6
FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1998
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. Employer 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 12,565,325 shares outstanding as of April 30,
1998
INDEX
LIFETIME HOAN CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Income for the
Three months ended March 31, 1998 and 1997 4
Condensed Consolidated Statement of Changes in Stockholders' Equity for the
Three months ended March 31, 1998 5
Condensed Consolidated Statements of Cash Flows for the
Three months ended March 31, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements for the
Three months ended March 31, 1998 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION 10
SIGNATURES 12
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
LIFETIME HOAN CORPORATION
(in thousands, except share data)
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March 31,
1998 December 31
(unaudited) 1997
ASSETS
CURRENT ASSETS
Cash and cash equivalents $5,596 $7,773
Accounts receivable, less allowances of
$1,019 in 1998 and
$851 in 1997 12,070 13,274
Merchandise inventories 46,466 42,763
Prepaid expenses 3,197 3,290
Deferred income taxes 591 439
Other current assets 2,509 2,170
TOTAL CURRENT ASSETS 70,429 69,709
PROPERTY AND EQUIPMENT, net 9,672 9,434
EXCESS OF COST OVER NET ASSETS ACQUIRED,net 1,824 1,841
OTHER INTANGIBLES, net 10,852 10,950
OTHER ASSETS 1,026 1,023
TOTAL ASSETS $93,803 $92,957
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and trade acceptances $3,067 $5,360
Accrued expenses 7,062 6,152
Income taxes 1,420 539
TOTAL CURRENT LIABILITIES 11,549 12,051
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, authorized
25,000,000 shares;
issued and outstanding 12,564,109 in 1998
and 12,522,246 in 1997 126 125
Paid-in capital 75,522 75,307
Retained earnings 7,571 6,443
Notes receivable for shares issued to (908) (908)
stockholders
Deferred compensation (57) (61)
TOTAL STOCKHOLDERS' EQUITY 82,254 80,906
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $93,803 $92,957
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
LIFETIME HOAN CORPORATION
(in thousands, except per share data)
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Three Months Ended
March 31,
1998 1997
Net sales $21,868 $21,108
Cost of sales 11,472 11,133
10,396 9,975
Selling, general and administrative expenses 7,370 7,737
INCOME FROM OPERATIONS 3,026 2,238
Interest expense 0 23
Other (income), net (85) (40)
INCOME BEFORE INCOME TAXES 3,111 2,255
Provision for federal, state and local
Income taxes 1,200 892
NET INCOME $1,911 $1,363
NET INCOME PER SHARE-BASIC AND DILUTED $0.15 $0.11
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
LIFETIME HOAN CORPORATION
(in thousands)
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Notes
Common Stock Paid-in Retained Receivable Deferred
Shares Amount Capital Earnings from Compensation Total
Stockholders
Balance at
December 31,1997 12,522 $125 $75,307 $6,443 ($908) ($61) $80,906
Exercise of stock
options 42 1 215 216
Net income for the
three months ended
March 31, 1998 1,911 1,911
Cash Dividend (783) (783)
Amortization of
deferred
compensation 4 4
Balance at
March 31, 1998 12,564 $126 $75,522 $7,571 ($908) ($57) $82,254
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
LIFETIME HOAN CORPORATION
(in thousands)
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Three Three
Months Months
Ended Ended
March 31, March 31,
1998 1997
OPERATING ACTIVITIES
Net income $1,911 $1,363
Adjustments to reconcile net income to net cash
provided by / (used in) operating activities:
Depreciation and amortization 527 403
Deferred tax (benefit) (152) (27)
Provision for losses on accounts receivable 61 10
Reserve for sales returns and allowances 84 105
Changes in operating assets and liabilities:
Accounts receivable 1,059 1,869
Merchandise inventories (3,702) (1,678)
Prepaid expenses, other current assets
and other assets (248) 371
Accounts payable and trade acceptances
and accrued expenses (1,383) (1,286)
Income taxes payable 880 (421)
NET CASH (USED IN) / PROVIDED BY
OPERATING ACTIVITIES (963) 709
INVESTING ACTIVITIES
Purchase of property and equipment, net (647) (326)
NET CASH (USED IN) INVESTING ACTIVITIES (647) (326)
FINANCING ACTIVITIES
Repayment of short term borrowings, net 0 (1,000)
Proceeds from the exercise of stock options 216 128
Cash Dividend Paid (783)
NET CASH (USED IN) FINANCING ACTIVITIES (567) (872)
(DECREASE) IN CASH AND CASH EQUIVALENTS (2,177) (489)
Cash and cash equivalents at beginning of
period 7,773 1,093
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,596 $604
See notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
LIFETIME HOAN CORPORATION
Note A - Basis of Presentation The 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 three
month period ended March 31, 1998 are not necessarily indicative
of the results that may be expected for the year ending December
31, 1998. 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, 1997.
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 March 31, 1998, the
Company had $16,592,000 of letters of credit and trade acceptances
outstanding and no borrowings. 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. The Company is
charged a nominal fee on the entire Line.
Note D - Capital Stock
Cash Dividends: On January 20, 1998, the Board of Directors of
the Company declared a quarterly cash dividend of $0.0625 per
share to shareholders of record on February 5, 1998, paid on
February 19, 1998 and on April 22, 1998 the Board of Directors
declared another regular quarterly cash dividend of $0.0625 per
share to shareholders of record on May 5, 1998, to be paid on May
19, 1998.
Earnings Per Share: In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, Earnings Per Share.
Statement No. 128 replaced the calculation of primary earnings per
share and fully diluted earnings per share with basic and diluted
earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options,
warrants, and convertible securities. Diluted earnings per share
is very similar to the previously reported fully diluted earnings
per share. All earnings per share amounts have been presented,
and where appropriate, restated to conform to Statement No. 128
requirements.
The following table sets forth the computation of basic and
diluted earnings per share:
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Three Months Ended
March 31,
(in thousands, except
per share data)
1998 1997
Numerator for basic and diluted earnings per
share - net income $1,911 $1,363
Denominator:
Denominator for basic earnings per share -
weighted average shares 12,538 12,417
Effect of dilutive securities:
Employee stock options 287 383
Denominator for diluted earnings per share -
adjusted weighted-average
shares and assumed conversions 12,825 12,800
Net income per share - basic $0.15 $0.11
Net income per share - diluted $0.15 $0.11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth income statement data of the
Company as a percentage of net sales for the periods indicated
below.
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Three Months Ended
March 31,
1998 1997
Net Sales 100.0 % 100.0 %
Cost of sales 52.5 52.7
Gross profit 47.5 47.3
Selling, general and administrative 33.7 36.7
expenses
Income from operations 13.8 10.6
Other (income), expense (0.4) (0.1)
Income before income taxes 14.2 10.7
Income taxes 5.5 4.2
Net Income 8.7 % 6.5 %
Three Months Ended March 31, 1998
Compared to Three Months ended March 31, 1997
Net Sales
Net sales for the three months ended March 31, 1998 were $21.9
million, an increase of $760,000 or 3.6% from the comparable 1997
period. Excluding sales from the Company's Farberware outlet
stores, net sales in the core business increased by approximately
12% in 1998. The sales growth was due principally to increased
shipments of Hoffritz and Farberware branded products, partially
offset by lower sales in non-branded products.
Net sales from the Farberware outlet stores were $1.1 million in
1998, as compared to $2.5 million for the comparable period in
1997. The lower sales in the 1998 period resulted from the
restructuring of the operations of the outlet stores pursuant to
an agreement with Meyer Corporation which became effective in the
third quarter of 1997. Under the terms of the agreement Meyer
Corporation receives all revenue from sales of cookware products
in the Farberware outlet stores and is responsible for 62.5% of
the operating expenses.
Gross Profit
Gross profit for the three months ended March 31, 1998 was $10.4
million, an increase of 4.2% from the comparable 1997 period.
Gross profit as a percentage of net sales improved to 47.5% due
primarily to a favorable change in the overall sales product mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended March 31, 1998 were $7.4 million, a decrease of 4.8% from
the comparable 1997 period. Excluding the expenses related to the
outlet stores, S,G&A expenses increased in the 1998 quarter by
8.8%. This increase was primarily attributable to higher selling
and distribution expenses related to the 12% sales increase in the
core business.
Selling, general and administrative expenses for the Farberwarer
outlet stores decreased by $910,000 in 1998 as compared to the
comparable period in 1997, reflecting the restructuring of the
operations of the outlet stores.
Forward Looking Statements: This Quarterly Report on Form 10-Q
contains certain forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, including statements concerning the Company's
future products, results of operations and prospects. These
forward-looking statements involve risks and uncertainties,
including risks relating to general economic and business
conditions, including changes which could affect customer payment
practices or consumer spending; industry trends; the loss of major
customers; changes in demand for the Company's products; the
timing of orders received from customers; cost and availability of
raw materials; increases in costs relating to manufacturing and
transportation of products; dependence on foreign sources of
supply and foreign manufacturing; and the seasonal nature of the
business as detailed elsewhere in this Quarterly Report on Form 10-
Q and from time to time in the Company's filings with the
Securities and Exchange Commission. Such statements are based on
management's current expectations and are subject to a number of
factors and uncertainties which could cause actual results to
differ materially from those described in the forward-looking
statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has 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 and trade acceptances. Borrowings under the
Line bear interest payable daily at a negotiated short term
borrowing rate. The Company is charged a nominal fee on the entire
Line. As of March 31, 1998, the Company had $16,592,000 of letters
of credit and trade acceptances outstanding under the Line and no
borrowings and, as a result, the availability under the Line was
$8,408,000. The Line is cancelable by either party at any time.
At March 31, 1998, the Company had cash and cash equivalents of
$5.6 million versus $7.8 million at December 31, 1997. The
decrease is primarily attributable to the Company's increased
inventory levels, decreased accounts payable and trade acceptances
and the cash dividend paid in February 1998, offset by decreased
accounts receivable, increased accrued expenses and increased
income taxes payable.
On April 22, 1998 the Board of Directors declared another regular
quarterly cash dividend of $0.0625 per share to shareholders of
record on May 5, 1998, to be paid on May 19, 1998. The dividend
to be paid will be $783,000.
The Company estimates that approximately $6.0 million of capital
expenditures will be incurred in 1998. These expenditures are
primarily for the equipment and a management system to be used in
a new, more modern, leased distribution facility, and the
installation of a new financial reporting system. These
expenditures will be financed from current operations, cash and
cash equivalents and, if needed, short term borrowings.
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 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.
The Company is in the process of installing a new
financial/accounting system and a separate warehouse management
system which the Company believes will significantly enhance
capabilities. These systems are expected to be fully operational
by the middle of 1999 and be Year 2000 compliant. The Company
also has initiated discussions with its significant suppliers,
large customers and financial institutions to ensure that those
parties have appropriate plans to remedy Year 2000 issues where
their systems interface with the Company's systems or otherwise
impact its operations. The Company will assess the extent to
which its operations are vulnerable should those organizations
fail to remedy properly their computer systems. While the Company
believes its planning efforts are adequate to address its Year
2000 concerns, there can be no guarantee that the systems of other
companies on which the Company's systems and operations rely will
be converted on a timely basis and will not have a material effect
on the Company.
PART II - OTHER INFORMATION
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the first quarter of 1998:
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K in the first quarter of 1998: 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
and is qualified in its entirety by reference to such financial
statements
for the three months ended March 31, 1998.
(in thousands, except per share data)
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Item Item Description Amount
Number
5-02(1) Cash and Cash Items $ 5,596
5-02(2) Marketable Securities $ 0
5-02(3)(a)(1) Notes and Accounts Receivable - Trade $ 12,145
5-02(4) Allowances for Doubtful Accounts $ 75 Accounts
5-02(6) Inventory $ 46,466
5-02(9) Total Current Assets $ 70,429
5-02(13) Property, Plant and Equipment $ 15,576
5-02(14) Accumulated Depreciation $ 5,904
5-02(18) Total Assets $ 93,803
5-02(21) Total Current Liabilities $ 11,549
5-02(22) Bonds, Mortgages and Similar Debt $ 0 Debt
5-02(28) Preferred Stock - Mandatory Redemption $ 0 Redemption
5-02(29) Preferred Stock - No Mandatory Redemption $ 0 Redemption
5-02(30) Common Stock $ 126
5-02(31) Other Stockholders' Equity $ 82,128
5-02(32) Total Liabilities and Stockholders'
Equity $ 93,803 Stockholders' Equity
5-03(b)1(a) Net Sales of Tangible Products $ 21,843
5-03(b)1 Total Revenues $ 21,868
5-03(b)2(a) Cost of Tangible Goods Sold $ 11,472
5-03(b)2 Total Costs and Expenses Applicable Applicable
to Sales and Revenues $ 11,472
5-03(b)3 Other Costs and Expenses $ 0
5-03(b)5 Provision for Doubtful Accounts
and Notes $ 61
5-03(b)(8) Interest and Amortization of Debt
Discount $ 0
5-03(b)(10) Income Before Taxes and Other Items $ 3,111
5-03(b)(11) Income Tax Expense $ 1,200
5-03(b)(14) Income/Loss Continuing Operations $ 1,911
5-03(b)(15) Discontinued Operations $ 0
5-03(b)(17) Extraordinary Items $ 0
5-03(b)(18) Cumulative effect - Changes in
Accounting Principles $ 0
5-03(b)(19) Net Income or Loss $ 1,911
5-03(b)(20) Earnings Per Share - Primary $ 0.15
5-03(b)(20) Earnings Per Share - Fully Diluted $ 0.15
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
May 14, 1998
/s/ Milton Cohen
__________________________________
Milton L. Cohen
Chairman of the Board of Directors
and President
(Principal Executive Officer)
May 14, 1998
/s/ Robert McNally
__________________________________
Robert McNally
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
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