5
FORM 10-Q
UNITED STATES 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, 2000
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 period 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 11,369,714 shares outstanding as of April 30,
2000
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C>
March 31,
2000 December 31,
(unaudited) 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $118 $1,563
Accounts receivable, less allowances of
$2,889 in 2000 and
$2,609 in 1999 18,036 22,443
Merchandise inventories 52,681 54,046
Prepaid expenses 2,394 2,641
Deferred income taxes 1,234 1,257
Other current assets 638 354
TOTAL CURRENT ASSETS 75,101 82,304
PROPERTY AND EQUIPMENT, net 12,548 12,597
EXCESS OF COST OVER NET ASSETS ACQUIRED, 10,163 10,756
net
OTHER INTANGIBLES, net 10,073 9,554
OTHER ASSETS 1,224 1,173
TOTAL ASSETS $109,109 $116,384
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowing $1,265 $8,073
Accounts payable and trade acceptances 4,291 5,553
Accrued expenses 13,887 13,691
Income taxes 782 371
TOTAL CURRENT LIABILITIES 20,225 27,688
MINORITY INTEREST 981 888
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, shares
authorized 25,000,000; shares
issued and outstanding 11,737,646 in 2000
and 11,817,646 in 1999 117 118
Paid-in capital 71,414 71,957
Retained earnings 17,306 16,671
Notes receivable for shares issued to (908) (908)
stockholders
Deferred compensation (26) (30)
TOTAL STOCKHOLDERS' EQUITY 87,903 87,808
TOTAL LIABILITIES AND $109,109 $116,384
STOCKHOLDERS' EQUITY
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>Three Months Ended March 31
<C>2000 <C>1999
Net Sales $27,609 $17,817
Cost of Sales 14,517 9,164
Gross Profit 13,092 8,653
Selling, General and Administrative Expenses 10,762 8,271
Other Expense (Income) (56) (46)
Income Before Income Taxes 2,386 428
Income Taxes 1,013 171
NET INCOME $1,373 $257
EARNINGS PER COMMON SHARE-BASIC AND DILUTED $0.12 $0.02
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>Three Months Ended March 31,
<C>2000 <C> <C>1999
OPERATING ACTIVITIES
Net income $1,373 $257
Adjustments to reconcile net income to net cash
provided by / (used in) operating activities:
Depreciation and amortization 754 695
Deferred tax (benefit) 23 (48)
Provision for losses on accounts receivable 2 331
Reserve for sales returns and allowances 1,289 414
Minority interest....................... 93 -
Changes in operating assets and liabilities:
Accounts receivable 3,115 636
Merchandise inventories 1,365 (8,750)
Prepaid expenses, other current assets
and other assets (88) (60)
Accounts payable and trade acceptances
and accrued expenses (1,179) 1,912
Income taxes payable 411 (725)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 7,158 (5,338)
INVESTING ACTIVITIES
Purchase of property and equipment, net (514) (330)
Repurchase of common stock (544) -
NET CASH (USED IN)
INVESTING ACTIVITIES (1,058) (330)
FINANCING ACTIVITIES
Repayment of short-term borrowings (6,808) -
Proceeds from the exercise of stock options - 64
Cash dividends paid (737) (787)
NET CASH (USED IN)
FINANCING ACTIVITIES (7,545) (723)
(DECREASE) IN CASH AND CASH
EQUIVALENTS (1,445) (6,391)
Cash and cash equivalents at beginning of period 1,563 9,438
CASH AND CASH EQUIVALENTS AT END OF PERIOD $118 $3,047
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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, 2000 are not necessarily indicative
of the results that may be expected for the year ending December
31, 2000. It is suggested that these condensed financial
statements be read in conjunction with the financial statements
and footnotes thereto included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1999.
Note B - Inventories
Merchandise inventories, principally finished goods, are priced at
the lower of cost (first-in, first-out basis) or market method.
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, letters of credit, or trade acceptances. Borrowings
under the Line bear interest payable daily at a negotiated short
term borrowing rate. The effective interest rate at March 31, 2000
was 8%. As of March 31, 2000, the Company had letters of credit
and trade acceptances of $8,460,000 outstanding and $200,000 of
borrowings under the Line. The Company is charged a nominal fee on
the entire Line. The line is cancelable by either party at any
time.
In addition to the Line above, the Prestige Companies (the
Company's 51% controlled European subsidiaries) have three lines
of credit with three separate banks for a total available credit
facility of approximately $1.8 million. As of March 31, 2000, the
Prestige Companies had borrowings of approximately $1.1 million
against these lines. Interest rates on these lines of credits
range from 3.6% to 7%.
Note D - Capital Stock
Cash Dividends: On January 27, 2000, the Board of Directors of
the Company declared a quarterly cash dividend of $0.0625 per
share to shareholders of record on February 4, 2000, paid on
February 18, 2000. On April 27, 2000, the Board of Directors
declared another regular quarterly cash dividend of $0.0625 per
share to shareholders of record on May 5, 2000, to be paid on May
19, 2000.
Earnings Per Share: Basic earnings per share has been computed by
dividing net income by the weighted average number of common
shares outstanding of 11,802,000 for the three months ended March
31, 2000 and 12,591,000 for the three months ended March 31, 1999.
Diluted earnings per share has been computed by dividing net
income by the weighted average number of common shares
outstanding, including the dilutive effects of stock options, of
11,850,000 for the three months ended March 31, 2000 and
12,821,000 for the three months ended March 31, 1999.
Common Stock Buy Back: In March 2000, the Board of Directors of
the Company increased the authorized amount of its Common Stock
buy back from 1,000,000 common shares to a total of 2,000,000
common shares. As of March 31, 2000, a total of 877,500 common
shares were repurchased and retired.
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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<TABLE>
<CAPTION>
<S>
<C> <C>Three Months Ended March 31,
<C>2000 <C> <C>1999 <C>
Net Sales 100.0 % 100.0 %
Cost of sales 52.6 51.4
Gross profit 47.4 48.6
Selling, general and administrative expenses 39.0 46.4
Other expense (income) (0.2) (0.2)
Income before income taxes 8.6 2.4
Income taxes 3.6 1.0
Net Income 5.0 % 1.4 %
Three Months Ended March 31, 2000
Compared to Three Months ended March 31, 1999
Net Sales
Net sales for the three months ended March 31, 2000 were $27.6
million, an increase of $9.8 million or 55% over the comparable
1999 period. The increase in sales reflect the positive impact of
the Company's return to normalized shipping rates and turnaround
times for customers orders, as all of its 1999 warehouse issues
have been resolved. To a lesser extent, the quarterly sales
comparisons also benefited from the Company's September 1999
acquisition of a 51% controlling interest in each of the Prestige
Companies based in Italy and Germany. The sales increase was
partially offset by decreased sales in the Company's Farberware
Outlet Stores due to the stores having insufficient inventory in
stock until late in March. The low inventory levels were caused
by the Company focusing on shipping product to its major retail
customers during the fourth quarter of 1999 and this year's first
quarter.
Gross Profit
Gross profit for the three months ended March 31, 2000 was $13.1
million, an increase of 51.3% from the comparable 1999 period.
Gross profit as a percentage of net sales decreased to 47.4% from
48.6%. The lower margin was primarily attributable to the impact
of Prestige Companies sales which currently generate lower
margins. In the Company's core business the margins were slightly
lower than 1999, due to customer mix as shipments were made to
selective customers during the first quarter of 1999.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended March 31, 2000 were $10.8 million, an increase of 30.1% from
the comparable 1999 period. The increase was attributable to the
added selling, general and administrative expenses of the Prestige
Companies which were acquired in September 1999, along with higher
warehouse labor costs and warehouse operating expenses and
increased freight expense and commission expense related to the
increased net sales.
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; risks relating to Year 2000
issues; 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 available an unsecured $25,000,000 line of credit
with a bank (the "Line") which may be used for short-term
borrowings, letters of credit, or trade acceptances. Borrowings
under the Line bear interest payable daily at a negotiated short
term borrowing rate. The effective interest rate at March 31, 2000
was 8%. As of March 31, 2000, the Company had letters of credit
and trade acceptances of $8,460,000 outstanding and $200,000 of
borrowings under the Line and, as a result, the availability under
the Line was $16,340,000. The Company is charged a nominal fee on
the entire Line. The line is cancelable by either party at any
time.
In addition to the Line above, the Prestige Companies (the
Company's 51% controlled European subsidiaries) have three lines
of credit with three separate banks for a total available credit
facility of approximately $1.8 million. As of March 31, 2000, the
Prestige Companies had borrowings of approximately $1.1 million
against these lines. Interest rates on these lines of credits
range from 3.6% to 7%.
At March 31, 2000, the Company had cash and cash equivalents of
$118,000 versus $1.6 million at December 31, 1999. The positive
cash flow generated from operations and reductions of accounts
receivable and inventory was used to reduce short-term borrowings
by $6.8 million and fund the purchase of 95,000 shares of our
common stock under our buyback program.
On April 27, 2000 the Board of Directors declared another regular
quarterly cash dividend of $0.0625 per share to shareholders of
record on May 5, 2000, to be paid on May 19, 2000. The dividend
to be paid will be approximately $735,000.
The Company expects that all capital expenditures expected to be
incurred in 2000 will be financed from current operations, cash
and cash equivalents and, if needed, short term borrowings.
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 at least 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 predominantly all of
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.
Impact of Year 2000
In prior years, the Company has discussed the nature and progress
of its plans to become Year 2000 computer compliant. In early
1999 the Company completed installation of a new financial
accounting reporting system and a separate new warehouse
management system. As a result of those two installations, the
Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and
believes those systems successfully responded to the Year 2000
date change. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, its
internal systems, or the products and services of third parties.
The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the
year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.
PART II - OTHER INFORMATION
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the first quarter of 2000:
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<CAPTION>
<S>Exhibit No. <C>Description
27 Financial Data Schedule
(b) Reports on Form 8-K in the first quarter of 2000: 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, 2000.
(in thousands, except per share data)
</TABLE>
<TABLE>
<CAPTION>
<S>
<C>Item Number <C>Item Description <C><C>Amount
5-02(1) Cash and Cash Items $ 118
5-02(2) Marketable Securities $ 0
5-02(3)(a)(1) Notes and Accounts Receivable-Trade $ 18,121
5-02(4) Allowances for Doubtful Accounts $ 85
5-02(6) Inventory $ 52,681
5-02(9) Total Current Assets $ 75,101
5-02(13) Property, Plant and Equipment $ 19,867
5-02(14) Accumulated Depreciation $ 7,319
5-02(18) Total Assets $ 109,109
5-02(21) Total Current Liabilities $ 20,225
5-02(22) Bonds, Mortgages and Similar Debt $ 0
5-02(28) Preferred Stock-Mandatory Redemption $ 0
5-02(29) Preferred Stock-No Mandatory Redemption $ 0
5-02(30) Common Stock $ 117
5-02(31) Other Stockholders' Equity $ 87,786
5-02(32) Total Liabilities and Stockholder Equity $ 109,109
5-03(b)1(a) Net Sales of Tangible Products $ 27,506
5-03(b)1 Total Revenues $ 27,609
5-03(b)2(a) Cost of Tangible Goods Sold $ 14,517
5-03(b)2 Total Costs and Expenses Applicable
to Sales and Revenues $ 14,517
5-03(b)3 Other Costs and Expenses $ 0
5-03(b)5 Provision for Doubtful Accounts and Notes $ 2
5-03(b)(8) Interest and Amortization of Debit Discount $ 0
5-03(b)(10) Income Before Taxes and Other Items $ 2,386
5-03(b)(11) Income Tax Expense $ 1,013
5-03(b)(14) Income/Loss Continuing Operations $ 1,373
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 $ 1,373
5-03(b)(20) Earnings Per Share - Primary $ 0.12
5-03(b)(20) Earnings Per Share - Fully Diluted $ 0.12
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, 2000
/s/ Milton Cohen
__________________________________
Milton L. Cohen
Chairman of the Board of Directors
(Principal Executive Officer)
May 14, 2000
/s/ Robert McNally
__________________________________
Robert McNally
Vice President - Finance and Treasurer
(Principal Financial and Accounting
Officer)
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