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Page 1 of 13
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1996
Commission file number 1-19254
Lifetime Hoan Corporation
(Exact name of registrant as specified in its charter)
Delaware 11-2682486
(State or other jurisdiction of incorporation or organization) (I.R.S. Empl
oyer
Identification No.)
One Merrick Avenue, Westbury, NY 11590
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 683-
6000
Not applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value 11,276,194 shares outstanding as of
October 31, 1996
INDEX
LIFETIME HOAN CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995 3
Condensed Consolidated Statements of Income for the
Three and Nine months ended September 30, 1996 and 1995 4
Condensed Consolidated Statement of Changes in Stockholders' Equity for the
Nine months ended September 30, 1996 5
Condensed Consolidated Statements of Cash Flows for the
Nine months ended September 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements for the
Nine months ended September 30, 1996 7
Item 2. Management's Discussion and Analysis of Financial
Condition
and Results of Operations 8
PART II. OTHER INFORMATION 11
SIGNATURES 13
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
LIFETIME HOAN CORPORATION
September December
30, 31,
1996 1995
(unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $56,847 $89,797
Accounts receivable, less allowances of $734,000
(1996)
and $663,000 (1995) 14,211,673 12,682,401
Merchandise inventories 43,410,089 43,337,000
Prepaid expenses 5,608,638 4,578,813
Deferred income taxes 1,116,000 1,186,000
Other current assets 1,840,996 695,241
TOTAL CURRENT ASSETS 66,244,243 62,569,252
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation
and amortization of $3,680,959 (1996) and 8,749,752 7,882,166
$2,841,202 (1995)
EXCESS OF COST OVER NET ASSETS ACQUIRED, net of
accumulated amortization of $757,000 (1996) and 1,922,202 1,971,102
$708,100 (1995)
OTHER INTANGIBLES, net of accumulated
amortization of
$238,294 (1996) and $24,000 (1995) 11,316,071 2,452,748
OTHER ASSETS 938,938 880,766
$89,171,206 $75,756,034
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and trade acceptances $5,387,069 $3,072,401
Accrued expenses 6,401,823 5,931,414
Income taxes 976,518 232,447
Short term borrowings 8,400,000 4,600,000
TOTAL CURRENT LIABILITIES 21,165,410 13,836,262
STOCKHOLDERS' EQUITY
Series B Preferred Stock, $1 par value,
authorized 2,000,000
shares; none issued
Common Stock, $.01 par value, authorized
25,000,000 shares;
issued and outstanding 11,276,194 (1996) and 112,762 112,573
11,257,276 (1995)
Paid-in capital 61,221,113 61,103,589
Retained earnings 7,661,480 1,845,007
68,995,355 63,061,169
Less:
Notes receivable for shares issued to 908,064 1,048,064
stockholders
Deferred compensation 81,495 93,333
68,005,796 61,919,772
$89,171,206 $75,756,034
Note: The Balance Sheet at December 31, 1995 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed consolidated financial
statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
LIFETIME HOAN CORPORATION
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Net sales $25,116,29 $22,093,672 $65,380,614 $56,327,592
Cost of sales 11,707,992 11,758,701 32,782,813 29,673,714
13,408,304 10,334,971 32,597,801 26,653,878
Selling, general and 8,502,046 6,378,161 22,622,276 18,152,488
administrative expenses
INCOME FROM OPERATIONS 4,906,258 3,956,810 9,975,525 8,501,390
Other (income) deductions:
Interest expense 193,399 152,198 527,932 217,932
Other (income), net (25,120) (23,980) (78,881) (121,321)
INCOME BEFORE INCOME TAXES 4,737,979 3,828,592 9,526,474 8,404,779
Provision for federal, state
and local
income taxes 1,865,000 1,465,000 3,710,000 3,252,000
NET INCOME $2,872,979 $2,363,592 $5,816,474 $5,152,779
NET INCOME PER SHARE $0.25 $0.20 $0.50 $0.44
WEIGHTED AVERAGE SHARES
OUTSTANDING 11,535,483 11,530,253 11,526,207 11,636,283
See notes to condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
LIFETIME HOAN CORPORATION
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Common Stock Paid-in Retained Notes Deferred
Receivable
Shares Amount Capital Earnings from Compensati Total
Stockholders on
Balance at
Dec. 31, 1995 11,257,276 $112,573 $61,103,589 $1,845,006 ($1,048,064) ($93,333) $61,919,771
Exercise of stock 17,860 178 111,388 111,566
options
Exercise of 1,058 11 6,136 6,147
warrants
Net income for
the
nine months
ended
September 5,816,474 5,816,474
30, 1996
Repayment of note
receivable 140,000 140,000
Amortization of
deferred 11,838 11,838
compensation
Balance at
Sept. 30, 1996 11,276,194 $112,762 $61,221,113 $7,661,480 ($908,064) ($81,495) $68,005,796
</TABLE>
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
LIFETIME HOAN CORPORATION
Nine Nine
Months Months
Ended Ended
September September
30, 30,
1996 1995
OPERATING ACTIVITIES
Net income $5,816,474 $5,152,779
Adjustments to reconcile net income to
net cash
provided by / (used in) operating
activities:
Depreciation and amortization 1,122,484 649,971
Amortization of deferred compensation 11,838 44,909
Deferred tax (benefit) 70,000 (246,000)
Provision for losses on accounts 446,256 460,568
receivable
Changes in operating assets and
liabilities:
Accounts receivable (1,975,528) (1,814,681)
Merchandise inventories (73,089) (14,753,000)
Prepaid expenses, other current assets
and other assets (2,233,752) (567,463)
Accounts payable and trade acceptances
and accrued expenses 2,785,077 819,287
Income taxes payable 744,071 (38,234)
NET CASH PROVIDED BY / (USED IN)
OPERATING ACTIVITIES 6,713,831 (10,291,864)
INVESTING ACTIVITIES
Purchase of property and equipment, net (1,726,877) (569,068)
Purchase of intangibles (9,077,617) (2,000,000)
NET CASH (USED IN)
INVESTING ACTIVITIES (10,804,494) (2,569,068)
FINANCING ACTIVITIES
Proceeds from short term borrowings, net 3,800,000 11,700,000
Proceeds from the exercise of warrants 6,147 43,447
Proceeds from the exercise of stock 111,566 247,963
options
Repurchase of common stock, net (1,609,352)
Repayment of note receivable 140,000 -
NET CASH PROVIDED BY
FINANCING ACTIVITIES 4,057,713 10,382,058
(DECREASE) IN CASH AND CASH
EQUIVALENTS (32,950) (2,478,874)
Cash and cash equivalents at beginning of 89,797 2,724,429
period
CASH AND CASH EQUIVALENTS AT END OF $56,847 $245,555
PERIOD...
See notes to condensed consolidated
financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
LIFETIME HOAN CORPORATION
Note A - Basis of PresentationThe accompanying unaudited condensed
consolidated financial statements have been prepared in accordance
with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine month period
ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996.
For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1995.
Note B - Inventories
Merchandise inventories, principally finished goods, are recorded
at the lower of cost (first-in, first-out basis) or market.
Note C - Line of Credit Agreement
The Company has available an unsecured $25,000,000 line of credit
with a bank (the "Line") which may be used for short term
borrowings or letters of credit. As of September 30, 1996, the
Company had $8,400,000 of borrowings and $9,561,000 of letters of
credit and trade accepatances outstanding. The line is cancelable
by either party at any time. Borrowings under the Line bear
interest payable daily at a negotiated short term borrowing rate
(7.00% at September 30, 1996). The Company is charged a nominal
fee on the entire Line.
Note D - Capital Stock
Net Income Per Share: Net income per common share is based on net
income divided by the weighted average number of common shares and
equivalents outstanding during the periods.
As of September 30, 1996, 775,737 shares of Common Stock have been
reserved for issuance upon the exercise of options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the operating data of the Company
as a percentage of net sales for the periods indicated below.
Three Months Nine Months
Ended Ended
September 30, September 30,
1996 1995 1996 1995
Net sales 100. % 100. % 100.0 % 100. %
0 0 0
Cost of sales 46.6 53.2 50.1 52.7
Gross profit 53.4 46.8 49.9 47.3
Selling, general and 33.9 28.9 34.6 32.2
administrative expenses
Income from operations 19.5 17.9 15.3 15.1
Other (income), expense 0.8 0.6 0.8 0.2
Income before income taxes 18.8 17.3 14.5 14.9
Income taxes 7.4 6.6 5.7 5.8
Net Income 11.4 % 10.7 % 8.9 % 9.1 %
Three Months Ended September 30, 1996
Compared to Three Months Ended September 30, 1995
Net SalesNet sales for the three months ended September 30, 1996
were $25.1 million, an increase of $3.0 million or 13.7% from the
comparable 1995 period. The sales growth was primarily due to net
sales from the Farberware Outlet Stores acquired in April 1996,
increased net sales of Farberware products, Smart Choice lines and
net sales from the new Hoffritzr line, partially offset by
decreased sales of other Company products.
Gross Profit
Gross profit for the three months ended September 30, 1996 was
$13.4 million, an increase of $3.1 million or 29.7% over the
comparable 1995 period. Gross profit as a percentage of net sales
was 53.4% as compared to 46.8% for the 1995 period. This increase
is primarily due to a reduction of royalty expense due to the
Farberware acquisition and changes in product mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended September 30, 1996 were $8.5 million, an increase of $2.1
million or 33.3% from the comparable 1995 period. Selling, general
and administrative expenses as a percentage of net sales were
33.9% during this three month period in 1996 as compared to 28.9%
for the 1995 period. This increase is primarily attributable to
the operations of the Farberware Outlet Stores and increased
personnel related expenses.
Nine Months Ended September 30, 1996
Compared to Nine Months Ended September 30, 1995
Net SalesNet sales for the nine months ended September 30, 1996
were $65.4 million, an increase of $9.1 million or 16.1% from the
comparable 1995 period. The sales growth was primarily due to net
sales from the Farberware Outlet Stores acquired in April 1996,
increased net sales of Farberware products, Smart Choice lines and
net sales from the new Hoffritzr line, partially offset by
decreased sales of other Company products.
Gross Profit
Gross profit for the nine months ended September 30, 1996 was
$32.6 million, an increase of $5.9 million or 22.3% over the
comparable 1995 period. Gross profit as a percentage of net sales
was 49.9% as compared to 47.3% for the 1995 period. This increase
is primarily due to a reduction of royalty expense due to the
Farberware acquisition and changes in product mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the nine months
ended September 30, 1996 were $22.6 million, an increase of $4.5
million or 24.6% from the comparable 1995 period. Selling, general
and administrative expenses as a percentage of net sales were
34.6% during this nine month period in 1996 as compared to 32.2%
for the 1995 period. This percentage increase is primarily
attributable to the operations of the Farberware Outlet Stores.
LIQUIDITY AND CAPITAL RESOURCES
The Company has available an unsecured $25,000,000 line of credit
with a bank (the "Line") which may be used for short term
borrowings or letters of credit.
Borrowings under the Line bear interest payable daily at a
negotiated short term borrowing rate (7.0% at September 30, 1996).
The Company is charged a nominal fee on the entire Line. As of
September 30, 1996, the Company had $8,400,000 of borrowings and
$9,561,000 of letters of credit and trade acceptances outstanding
under the Line and, as a result, the availability under the Line
was $7,039,000. The Line is cancelable by either party at any
time.
At September 30, 1996, the Company had cash and cash equivalents
of $57,000 versus $90,000 at December 31, 1995, a decrease of
$33,000. The decrease is primarily attributable to the Company's
increased prepaid expenses and other current assets offset by
increased accounts payable and trade acceptances.
Products are sold to retailers primarily on 30-day credit terms,
and to distributors primarily on 60-day credit terms.
The Company believes that its cash and cash equivalents,
internally generated funds and its existing credit arrangements
will be sufficient to finance its operations for the next 12
months.
The results of operations of the Company for the periods discussed
have not been significantly affected by inflation or foreign
currency fluctuation. The Company negotiates its purchase orders
with its foreign manufacturers in United States dollars. Thus,
notwithstanding any fluctuation in foreign currencies, the
Company's cost for any purchase order is not subject to change
after the time the order is placed. However, the long term
weakening of the United States dollar against local currencies
could lead certain manufacturers to increase their United States
dollar prices for products. The Company believes it would be able
to compensate for any such price increase.
PART II - OTHER INFORMATION
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the third quarter of 1996:
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K in the third quarter of 1996: NONE
Exhibit 27. Financial Data Schedule
Lifetime Hoan Corporation
Financial Data Schedule
Pursuant to Item 601(c) of Regulation S-K
This schedule contains summary financial information extracted
from the financial statements included in the form 10-Q
for the nine months ended September 30, 1996.
Item Item Description Amount
Number
5-02(1) Cash and Cash Items $ 56,847
5-02(2) Marketable Securities $ 0
5- Notes and Accounts Receivable - $ 14,286,673
02(3)(a)( Trade
1)
5-02(4) Allowances for Doubtful $ 75,000
Accounts
5-02(6) Inventory $ 43,410,089
5-02(9) Total Current Assets $ 66,244,243
5-02(13) Property, Plant and Equipment $ 12,430,711
5-02(14) Accumulated Depreciation $ 3,680,959
5-02(18) Total Assets $ 89,171,206
5-02(21) Total Current Liabilities $ 21,165,410
5-02(22) Bonds, Mortgages and Similar $ 0
Debt
5-02(28) Preferred Stock - Mandatory $ 0
Redemption
5-02(29) Preferred Stock - No Mandatory $ 0
Redemption
5-02(30) Common Stock $ 112,762
5-02(31) Other Stockholders' Equity $ 67,893,034
5-02(32) Total Liabilities and $ 89,171,206
Stockholders' Equity
5- Net Sales of Tangible Products $ 65,185,081
03(b)1(a)
5-03(b)1 Total Revenues $ 65,380,614
5- Cost of Tangible Goods Sold $ 32,782,813
03(b)2(a)
5-03(b)2 Total Costs and Expenses
Applicable
to Sales and Revenues $ 32,782,813
5-03(b)3 Other Costs and Expenses $ 0
5-03(b)5 Provision for Doubtful Accounts $ 446,256
and Notes
5- Interest and Amortization of $ 527,932
03(b)(8) Debt Discount
5- Income Before Taxes and Other $ 9,526,474
03(b)(10) Items
5- Income Tax Expense $ 3,710,000
03(b)(11)
5- Income/Loss Continuing $ 5,816,474
03(b)(14) Operations
5- Discontinued Operations $ 0
03(b)(15)
5- Extraordinary Items $ 0
03(b)(17)
5- Cumulative effect - Changes in
03(b)(18) Accounting
Principles $ 0
5- Net Income or Loss $ 5,816,474
03(b)(19)
5- Earnings Per Share - Primary $ 0.50
03(b)(20)
5- Earnings Per Share - Fully $ 0.50
03(b)(20) Diluted
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Lifetime Hoan Corporation
/s/ Milton L. Cohen November 14,
1996
__________________________________
Milton L. Cohen
Chairman of the Board of Directors
and President
(Principal Executive Officer)
/s/ Fred Spivak November 14,
1996
__________________________________
Fred Spivak
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
