next month.

Great.

So -- which will offset some of -- if there are any increases in materials.

Great.

Good. Thank you very much.

[David Cohen, with Midwood Capital].

Hey, guys, good quarter.

Hi, David.

Question -- with the Syratech acquisition, you’ve got now even a couple of more facilities, I think, particularly on the West Coast. Can you give us a sense of your game plan as far as consolidating those distribution assets, and what the economic benefit could be, once you accomplish that?

Well, we do have -- you’re right. We ended up actually with three facilities within half an hour of each other in California. We’re working on it now. We’re working on rationalizing it out. People have been out there; they’re working on plans to bring us into the future on distribution. So we’ll need a few more months on that one. But we certainly recognize that [there] could be [saying things] in different ways.

Okay. And, I mean, any sense of sort of how much [duplicative] costs you have in the system now, with those facilities?

Not really. Not yet.

Okay --

I think, David, it’s too early to talk to that. Suffice to say that our projections do not include any synergy from that. So when we put together our distribution strategy, we’ll figure out the cost savings then. It will be additive to what we have now in hand.

Okay.

And can you give us a sense of -- with the Syratech acquisition, what the pro forma balance sheet looks like, or capitalization -- your total debt, and then shares outstanding, Bob?

The shares outstanding -- we issued about 440,000 shares, as a result. And adding that to 13,160 will give you about 13,600 going forward.

Okay. Okay.

And --

With respect to the debt -- if we just took the quarter-end numbers and added roughly $42 million to it, that would be our debt structure today.

Okay.

And last question -- are there any programs in particular across your brands and categories that you can talk about? I mean, I think going into the year, there was some nice progress on the Kitchenware side, in sinkware; things like that. Any really nice pieces of business that you can talk about --

Yes.

-- working on?

Our business is strong across all of the major product lines that we have. And actually, the focus today is more towards 2007. We’re -- the plans for 2006, for the most part, are finished by all the major retailers.

[Okay].

We’re now -- and that’s why we’re getting more confident that our business will be exactly on plan for the year. And hopefully, we will have a wonderful year. 2007 is the focus right now. And I guess things move a lot further in advance than they used to. I guess as the retailers have become larger, they’ve become more sophisticated. They no longer have to wait for the results of the year before they make decisions for the following year. So it’s, to us -- I think it’s a benefit to us, because we’re very -- we’re more prepared than a small company could be to do this. But we’re working for 2007 right now.

[All right]. Great, thanks.

[Steve Colbert, with Canaccord Adams].

Hi, guys, good morning.

Morning.

The Tabletop category -- it’s obviously important category for you going forward. Any updates you can provide on the business, with either the price cuts you’ve had, maybe the reception you’ve been receiving with the new products, or the channels where you see the most opportunity going forward?

I -- give you a little of what happens. I mean, we made the Excel acquisition, which is a year earlier than the Pfaltzgraff acquisition. And it took us about a year to really get it going. And a couple of the brands that we acquired from them are starting to do very well for us, and getting extremely good placement. Same thing is true -- we just came from a tabletop show that was just a few weeks ago, in New York. And we got rave reviews to the new Sasaki® line, which is a very upscale line that we have; an old brand that we acquired with the Salton acquisition. And that’s going to get terrific placement -- but more going into the fall.

The Pfaltzgraff -- same thing. The new patterns were very, very well received. The Pfaltzgraff business is much more heavily in the -- what you call the better stores; department stores and specialty stores. And the placement for those stores tends to be much more into the fall, the new placement. So we are going to have terrific new placement for Pfaltzgraff -- basically all of the brands that we’re acquired in Tabletop -- going into the fall.

Okay, great.

And then, there’s been a bit of noise recently with Wal-Mart reducing inventories. Have you been seeing any sign of this in your business with them?

No, really not. Our business there is very strong. We’re onto their -- what they call their retail link, which is their computerized system. Our point-of-sale information is very, very strong. And we continue to grow there. We continue to get additional placement and grow at Wal-Mart, as we do with all of our major accounts.

We have not had any inventory cutbacks. We’ve gone through that over the last couple of years, though. We dramatically reduced the case pack size, starting two years ago, that we sell to Wal-Mart. We reduced the inner pack size, in order to help them with their turns. Our return on investment for Wal-Mart on our products is near the upper end of the range that they’re looking for. So I don’t -- I haven’t -- we’ve read a lot about the situations that you talked about. We have not had it affect us. That’s all I can tell you.

Okay.

And then, I may have missed this, but did you give a retail store count that you currently have? Is it still where it was at year end?

No, we closed a number of stores in January. I believe we’re at 88 --

Yes.

-- 44 Farberware® stores and 44 Pfaltzgraff stores --

So it’s still at the 88 from last time you reported?

Yes. That was actually done -- most of the closings were in January.

Yes.

So they were in the first quarter. And frankly, it took a tremendous effort from the people who run the stores to close that many stores in [just] a short period of time. But it was the right thing for the Company, and we did it. And it’s behind us. So we have -- all the really poor, underperforming stores have been closed.

Okay.

And then I think I heard diluted-share count going forward -- 13,600? Is that what we should be using?

That’s correct.

Okay.

That’s it for me. Thanks, guys.

[Operator Instructions] Gary Giblen, with Brean Murray, Carret.

Yes, Carret. Hi, good morning, everybody.

Hi, Gary.

Did you exceed your internal financial plan for the first quarter?

I think we -- I would say we -- overall, we probably exceeded it [by somewhat], yes.

Okay.

If you think, Gary, about the range we put out there -- $1.45 to $1.70 -- there’s a range for each quarter. And so we’re in that range.

Okay. Got it.

And given that the second quarter is almost a third or half over the -- excluding Syratech, would you be on plan for the second quarter, on your internal plan?

I think -- let’s just say that we -- April looks strong -- the aspects of the April business were as strong, and leave it at that. I mean, I think we had earlier questions from Greg about this quarter-to-quarter comparison. And let’s remind everybody, we’ve said a long time, Q1 and Q2 are really not that indicative of the whole year. And a slight increase in one account can affect your comparisons.

So I mean --

Yes, [inaudible] --

-- we did have a great first quarter; we’re happy with the first quarter. But we don’t necessarily look at Q1 and Q2 as indicative of our year.

Okay.

And how is Federated May shaping up short term for you? I mean, is there -- is the degree of massive confusion there getting resolved as they change the [GMNs] at Macy’s, et cetera, and --

Yes, it is. It’s --

-- are order patterns way off normal there, because of transition? Or it is [inaudible] --

Yes. For the first and second quarter, they’ve absolutely been off, and we expected it. But things are looking much better. They certainly are getting their house in order. There’s been a lot of press about it, as you know. But they seem to have really gotten their hands around it.

They now have -- they’re really now a truly centralized operation. And they’re going in the right direction. We’re very pleased with how our brands are being placed within the organization for the fall. They’re looking for very positive things. We had terrific meetings with their tabletop team at the tabletop show. We’re highly enthused.

Okay, great.

And can you give us an update on -- so far, with Syratech -- and you were kind of working with them very early on -- are there any specific examples of meaningful magnitude, where you’ve gone into new channels -- such as jewelry, that they’re involved in -- and you haven’t been [forth] penetrating new, specific accounts --

[inaudible]

-- [or where] they are and you haven’t been, or where you got them into accounts or channels that you’re in but they’re not?

We have -- as of the date of the closing, we had already integrated the sales team. So everything was planned and done, and everyone had -- actually, their entire sales force attended our sales meetings before the closing. So we were -- we’re very much on the same path. And there are a number of accounts that they do business with that we don’t, that we believe we will be doing business with starting this fall. I don’t want to go into the specific accounts, but there’s one sizeable home-furnishings chain that we did no business with, and I have never done business with them. We had some excellent meetings with them for our other businesses in the last few months -- last two months.

There will definitely be synergies on the aspect of sales, in both ways. They have a very well-established sales force that’s now integrated into our teams. Some of their people I know for a very long time; they’re very good at what they do. They have great relationships with retailers. We’re working very closely with them. We’re very pleased with the team that’s in place there. We’re looking for big things. And there will be accounts that we do business with that they didn’t, and visa-versa; there are accounts that we do very strong business with, and they were not in. And our teams will get them in for those accounts.

So we are working together, and there will be synergies on that end.

Okay. So specific stuff is happening already there?

Yes, it is.

Okay.

And then, what’s your sense of -- with Global Home -- I mean, is it going to continue to operate in the fashion that it is now, or in the form that it is now? Or is it -- it’s confusing with the [age] of -- with all the news, and the bankruptcy, whether it will continue operating or be broken up. And if it were -- just assuming it were broken up, which may or may not be true -- I mean, are there pieces there that you would be interested in acquiring?

We look at so many things, Gary. And we will certainly look at this like we do everything else. We’re very hard-nosed on an acquisition. We know what we need. We know the parts that are good for us. We understand the businesses. They’re not in any businesses that are foreign to us; we do understand the businesses. And we certainly -- we look at things that come across our table. As you could imagine, we look at many more than we take action on.

Okay. And is your sense -- are they running it to operate the company, or to kind of wind it down or sell it off?

Since we really don’t compete with them, it’s hard for us to know that right now. Their overlap in competitive products between us and them is negligible. It really is negligible. [Wherever] might have some cookie sheets, but they’re not really -- they’re in a different business. And we certainly don’t do anything in the glass that Anchor Hocking does; the type of glass that they’re in.

Okay.

Yes, they’re -- and Burns is a very different type of picture frame company than the Syratech picture frame company, Melannco. Burns is much more into the [mask], where Melannco is a very strong department store and specialty store resource for the picture frames. So they really don’t even -- they don’t compete in that business at all.

Oh, okay.

I really can’t tell you if they’re -- what they’re going to do; whether they’re going to operate it or not.

Yes, okay.

And then finally, is the crystal business part of Syratech something that you want to -- you’re enthusiastic about and want to grow? I ask because Enesco sold off Dartington. And I don’t know if it was just a company-specific problem or their own --

Yes. Our --

[inaudible] crystal industry issue.

Gary, we have a crystal business that we acquired with Salton, which actually looks like --

[From Salton] --

-- it’s going to be performing very well for us. It’s under the Block® name, and the Block® and Atlantis®, and [Tabla] and a Stiffel® license, as well as Sasaki®. It looks like that business is performing well for us.

The Syratech crystal business is a relatively small business under the Towle brand. It’s -- I can tell you it’s under a $5 million business. And that business is moving over to our other division, which is more in the crystal business. They will use the Towle brand as a brand. But they’ll move it over. We don’t have any intentions of divesting ourselves of the crystal business.

I think the Dartington business that Enesco divested themselves of was a UK business. And the UK market right now is a very poor market [there].

[Lot of] consumer weakness, yes.

Okay. Well, good luck as you continue through the integration of Syratech. And it sounds like you’re -- are you finished with it, or are you --

It’s finishing -- it’s interesting. We had the -- because of the long negotiation period, and the long period between the contract and the closing, we’ve had a tremendous amount of time to do much more before we closed than we ever would have done before. The overseas offices -- even though we closed on this last week -- we will integrate them by next month. And sales is totally integrated already. And we’re in the process of integrating everything that makes sense to integrate. We set a goal of 90 days. We’re going to beat the 90 days dramatically; I can tell you that.

The things that we won’t integrate quickly, of course, are the things that would have risks, like IT. We’re not going to integrate IT in a fall season. It would be very foolish for us to do that. So we would wait to integrate the IT until next spring.

Sure.

Okay. Well, good luck with things, [I guess].

[Todd Schwartzman, with Sidoti & Company].

Good morning, gentlemen.

Could you offer a little bit of color, maybe, on the cost and timetable for the Asian design center? And also are you building it, or leasing it?

It’s not a building. Syratech has an extensive operation in Guangzhou, which is the old Canton. And we’re going to be doing it in that operation. They have a significant amount of space in there. They have the IT setup in there; the connections and everything are terrific. And so this is not going to be a major capital expenditure in any way. It’s basically hiring the people, buying the equipment -- which is relatively inexpensive; it’s well under $10,000 a workstation to set up a person -- and training the people.

And the way we’re training them, we’re going to be training them -- even though we’re hiring them from technical schools in China, we will be training them -- our people will be training them. We will send people from our design staff who speak Chinese over there to train them. And they will -- we’ll eventually end up pairing them, so that they work together with the person over here.

There is not a significant cost involved in this. It’s just -- having the right people to do it is important. And we do.

And on your answer to the input price question, you said that you’re just seeing minor -- some minor increases. Could you maybe quantify what you’re seeing in plastics over the last couple of months?

Though the price of some plastics has gone up, we’re frankly not getting the passthrough to the product. It’s absolutely negligible. I mean, the way we’re set up as a company, any time there’s a price increase, I have to approve it. Mean, I don’t want anything to slip through. And I haven’t been approving anything.

Okay.

Let me add -- one of the reasons that -- we’re not miracle-workers with that. The reason it works well for us is that we introduce so much new product. And each new product that we introduce is priced based on the cost of the materials and the labor to make the product. That’s the way we do it.

So people call that sometimes a stealth price increase. Because if we come out, for instance, with a new peeler that’s more expensive than an old one, is it a price increase? Not really; it’s a new peeler. And the retailer doesn’t look at it that way. As long as the retailer’s making the margin they want -- and frankly, they love getting higher price points -- if we can produce a better peeler at a higher price point that they can do more business with, they love it. It’s perfect for them, as long as they’re making their same margin.

But a lot of it is -- because of our ability to design so quickly and be so prolific in design, and change lines so quickly, really enables us to avoid price increases. Old products that you’ve had for many years and continue to run the same product -- you’re going to eventually face price increases.

Great.

[Operator Instructions] Gary Giblen, with Brean Murray, Carret.

Yes, hi. This is a financial question, I guess, for Bob.

The -- I know you told us what the current [debt] balance is. But what would be your sense of range-of-interest expense for the year?

Okay. We’re looking at interest expense of about $4.5 million for the year.

Okay, yes, that’s helpful. It’s hard to keep track of --

Yes, no, I understand.

But that’s great. Okay, yes. That was my only follow-up.

Thank you.

[Todd Schwartzman, with Sidoti & Company].

Hi.

Since you first issued the annual EPS guidance of [$145] million to [$170] million, has your internal earnings forecast for the second half of the year changed at all?

Well, yes, it has. Because effectively, Syratech is going to give us a negative in Q2, and then a positive in second half. So that would be the impact at this point.

Okay, thanks.

[Operator Instructions] And there are no further questions at this time. Please proceed with your presentation, or any closing remarks.

Thank you.

Before I close, I’d like to share my thoughts with you on what it means that we are now the largest publicly traded non-electric housewares company in the U.S.

Our sheer size gives us the ability to leverage our investments in brands, design and sourcing; as well as our relationships with major retailers, to be not just a vendor, but a partner in their success.

You should also note that we continue to look at new opportunities, especially ones that would add brands, placement or categories that complement our strengths. And I must reemphasize that while much of our recent growth has come from acquisitions, we have not compromised our liquidity nor lost our focus on execution, as shown by the continuing dramatic organic growth in our core business.

Thanks, everyone, for joining us this morning, as we reviewed Lifetime’s progress during the first quarter, and the many ways we are using our outstanding brands, product development and sourcing capabilities to accelerate the Company’s growth.

We look forward to giving you another update at the end of the second quarter.

Thank you.

Ladies and gentlemen, that concludes your Conference Call for today.

We thank you for your participation and ask that you please disconnect your line.