UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
[No Fee Required]
For the fiscal year ended December 31, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
[No Fee Required]
For the transition period from to
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, New York 11590
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(516) 683-6000
Securities registered pursuant to Section 12(b) of the
Act: None
Securities registered pursuant to Section 12(g) of the
Act:
Common Stock, par value $.01 per share
(Title of Class)
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___
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to
this Form 10-K [ ].
The aggregate market value of 5,651,000 shares of the
voting stock held by non-affiliates of the registrant
as of February 29, 2000 was approximately
$36,025,000. Directors, executive officers, and
trusts controlled by said individuals are considered
affiliates for the purpose of this calculation, and
should not necessarily be considered affiliates for
any other purpose.
The number of shares of Common Stock, par value $.01
per share, outstanding as of February 29, 2000 was
11,800,746.
DOCUMENTS INCORPORATED BY REFERENCE
See Part III hereof with respect to incorporation by
reference from the registrant's definitive proxy
statement to be filed pursuant to Regulation 14A
under the Securities & Exchange Act of 1934 and the
Exhibit Index hereto.
LIFETIME HOAN CORPORATION
FORM 10-K
TABLE OF CONTENTS
PART 1
1. Business 3
2. Properties 10
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders
11
PART II
5. Market for the Registrant's Common Stock and Related
Stockholder Matters 11
6. Selected Financial Data 12
7. Management's Discussion and Analysis of Financial
Condition
and Results of Operations 13
8. Financial Statements and Supplementary Data 17
9. Changes in and Disagreements with Accountants on
Accounting
and Financial Disclosure 17
PART III
10. Directors and Executive Officers of the Registrant18
11. Executive Compensation 19
12. Security Ownership of Certain Beneficial Owners and
Management 19
13. Certain Relationships and Related Transactions 19
PART IV
14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K 19
Exhibit Index 19
Index to Financial Statements and Financial Statement
Schedule F-1
Signatures
2
PART I
ITEM 1. BUSINESS
General
Forward Looking Statements: This Annual Report on Form
10-K 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 Annual Report on Form 10-K 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.
Lifetime Hoan Corporation designs, markets and
distributes a broad range of household cutlery,
kitchenware, cutting boards and bakeware products. Items
are sold under both owned and licensed trade names.
Owned trade names include Hoffritzr, Prestiger, Tristarr,
Old Homesteadr, Roshcor, Baker's Advantager and Hoanr.
Licensed trade names include Farberwarer, Reverer and
various names under license from The Pillsbury Company.
The Farberwarer trade name is used pursuant to a 200 year
royalty-free license. As used herein, unless the context
requires otherwise, the terms "Company" and "Lifetime"
mean Lifetime Hoan Corporation and its subsidiaries.
Sales growth is stimulated by expanding product offerings
and penetrating various channels of distribution, both
domestically and internationally. Lifetime has developed
a strong consumer franchise by promoting and marketing
innovative products under Company trade names and through
licensing agreements. In addition, the following
acquisitions and agreements have been made which have had
a favorable impact on the Company's business:
Hoffritzr
In September 1995, the Company acquired the Hoffritzr
trademarks and brand name. The Company uses the name on
various products including cutlery, scissors, personal
care implements, kitchen tools, bakeware, barware and
barbecue accessories. The Company believes that Hoffritzr
is a well-known, respected name with a history of
quality. The acquisition has enabled the Company to sell
products at higher price points than the rest of the
Company's products. Since acquiring the brand name, the
Company has continuously designed and developed new items
each year and currently sells approximately 350 types of
items under the Hoffritz brand name. The Company markets
these products through major department stores and high
end specialty stores nationwide.
3
Farberwarer
In April 1996, the Company entered into an agreement to
acquire certain assets of Farberware, Inc.
("Farberware"). Under the terms of the acquisition
agreement, and a joint venture agreed to by the Company
and Syratech Corporation in connection therewith, the
Company acquired a 200 year, royalty-free, exclusive
right to use the Farberwarer name in connection with the
product lines covered by its then existing license
agreement, which included kitchen cutlery products
(excluding flatware) and kitchen tools such as spatulas,
barbecue forks and "gadgets" (but excluding appliances),
plus certain limited additional products. This agreement
enables the Company to market products under the
Farberwarer name without paying additional royalties.
The Company also acquired 50 Farberware outlet stores.
In addition, rights to license the Farberwarer name for
use by third parties in certain product categories are
held by a joint venture, owned equally by the Company and
a wholly owned subsidiary of Syratech Corporation.
Microban
In April 1997, the Company entered into an agreement with
the Microban Products Company whereby the Company secured
exclusive rights to incorporate Microban antibacterial
protection into plastic components of cutting boards,
kitchen tools, kitchen gadgets, and cutlery.
Meyer Agreement
In 1997, the Company entered into an agreement with Meyer
Corporation, regarding the operation of the Company's
Farberware retail outlet stores. Pursuant to the
agreement, the Company continues to own and operate the
Farberware retail outlet stores, which the Company
acquired in 1996, and Meyer Corporation, the licensed
manufacturer of Farberware branded cookware products,
assumes responsibility for merchandising and stocking
cookware products in the stores. Meyer Corporation
receives all revenue from sales of Farberware cookware,
currently occupies 40% of the space in each store and
reimburses the Company for 40% of the operating expenses
of the stores.
Salton Agreement
Effective January 1, 2000, the Company entered into an
agreement with Salton Inc., regarding the operation of
the Company's Farberware retail outlet stores. Pursuant
to the agreement, the Company continues to own and
operate the Farberware retail outlet stores, which the
Company acquired in 1996 and Salton Inc., the licensed
manufacturer of Farberware branded electric products,
assumes responsibility for merchandising and stocking
electric products in the stores. Salton Inc. receives all
revenue from sales of Farberware electric, occupies 20%
of the space in each store and reimburses the Company for
20% of the operating expenses attributable to the stores.
Roshco Acquisition
In August 1998, the Company acquired all of the
outstanding common stock of Roshco, Inc. ("Roshco"), a
privately held bakeware and baking-related products
distributor, located in Chicago, Illinois. Roshco
markets its bakeware and baking-related products under
the Roshco and Baker's Advantage trade names, and its
revenues were approximately $10 million in 1997. The
purchase price consisted of an initial cash payment of
$5.0 million and notes payable of $1.5 million. In 1999
the Company paid $500,000 for the first note payable.
The Company is also obligated to make additional payments
based on annual sales volume for bakeware and baking-
related products for a period of two years. In 1999 the
Company paid approximately $416,000 for the first year.
The Company also assumed bank debt of $2.6 million that
was paid on the acquisition date.
4
Revere Agreement
In October 1998, the Company entered into a licensing
agreement with Corning Consumer Products Company. This
agreement allows the Company to design and market cutlery
and cutting boards under the Reverer trademark in the
United States and Canada. Shipments of products under
the Reverer name began in the first halfsecond quarter of
1999.
Prestige Acquisition
In September 1999, the Company acquired 51% of the
capital stock of Prestige Italiana, Spa. ("Prestige
Italy") and Prestige Haushaltswaren GmbH ("Prestige
Germany") (together, the "Prestige Companies") for
approximately $1.3 million in cash.
Meyer Corporation will continue to own 49% of the
Prestige Companies.
The Prestige Companies market and distribute kitchen
tools, gadgets, cutlery and bakeware under the Prestiger
trade name in Italy and Germany. For the twelve months
ended August 31, 1999, the Prestige Companies recorded
net revenues of approximately $10 million.
Salton Agreement
Effective January 1, 2000, the Company entered into an
agreement with Salton Inc., regarding the operation of
the Company's Farberware retail outlet stores. Pursuant
to the agreement, the Company continues to own and
operate the Farberware retail outlet stores, which the
Company acquired in 1996, and Salton Inc., the licensed
manufacturer of Farberware branded electric products,
assumes responsibility for merchandising and stocking
electric products in the stores. Salton Inc. receives all
revenue from sales of Farberware electric, occupies 20%
of the space in each store and reimburses the Company for
20% of the operating expenses attributable to the stores.
5
Products
The Company designs, markets and distributes a broad
range of household cutlery, kitchenware, cutting boards
and bakeware, marketing its products under various trade
names including Farberwarer, Hoffritzr, Prestiger,
Bakers Advantager and Reverer.
Cutlery
The Company markets and distributes household cutlery
under a variety of trade names including Farberwarer,
Hoffritzr, Reverer and Tristarr. Cutlery is sold
individually, in blister packages, boxed sets and in sets
fitted into wooden counter blocks, resin carousels and
stainless carousels.
Cutlery is generally shipped as individual pieces from
overseas manufacturers to the Company's warehouse
facilities in central New Jersey. This permits the
Company to configure the quantity, style and contents of
cutlery sets to meet customer requirements as to product
mix and pricing. The sets are then assembled and
packaged for shipment to customers.
Kitchenware
The Company sells over 2,750 kitchenware items under
various trade names including Farberwarer, Hoffritzr,
Hoanr, Prestiger, Smart Choice and Pillsbury. The
kitchenware items are manufactured to the Company's
specifications outside the United States and are
generally shipped fully assembled. These items are
typically packaged on a card which can be mounted for
sale on racks at the retailers' premises for maximum
display visibility. Products include the following:
Kitchen Tools and Gadgets
Food preparation and serving tools such as metal,
plastic and wooden spoons, spatulas, serving forks,
graters, strainers, ladles, shears, vegetable and fruit
knives, juicers, pizza cutters, pie servers, and slicers;
Barbecue accessories, in sets and individual pieces,
featuring such items as spatulas, tongs, forks, skewers,
hamburger and fish grills, brushes, corn holders, food
umbrellas, and nut and lobster crackers;
Green Giantr, vegetable-related kitchen accessories
incorporating the Green Giantr character, including items
such as peelers, can openers, kitchen hooks, magnets,
spoons, steamers and strainers.
Impulse Purchase Products
J-Hook and Clip Strip merchandising systems which
enable the Company to create additional selling space in
the stores. The line consists of a variety of quality,
novelty items designed to trigger impulse buying. This
line is targeted towards supermarkets and mass merchants.
6
Cutting Boards
The Company designs, markets and distributes a full
range of cutting boards made of polyethylene, wood, glass
and acrylic. All cutting boards except for glass are
imported. Glass cutting board blanks are purchased
domestically and are finished and packaged in the
Company's warehouse facilities in central New Jersey.
Boards are also packaged with cutlery items and kitchen
gadgets.
Bakeware
The Company designs, markets and distributes a
variety of bakeware and baking related products.
This product line includes baking, measuring, and
rangetop products such as cookie sheets, muffin, cake and
pie pans, drip pans, bake, roast and loaf pans, scraper
sets, whisks, cutters, rolling pins, baking shells,
baking cups, measuring devices, thermometers, timers,
pizza stones, fondues, woks, ceramics and coasters.
These items are manufactured to the Company's
specifications outside the United States and are
generally shipped fully assembled. The Company also
began to design, market and distribute selected items of
this product line under the trade names of Hoffritzr and
Farberwarer in the first half of 1999.
The Company also distributes bakeware under a
license from Pillsbury, one of America's best known
brands of baking accessories, featuring the Poppin-FreshT
logo on such items as pastry brushes, spatulas, whisks,
spoon and cup sets, cookie cutters, mixing spoons and
magnets.
New Products
The Company has a design and development department
consisting of 14 employees who create new products,
packaging and merchandising concepts. In excess of 450
items were developed or remodeled in 1999, including the
following:
Hoffritz: Introduction of a new line of professional
bakeware, fondue sets and numerous additions to the
kitchenware product line line.in 1999.
Cutlery: Introduction of Reverer cutlery and Farberwarer
Walnut Millenium knife block sets and open stock cutlery.
Gadgets: Introduction of Farberwarer and Roshcor 100
piece cookie cutter sets, metal cleaning polishes and
expansion of the Millenium line of kitchen tools and
accessories.
Bakeware: Introduction of Pillsbury non stick bakeware
line, Roshcor ceramic bakeware and Roshcor clay bakers.
7
Sources of Supply
The Company sources its products from approximately 40
manufacturers located primarily in the Far East,
including the People's Republic of China and Malaysia,
and to a smaller extent in the United States, India,
France, Indonesia, Taiwan, Thailand and Italy. A
majority of its cutlery was purchased from three
suppliers in 1999 who accounted for 47%, 26% and 17% of
the total purchases and from five suppliers in 1998 who
accounted for 29%, 24%, 18%, 13% and 10% of the total
purchases, respectively. An interruption of supply from
any of these manufacturers could have an adverse impact
on the Company's ability to fill orders on a timely
basis. However, the Company believes other manufacturers
with whom the Company does business would be able to
increase production to fulfill the Company's
requirements.
The Company's policy is to maintain a large inventory
base and, accordingly, it orders products substantially
in advance of anticipated time of sale to its customers.
While the Company does not have any long-term formal
arrangements with any of its suppliers, in certain
instances, particularly in the manufacture of cutlery,
the Company places firm commitments for products up to
twelve months in advance of receipt of firm orders from
customers. Lifetime's arrangements with most
manufacturers allow for flexibility in modifying the
quantity, composition and delivery dates of each order.
Excluding the Prestige Companies, all purchase orders are
in United States dollars. The Prestige Companies
purchase orders are in their local currency.
Marketing
The Company markets its product lines directly through
its own sales force and through a network of independent
sales representatives. The Company's products are sold
primarily in the United States to approximately 1,000
customers including national retailers, department store
chains, mass merchant retail and discount stores,
supermarket chains, warehouse clubs, direct marketing
companies, specialty chains and through other channels of
distribution. During the years ended December 31, 1999,
1998 and 1997, Walmart accounted for approximately 14%
,17% and 15% of net sales, respectively. No other
customer accounted for 10% or more of the Company's net
sales during 1999, 1998 and 1997.
Competition
The markets for household cutlery, kitchenware, cutting
boards and bakeware are highly competitive and include
numerous domestic and foreign competitors, some of which
are larger than the Company. The primary competitive
factors in selling such products to retailers are
consumer brand name recognition, quality, packaging,
breadth of product line, distribution capability, prompt
delivery and price to the consumer.
8
Patents and Trademarks
The Company uses a number of owned trademarks, primarily
Hoffritzr, Tristarr and Hoanr, as well as Farberwarer
which is licensed under a 200 year royalty-free
agreement, which the Company considers significant to its
competitive position. Some of these trademarks are
registered in the United States and others have become
distinctive marks as to which the Company has acquired
common law rights. The Company also has licensed
trademarks from The Pillsbury Company and Corning
Consumer Products Company which it uses in its business.
The Company also owns several design and utility patents
expiring from 2000 to 2017 on the overall design of some
of its products. The Company also acquired patents,
trademarks and copyrights as part of the Hoffritzr
purchase and Roshco acquisition, that expire from 2000 to
2022. The Company believes that the expiration of any of
its patents would not have a material adverse effect on
its business.
Seasonality
Although the Company sells its products throughout the
year, the Company has traditionally had higher net sales
during its third and fourth quarters. During 1999, the
Company experienced problems with the installation of a
new warehouse management system that negatively impacted
its ability to make shipments primarily in the first and
third quarters which impacted the normal seasonality of
quarterly shipments. The following table sets forth the
quarterly net sales for the years ended December 31,
1999, 1998 and 1997:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net Sales
(in thousands)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
1999 $17,800 $26,900 $23,000 $39,100
1998 21,900 24,200 31,300 39,400
1997 21,100 22,100 24,500 32,300
Backlog
Lifetime receives projections on a seasonal basis from
its principal customers; however, firm purchase orders
are most frequently placed on an as needed basis. The
Company's experience has been that while there may be
some modifications of customers' projections, the Company
is able, with some degree of certainty, to predict its
product needs.
Lifetime's backlog at December 31, 1999 and 1998 was
$9,802,000 and $4,227,000 respectively. The Company
expects to fill the 1999 backlog during 2000. The
Company does not believe that backlog is indicative of
its future results of operations or prospects. Although
the Company seeks commitments from customers well in
advance of shipment dates, actual confirmed orders are
typically not received until close to the required
shipment dates.
Employees
As of December 31, 1999, Lifetime had 685 685 full-time
employees, of whom 5 were employed in an executive
capacity, 51 in sales, marketing, design or product
development, 58 in financial, administrative or clerical
capacities, 286 in warehouse or distribution capacities
and 239 were outlet store personnel. Prestige Italy had
19 employees and Prestige Germany had 27 employees. None
of the Company's employees are represented by a labor
union. The Company considers its employee relations to be
good.
9
ITEM 2. PROPERTIES
The following table describes the facilities at which the
Company operates its business:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Approximate Owned Lease
Description/Use of Square or Expiration
Property Location Footage Leased Date
Corporate Westbury,
headquarters and New York 47,000 Owned N/A
outlet store York
Warehouse and Dayton,
distribution New 305,000 Leased 1/31/01
facility Jersey
Warehouse and Dayton,
distribution New 136,000 Leased 1/31/01
facility Jersey
Warehouse and Cranberry,
distribution New 152,000 Leased 6/30/04
facility Jersey
Bentonville,
Showroom Arkansas 1,000 Leased 3/31/02
Chicago,
Sales office Illinois 1,000 Leased 12/31/03
Prestige Italy
office, warehouse
and distribution Milan, 26,000 Owned N/A
facility Italy
Prestige Germany
office, warehouse Solingen
and distribution Germany 24,000 Leased 3/31/01
facility
In 1999, the Company built a 5,000 square foot addition
onto its corporate headquarters to house a new outlet
store.
Aside from the properties listed above, the Company's
Outlet Store subsidiary leases approximately 55 stores in
retail outlet centers located in 24 states throughout the
United States. The square footage of the stores range
from approximately 2,000 square feet to 5,000 square
feet. The terms of these leases range from three to five
years with expiration dates beginning in February 2000
and extending through December 2005.
The Company is designing a new distribution center, which
it expects to commence leasing in the second half of
2001.
10
ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation
arising in the normal course of its business. The
Company believes that there are currently no material
legal proceedings the outcome of which would have a
material adverse effect on the Company's financial
position or its results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded under the symbol
"LCUT" on The Nasdaq National Market ("Nasdaq") and has
been since its initial public offering in June 1991. In
December 1999, the Board of Directors of the Company
authorized a repurchase of up to 1,000,000 of its
outstanding common shares. Through December 31, 1999,
782,500 common shares were repurchased and through
February 29, 2000, an aggregate of 799,400 common shares
were repurchased.
The following table sets forth the high and low sales
prices for the Common Stock of the Company for the fiscal
periods indicated as reported by Nasdaq.
</TABLE>
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C> <C> <C>
High Low High Low
First Quarter $10.88 $9.38 $11.50 $9.25
Second Quarter $10.38 $7.25 $12.56 $9.75
Third Quarter $10.13 $7.25 $11.25 $8.00
Fourth Quarter $7.38 $4.78 $11.75 $8.00
At December 31, 1999, the Company estimates that there
were approximately 1,000 beneficial holders of the Common
Stock of the Company.
The Company paid quarterly cash dividends of $0.0625 per
share or a total annual cash dividend of $0.25 per share
on its Common Stock in each of 1999 and 1998. The Board
of Directors currently intends to maintain quarterly cash
dividends of $0.0625 per share of Common Stock for the
foreseeable future, although the Board may in its
discretion determine to modify or eliminate such dividend
at any time.
11
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below for the five
years in the period ended December 31, 1999 have been
derived from the audited financial statements of the
Company. The data for 1997 through 1999 should be read in
conjunction with "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of
Operations" and the audited financial statements and
related notes thereto included elsewhere herein.
</TABLE>
<TABLE>
<CAPTION>
(in thousands except per share data)
Year Ended December 31, Year Ended December 31,
<S> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
INCOME STATEMENT DATA:
Net sales $106,761 $116,746 $100,021 $98,426 $80,495
Cost of sales 57,979 60,507 51,419 50,528 43,531
Gross profit 48,782 56,239 48,602 47,898 36,964
Selling, general and
administrative expenses 42,250 35,306 33,114 31,915 25,397
Income from operations 6,532 20,933 15,488 15,983 11,567
Interest expense 281 203 76 671 401
Other income, net (532) (200) (149) (100) (148)
Income before income taxes 6,783 20,930 15,561 15,412 11,314
Income taxes 2,822 8,372 6,000 6,060 4,387
Net income $3,961 $12,558 $9,561 $9,352 $6,927
Basic earnings per common share $0.32 $1.00 $0.77 $0.75 $0.56
Weighted average shares - basic 12,572 12,570 12,459 12,395 12,465
Diluted earnings per common share $0.31 $0.98 $0.75 $0.74 $0.54
Weighted average shares - diluted 12,671 12,843 12,720 12,676 12,753
Cash dividends paid per
common share $0.25 $0.25 $0.06 - -
December 31,
1999 1998 1997 1996 1995
BALANCE SHEET DATA:
Current assets $82,304 $72,265 $69,709 $61,884 $62,569
Current liabilities 27,688 13,925 12,051 13,213 13,836
Working capital 54,616 58,340 57,658 48,671 48,733
Total assets 116,384 105,072 92,957 84,772 75,756
Borrowings 8,073 - - 1,000 4,600
Stockholders' equity 87,808 91,147 80,906 71,559 61,920
12
ITEM 7. 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
1999 1998 1997
Net sales 100.0% 100.0% 100.0%
Cost of sales 54.3 51.8 51.4
Gross profit 45.7 48.2 48.6
Selling, general and adm.expenses 39.6 30.2 33.1
Income from operations 6.1 18.0 15.5
Interest expense 0.3 0.2 0.1
Other income, net (0.5) (0.2) (0.1)
Income before income taxes 6.3 18.0 15.5
Income taxes 2.6 7.2 6.0
Net income 3.7% 10.8% 9.5%
1999 COMPARED TO 1998
Net Sales
Net sales in 1999 were $106.8 million, a decrease of
approximately $10.0 million, or 8.6% below 1998. The
decrease in sales was attributable to problems issues
experienced in our warehouse operations that resulted
from the installation of a new warehouse management
system in January 1999. The problems issues with the new
warehouse management system negatively impacted the
Company's ability to ship merchandise to its customers
and in turn also caused inventory to increase well beyond
the warehouse's efficient capacity. The Company believes
that appropriate measures were taken to rectify these
problems and that the system properly functioned at
acceptable levels during the fourth quarter.
Gross Profit
Gross profit for 1999 was $48.8 million, 13.3% lower than
1998. Gross profit as a percentage of net sales decreased
to 45.7% in 1999 as compared to 48.2% in 1998. This
decrease was primarily attributable to an increase in
reserves for slow moving and discontinued inventory and
to an increase in accruals for sales returns and
allowances.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for 1999
were $42.3 million, an increase of $6.9 million, or
19.7%, over 1998. The increase in selling, general and
administrative expenses was primarily attributable to
increased warehouse personnel expenses and warehouse
operating expenses, incremental selling, general and
administrative expenses related to the Prestige Companies
acquired in September 1999, increased software consulting
expenses and accruals for customer chargebacks related to
the problems issues associated with the installation of
the new warehouse management system.
13
Interest Expense
Interest expense for 1999 was $281,000, an increase of
$78,000 from 1998. This increase was due attributable to
increased borrowings under the Company's line of credit
during 1999, primarily due to lower sales and earnings in
the first three quarters of 1999 as compared to 1998.
1998 COMPARED TO 1997
Net Sales
Net sales in 1998 were $116.7 million, an increase of
$16.7 million, or 16.7%, over 1997. The acquisition of
Roshco completed in August 1998 added $6.0 million to net
sales for the year. Excluding the impact of Roshco
product sales, net sales for the Company grew 10.7%.
This sales growth was due principally to increased
shipments of Hoffritz and Farberware branded products,
partially offset by lower sales of non-branded products.
Net sales of Farberwarer outlet stores were $8.0 million
in 1998 as compared to $8.6 million in 1997, reflecting
the restructuring of the operations of the outlet stores,
which became effective in the third quarter of 1997
pursuant to an agreement with the Meyer Corporation.
Under the agreement, the Company continued to own and
operate the Farberwarer retail outlet stores, and Meyer
Corporation, the licensed manufacturer of Farberwarer
branded cookware products, assumed responsibility for
merchandising and stocking cookware products in the
stores. As a result, Meyer Corporation received all
revenue from sales of cookware and was responsible for
52.0% of the operating expenses, as defined, attributable
to the stores.
Gross Profit
Gross profit for 1998 was $56.2 million, an increase of
15.7% over 1997. Gross profit as a percentage of net
sales decreased slightly to 48.2% in 1998 as compared to
48.6% in 1997, primarily as a result of the addition of
the Roshco product sales which carried lower gross profit
margins as compared to the Company's other product sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for 1998
were $35.3 million, an increase of $2.2 million or 6.6%
from 1997. Selling, general and administrative expenses
for the Farberware outlet stores decreased by $810,000,
reflecting the restructuring of the operations of the
outlet stores. Excluding the expenses related to the
outlet stores and those associated with Roshco, selling,
general and administrative expenses in the Company's core
business increased by 6.1%. The higher dollar expenses
were primarily attributable to increased selling,
warehousing and distribution expenses related to the
higher sales volume, offset by decreased bad debt
expense. These expenses as a percentage of net sales
decreased to 29.5% in 1998 as compared to 31.2% in 1997.
Interest Expense
Interest expense for 1998 was $203,000, an increase of
$127,000 from 1997. This increase was due to increased
borrowings under the Company's line of credit during
1998, primarily to finance the Roshco acquisition in
August 1998. All borrowings under the Company's line of
credit were repaid by December 31, 1998.
14
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had cash and cash
equivalents of $1.6 million, a decrease of $7.9 million
from the prior year, working capital was $54.6 million, a
decrease of $3.7 million from 1998, and the current
ratio was 3.0 to 1.
Cash used by operating activities was approximately $2.1
million, primarily the result of increased accounts
receivable and increased merchandise inventories, offset
by net income and increased accrued expenses. The
increased accounts receivable was a result of higher
sales in November and December of 1999 as compared to the
comparable periods in 1998. Inventories increased as a
result of lower than expected shipments in the third
quarter due to problems with the warehouse management
system. Cash used in investing activities was
approximately $9.1 million, which was primarily used for
the repurchase of common stock, purchases of fixed assets
and the acquisition of the Prestige Companies. Cash
provided by financing activities was approximately $3.3
million, which included increased short term borrowings
of $6.4 million offset by the payment of dividends of
$3.1 million.
Capital expenditures were $2.6 million in 1999 and $3.8
million in 1998. Capital expenditures for 1999 consisted
primarily of the new warehouse management system,
machinery and equipment for use in the warehouse and the
construction of an outlet store that is attached to the
corporate headquarters. Total planned capital
expenditures for 2000 are estimated at $2.2 million.
These expenditures are primarily for equipment in the
warehouse and distribution facilities. These
expenditures are expected to be funded from current
operations, cash and cash equivalents and, if needed,
short term borrowings.
In September 1999, the Company acquired 51% of the
capital stock of Prestige Italy and Prestige Germany for
approximately $1.3 million. Also pursuant to the
acquisition agreement, the Company infused $510,000 of
capital into the Prestige Companies.
The Company has available anan unsecured $25,000,000
$25,000,000 line of credit with a bank (the "Line") which
may be used for revolving credit loans or letters of
credit. Borrowings made under the Line bear interest
payable daily at a negotiated short term borrowing rate.
The effective interest rate at December 31, 1999 was
6.875%. As of December 31, 1999, the Company had
$5,267266,000 of letters of credit and trade acceptances
outstanding and $6,7006,700,000 of borrowings under the
Line and, as a result, the availability under the Line
was $13,033,000034,000. The Line is cancelable by either
party at any time.
In addition to the Line above, the Prestige Companies
have three lines of credit with three separate banks for
a total available credit facility of approximately $1.8
million. As of December 31, 1999, the Prestige Companies
had borrowings of approximately $1.4 million against
these lines. Interest rates on these lines of credit
range from 3.6% to 7%.
15
Products are sold to retailers primarily on 30-day credit
terms, and to distributors primarily on 60-day credit
terms. As of December 31, 1999, the Company had an
aggregate of $2.4 5 million of accounts receivable
outstanding in excess of 60 days or approximately 9.90%
of gross receivables, and had inventory of $54.0 million.
The Company believes that its cash and cash equivalents
plus internally generated funds and its credit
arrangements will be sufficient to finance its operations
for the next twelve 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.
16
The Company believes that its cash and cash equivalents
plus internally generated funds and its credit
arrangements will be sufficient to finance its operations
for the next twelve 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are included herein commencing
on page F-1.
The following is a summary of the quarterly results of
operations for the years ended December 31, 1999 and
1998.
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
<S> <C>3/31 <C>6/30 <C>9/31 <C>12/31
(in thousands, except per share data)
1999
Net sales $17,817 $26,903 $22,950 $39,091
Cost of sales 9,164 13,525 12,254 23,036
Net income 257 2,664 393 647
Basic earnings per common share $0.02 $0.21 $0.03 $0.05
Diluted earnings per common share $0.02 $0.21 $0.03 $0.05
1998
Net sales $21,868 $24,184 $31,313 $39,382
Cost of sales 11,472 12,171 16,003 20,861
Net income 1,911 2,318 3,694 4,636
Basic earnings per common share $0.15 $0.18 $0.29 $0.37
Diluted earnings per common share $0.15 $0.18 $0.29 $0.36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The following table sets forth certain information
concerning the Executive Officers and Directors of the
Company:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>Director or Executive
Officer of Company or
Name Age Position Its Predecessor Since
Milton L. Cohen 71 Chairman of the Board 1958
of Directors and Chief
Executive officer
Jeffrey Siegel 57 President and Director 1967
Craig Phillips 50 Vice-President-Distribution 1973
Secretary and Director
Robert McNally 53 Vice-President-Finance 1997
and Treasurer
Bruce Cohen 41 Executive Vice President 1998
and Director
Ronald Shiftan 55 Director 1991
Howard Bernstein 79 Director 1992
Mr. Milton L. Cohen has been continuously employed by
the Company in his present capacity since 1958.
Mr. Siegel has been continuously employed by the
Company in his present capacity since 1999. Prior
thereto Mr. Siegel was Executive Vice President of the
Company since 1967.
Mr. Phillips has been continuously employed by the
Company in his present capacity since 1981.
Mr. McNally has been continuously employed by the
Company in his present capacity since October 1997. Mr.
McNally, was formerly Senior Vice President - Finance for
Cybex International, Inc., (formerly Lumex, Inc.), a
manufacturer and distributor of healthcare products and
fitness equipment. Mr. McNally held that position for 15
years prior to joining the Company.
Mr. Bruce Cohen was elected a Director for the first
time in 1998 and has been continuously employed by the
Company in his present capacity since 1999. Prior
thereto Mr. Bruce Cohen was a Vice President - National
Sales Manager for the Company since 1991.
Mr. Shiftan has served as Deputy Executive Director of
The Port Authority of New York & New Jersey since
September 1998. Prior to becoming Deputy Executive
Director of the Port Authority of New York & New Jersey,
he had, since 1996, been Chairman of Patriot Group, LLC,
a financial advisory firm. Prior thereto, Mr. Shiftan
held executive management positions in venture capital,
investment banking and financial advisory firms.
Mr. Bernstein has been a member of the Certified Public
Accounting firm, Cole, Samsel & Bernstein LLC (and its
predecessors) for approximately forty-eight years.
Milton L. Cohen is the father of Bruce Cohen.
Jeffrey Siegel and Craig Phillips are cousins.
18
The Board of Directors has an audit committee, both of
whose members are independent directors.
The directors and officers of the Company are elected
annually by the stockholders and Board of Directors of
the Company, respectively. Directors serve until the next
annual meeting of the stockholders or until their
successors have been elected and qualified or until their
earlier resignation or removal. Officers are elected at
the first Board of Directors meeting following the annual
stockholders meeting and serve at the pleasure of the
Board of Directors.
Directors who are not employees of the Company will
receive a retainer of $5,000 per year, an additional fee
of $1,000 for each Board meeting attended, plus
reimbursement of reasonable out-of-pocket expenses.
Directors who are employees of the Company do not receive
compensation for serving as directors or attending
meetings. The Company has entered into indemnification
agreements with the directors and officers of the
Company.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information
to appear under the caption "Executive Compensation" in
the Company's definitive Proxy Statement for its 2000
Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information
to appear under the caption "Principal Stockholders" in
the Company's definitive Proxy Statement for its 2000
Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information
to appear under the caption "Certain Transactions" in the
Company's definitive Proxy Statement for its 2000 Annual
Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a)(1) and (2) - see list of Financial Statements and
Financial Statement Schedule on F-1.
(b) Reports on Form 8-K in the fourth quarter of 1999.
None.
(c) Exhibits*:
Exhibit
No. Description
3.1 Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3[a] to
Form S-1 [No. 33-40154] of Lifetime Hoan
Corporation).
3.2 Amendment dated June 9, 1994 to the Restated
Certificate of Incorporation of the Company (incorporated
herein by reference to the December 31, 1994 Form 10-K
[No. 1-19254] of Lifetime Hoan Corporation).
19
3.3 By-Laws of the Company (incorporated herein by
reference to Exhibit 3[b] to Form S-1 [No. 33-40154]
of Lifetime Hoan Corporation).
10.1 Loan Agreement dated as of May 11, 1988 with Bank of
New York, as amended (incorporated by Reference to
Exhibit 10[d] to Form S-1 [No. 33-40154] of Lifetime
Hoan Corporation).
10.2 Amendment No. 6 dated as of March 5, 1992 between
Lifetime Hoan Corporation and The Bank of New York
(incorporated by reference to the December 31, 1991
Form 10-K [No. 1-19254] of Lifetime Hoan
Corporation).
10.3 Stock Option Plan for key employees of Lifetime Hoan
Corporation, as amended June 9, 1994 (incorporated
by reference to the December 31, 1994 Form 10-K [No.
1-19254] of Lifetime Hoan Corporation).
10.4 Promissory notes dated December 17, 1985 of Milton
L. Cohen, Jeffrey Siegel, Craig Phillips and Robert
Phillips, as amended (incorporated by reference to
Exhibit 10[f] to Form S-1 [No. 33-40154] of Lifetime
Hoan Corporation).
10.5 Lease to Dayton, New Jersey premises dated August
20, 1987 and amendment between the Company and
Isaac Heller (incorporated by reference to Exhibit
10[h] to Form S-1 [No. 33-40154] of Lifetime Hoan
Corporation).
10.6 License Agreement dated December 14, 1989 between
the Company and Farberware, Inc. (incorporated by
reference to Exhibit 10[j] to Form S-1 [No. 33-
40154] of Lifetime Hoan Corporation).
10.7 License Agreement dated as of April 19, 1991 between
the Company and The Pillsbury Company (incorporated
by reference to Exhibit 10[m] to Form S-1 [No. 33-
40154] of Lifetime Hoan Corporation).
10.8 Real Estate Sales Agreement dated October 28, 1993
between the Company and The Olsten Corporation
(incorporated by reference to the December 31, 1993
Form 10-K [No. 1-19254] of Lifetime Hoan
Corporation).
10.9 Amendment to the Real Estate Sales Agreement dated
September 26, 1994 between the Company and The
Olsten Corporation. (incorporated by reference to
the December 31, 1995 Form 10-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.10 Lease to additional Dayton, New Jersey premises
dated December 7, 1994. (incorporated by reference
to the December 31, 1995 Form 10-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.11 License Agreement dated December 21, 1995
between the Company and The Walt Disney Company.
10.12 Memorandum of purchase dated September 18, 1995
between the Company and Alco Capital Group, Inc.
(incorporated by reference to the September 30, 1995
Form 10-Q [No. 1-19254] of Lifetime Hoan
Corporation).
10.13 Registration Rights Agreement dated September
18, 1995 between the Company and Alco Capital Group,
Inc. (incorporated by reference to the September 30,
1995 Form 10-Q [No. 1-19254] of Lifetime Hoan
Corporation).
20
10.14 Amendment No. 1 dated September 26, 1995 to the
Lease for the additional Dayton, New Jersey
premises. (incorporated by reference to the
September 30, 1995 Form 10-Q [No. 1-19254] of
Lifetime Hoan Corporation).
10.15 Form of Extension Agreement dated as of
December 15, 1995 between Milton L. Cohen and
Lifetime Hoan Corporation (incorporated by reference
to the January 8, 1996 Form 8-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.16 Form of Extension Agreement dated as of
December 15, 1995 between Jeffrey Siegel and
Lifetime Hoan Corporation (incorporated by reference
to the January 8, 1996 Form 8-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.17 Form of Extension Agreement dated as of
December 15, 1995 between Craig Phillips and
Lifetime Hoan Corporation (incorporated by reference
to the January 8, 1996 Form 8-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.18 Asset Purchase Agreement by and between
Farberware, Inc., Far-b Acquisition Corp., Syratech
Corporation and Lifetime Hoan Corporation, dated
February 2, 1996.
10.19 Joint Venture Agreement by and among Syratech
Corporation, Lifetime Hoan Corporation and Far-b
Acquisition Corp., dated February 2, 1996.
10.20 Employment Agreement dated April 7, 1996 with
Milton L. Cohen (incorporated by reference to the
March 31, 1996 10-Q).
10.21 Employment Agreement dated April 7, 1996 with
Jeffrey Siegel (incorporated by reference to the
March 31, 1996 10-Q).
10.22 Employment Agreement dated April 7, 1996 with
Craig Phillips (incorporated by reference to the
March 31, 1996 10-Q).
10.23 Lifetime Hoan 1996 Incentive Stock Option Plan
(incorporated by reference to the March 31, 1996 10-
Q).
10.24 Lifetime Hoan 1996 Incentive Bonus Compensation
Plan (incorporated by reference to the March 31,
1996 10-Q).
10.25 Meyer Operating Agreement dated July 1, 1997
between Lifetime Hoan Corporation and Meyer
Corporation and Amendment to Agreement dated July 1,
1998.
10.26 Jeffrey Siegel Employment Agreement Amendment
No. 1, dated June 6, 1997
10.27 Milton L. Cohen Employment Agreement Amendment
No. 1, dated June 6, 1997
10.28 Stock Purchase Agreement between Lifetime Hoan
Corporation and Roshco, Inc. dated August 10, 1998.
10.29 Stock Purchase Agreement between Lifetime Hoan
Corporation and Meyer International Holdings Limited
and Prestige Italiana, SPA dated September 2, 1999.
10.30 Stock Purchase Agreement between Lifetime Hoan
Corporation and Meyer International Holdings Limited
and Prestige Haushaltswaren GmbH, dated September 2,
1999.
21 Subsidiaries of the registrant
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule
*The Company will furnish a copy of any of the exhibits
listed above upon payment of $5.00 per exhibit to cover
the cost of the Company furnishing the exhibits.
(d) Financial Statement Schedules - the response to this
portion of Item 14 is submitted as a separate
section of this report.
21
FORM 10-K -- ITEM 14(a)(1) and (2)
LIFETIME HOAN CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE
The following Financial Statements and Schedule of
Lifetime Hoan Corporation are included in Item 8.
Report of Independent Auditors F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-3
Consolidated Statements of Income for the
Years ended December 31, 1999, 1998 and 1997 F-4
Consolidated Statements of Stockholders' Equity for the
Years ended December 31, 1999, 1998 and 1997 F-5
Consolidated Statements of Cash Flows for the
Years ended December 31, 1999, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7
The following financial statement schedule of Lifetime Hoan Corporation is included
in Item 14 (d);
Schedule II - Valuation and qualifying accounts S-1
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-1
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Lifetime Hoan Corporation
We have audited the accompanying consolidated balance
sheets of Lifetime Hoan Corporation as of December 31,
1999 and 1998 and the related consolidated statements of
income, stockholders' equity, and cash flows for each of
the three years in the period ended December 31, 1999.
Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These consolidated
financial statements and schedules are the responsibility
of the Company's management. Our responsibility is to
express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States. Those
standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the consolidated financial position of Lifetime
Hoan Corporation at December 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows
for each of the three years in the period ended December
31, 1999, in conformity with accounting principles
generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when
considered in relation to the basic financial statements
taken as a whole, presents fairly in all material
respects the information set forth therein.
Ernst & Young LLP
Melville, New York
February 1822, 2000
F-2
LIFETIME HOAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
</TABLE>
<TABLE>
<CAPTION>
December 31,
<S> <C> <C> <C>
ASSETS 1999 1998
CURRENT ASSETS
Cash and cash equivalents $1,563 $9,438
Accounts receivable, less allowances of $2,609
in 1999 and 1,527 in 1998 22,443 13,306
Merchandise inventories 54,046 44,938
Prepaid expenses 2,641 2,956
Deferred income taxes 1,257 397
Other current assets 354 1,230
TOTAL CURRENT ASSETS 82,304 72,265
PROPERTY AND EQUIPMENT, net 12,597 11,823
EXCESS OF COST OVER NET ASSETS ACQUIRED, net 10,756 9,316
OTHER INTANGIBLES, net 9,554 10,560
OTHER ASSETS 1,173 1,108
TOTAL ASSETS $116,384 $105,072
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $8,073 $ --
Accounts payable and trade acceptances 5,553 2,706
Accrued expenses 13,691 10,263
Income taxes 371 956
TOTAL CURRENT LIABILITIES 27,688 13,925
MINORITY INTEREST 888 --
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, shares authorized:
25,000,000; shares issued and outstanding:
11,817,646 in 1999 and 12,588,264 in 1998 118 126
Paid-in capital 71,957 76,115
Retained earnings 16,671 15,859
Notes receivable for shares issued to stockholders (908) (908)
Deferred compensation (30) (45)
TOTAL STOCKHOLDERS' EQUITY 87,808 91,147
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $116,384 $105,072
See notes to consolidated financial statements.
F-3
LIFETIME HOAN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands - except per share data)
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
<S> <C> <C> <C> <C> <C>
1999 1998 1997
Net Sales $106,761 $116,746 $100,021
Cost of Sales 57,979 60,507 51,419
48,782 56,239 48,602
Selling, General and Admin. Expenses 42,250 35,306 33,114
Income from Operations 6,532 20,933 15,488
Interest Expense................. 281 203 76
Other (Income), net (532) (200) (149)
Income Before Income Taxes 6,783 20,930 15,561
Income Taxes................ 2,822 8,372 6,000
NET INCOME $3,961 $12,558 $9,561
BASIC EARNINGS PER COMMON SHARE $0.32 $1.00 $0.77
DILUTED EARNINGS PER COMMON SHARE $0.31 $0.98 $0.75
See notes to consolidated financial statements.
F-4
LIFETIME HOAN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
</TABLE>
<TABLE>
<CAPTION>
Common Stock Paid-in Retained
Shares Amount Capital Earnings Notes Receivable Deferred
(Deficit) from stockholders Compensation Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 12,407 $124 $74,757 ($2,337) ($908) ($77) $71,559
Net income for 1997 9,561 9,561
Exercise of stock options 115 1 550 551
Amortization of deferred compensation 16 16
Cash dividends (781) (781)
Balance at December 31, 1997 12,522 125 75,307 6,443 (908) (61) 80,906
Net income for 1998 12,558 12,558
Exercise of stock options 66 1 458 459
Grant of stock options 350 350
Amortization of deferred compensation 16 16
Cash dividends (3,142) (3,142)
Balance at December 31,1998 12,588 126 76,115 15,859 (908) (45) 91,147
Net income for 1999 3,961 3,961
Exercise of stock options 12 92 92
Repurchase and retirement
of common stock (782) (8) (4,250) (4,258)
Amortization of deferred compensation 15 15
Cash dividends (3,149) (3,149)
Balance at December 31,1999 11,818 $118 $71,957 $16,671 ($908) ($30) $87,808
See notes to consolidated financial statements.
F-5
LIFETIME HOAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, Ended December 31,
<S> <C> <C> <C> <C> <C>
1999 1998 1997
OPERATING ACTIVITIES
Net income $3,961 $12,558 $9,561
Adjustments to reconcile net income
to net cash (used in)provided by
operating activities:
Depreciation and amortization 2,815 2,480 1,990
Deferred income taxes (860) 42 579
Provision for losses on accounts receivable 640 444 2,112
Reserve for sales returns and allowances 5,838 3,683 3,533
Minority interest 162 - -
Changes in operating assets and liablilites,
excluding the effects of the Roshco, Inc.
and Prestige acquisitions:
Accounts receivable (11,742) (2,916) (4,919)
Merchandise inventories (7,203) 2,268 (5,946)
Prepaid expenses, other current assets
and other assets 1,142 1,985 317
Accounts payable, trade acceptances
and accrued expenses 3,633 (5,067) 618
Income taxes (518) 417 (780)
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (2,132) 15,894 7,065
INVESTING ACTIVITIES
Purchases of property and equipment, net (2,552) (3,777) (2,255)
Purchase of marketable securities (25) (256) -
Acquisition of Roshco, Inc. (916) (4,926) -
Aquisition of Prestige Companies (1,338) - -
Payment of note payable of acquired business - (2,587) -
Sale of inventory to Meyer Corporation - - 3,100
Repurchase of common stock (4,258) - -
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (9,089) (11,546) 845
FINANCING ACTIVITIES
Proceeds (payments) of short term
borrowings, net 6,403 - (1,000)
Proceeds from the exercise of stock options 92 459 551
Cash dividends paid (3,149) (3,142) (781)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 3,346 (2,683) (1,230)
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (7,875) 1,665 6,680
Cash and cash equivalents at beginning of year 9,438 7,773 1,093
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,563 $9,438 $7,773
See notes to consolidated financial statements.
F-6
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Organization and Business: The accompanying consolidated
financial statements include the accounts of Lifetime Hoan
Corporation ("Lifetime"), its wholly-owned subsidiaries,
Outlet Retail Stores, Inc. ("Outlets") and Roshco, Inc.
("Roshco"), and its 51% owned and controlled subsidiaries,
Prestige Italiana, Spa. ("Prestige Italy") and Prestige
Haushaltswaren GmbH ("Prestige Germany") (together, the
"Prestige Companies"), collectively, the "Company".
Significant intercompany accounts and transactions have been
eliminated in consolidation.
The Company is engaged in the design, marketing and
distribution of household cutlery, kitchenware, cutting boards
and bakeware, marketing its products under a number of trade
names, some of which are licensed. The Company sells its
products primarily to retailers throughout the United States
and to consumers through its Outlets subsidiary.
Revenue Recognition: Revenue is recognized upon the
shipment of merchandise.
Inventories: Merchandise inventories, principally finished
goods, are priced by the lower of cost (first-in, first-out
basis) or market method.
Property and Equipment: Property and equipment is stated at
cost. Property and equipment other than leasehold
improvements is being depreciated by the straight-line method
over the estimated useful lives of the assets. Building and
improvements are being depreciated over 30 years and
machinery, furniture, and equipment over 5 to 7 years.
Leasehold improvements are amortized over the term of the
lease or the estimated useful lives of the improvements,
whichever is shorter.
Cash Equivalents: The Company considers highly liquid
instruments with a maturity of three months or less when
purchased to be cash equivalents.
Use of Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Excess of Cost Over Net Assets Acquired and Other
Intangibles: Excess of cost over net assets acquired pursuant
to acquisitions are being amortized by the straight-line
method over periods ranging from 30 to 40 years. Accumulated
amortization at December 31, 1999 and 1998 was $1,333,000 and
$1,004,000, respectively.
Other intangibles consist of a royalty-free license,
trademarks and brand names acquired pursuant to two
acquisitions and are being amortized by the straight-line
method over 30 years. Accumulated amortization at December
31, 1999 and 1998 was $1,506,000 and $1,116,000, respectively.
Long-Lived Assets: If there are indicators of
impairment, the Company reviews the carrying value of its long-
lived assets in determining the ultimate recoverability of
their unamortized values using future undiscounted cash flow
analyses.
Income Taxes: Income taxes have been provided using
the liability method.
F-7
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings Per Share: Basic earnings per share has been
computed by dividing net income by the weighted average number
of common shares outstanding of 12,572,000 in 1999, 12,570,000
in 1998 and 12,459,000 in 1997. 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 12,671,000 in 1999,
12,843,000 in 1998 and 12,720,000 in 1997.
NOTE B - ACQUISITIONS AND LICENSES
Prestige Acquisition: In September 1999, the Company
acquired 51% of the capital stock and controlling interest in
each of Prestige Italy and Prestige Germany. The Company paid
approximately $1.3 million for its majority interest in the
Prestige Companies. This acquisition was accounted for using
the purchase method and the Company recorded excess of cost
over net assets acquired of $586,000.
Roshco Acquisition: In August 1998, the Company acquired
all of the outstanding common stock of Roshco, Inc.
("Roshco"), a privately-held bakeware and baking-related
products distributor. The purchase price consisted of an
initial cash payment of $5.0 million and notes payable of $1.5
million. In 1999 the Company paid $500,000 for the first note
payable. The Company is also obligated to make additional
payments based on annual sales volume for bakeware and baking-
related products for a period of two years. In 1999 the
Company paid approximately $416,000 for the first year. The
Company also assumed bank debt of $2.6 million that was paid
on the acquisition date. This acquisition was accounted for
using the purchase method and the Company recorded excess of
cost over net assets acquired of $8,208,000.
Revere Licensing Agreement: In October 1998, the Company
entered into a licensing agreement with Corning Consumer
Products Company. This agreement allows the Company to design
and market cutlery and cutting boards under the Reverer
trademark in the United States and Canada. Shipments of
products under the Reverer brand began in the second
quarterfirst half of 1999.
F-8
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE C - LINE OF CREDIT
The Company has available an unsecured $25,000,000
line of credit with a bank (the "Line") which may be used
for revolving credit loans or letters of credit.
Borrowings made under the Line bear interest payable
daily at a negotiated short term borrowing rate. The
effective interest rate at December 31, 1999 was 6.875%.
As of December 31, 1999, the Company had $5,266,000 of
letters of credit and trade acceptances outstanding and
$6,700,000 of borrowings under the Line and, as a result,
the availability under the Line was $13,034,000. The Line
is cancelable by either party at any time.
In addition to the Line above, the Prestige Companies
have three lines of credits with three separate banks for
a total available credit facility of approximately $1.8
million. As of December 31, 1999, the Prestige Companies
had borrowings of approximately $1.4 million against
these lines. Interest rates on these lines of credits
range from 3.6% to 7%.
The Company paid interest of approximately $281,000,
$203,000 and $76,000 during the years ended December 31, 1999,
1998 and 1997, respectively.
NOTE D - CAPITAL STOCK
Cash Dividends: The Company paid regular quarterly
cash dividends of $0.0625 per share on its Common Stock, or a
total annual cash dividend of $0.25, in 1999 and 1998. In
1997, the Company paid a quarterly cash dividend of $0.0625 in
November. The Board of Directors currently intends to maintain
a quarterly cash dividend of $0.0625 per share of Common Stock
for the foreseeable future, although the Board may in its
discretion determine to modify or eliminate such dividend at
any time.
Common Stock Repurchase and Retirement: In December
1999, the Board of Directors of the Company authorized a
repurchase of up to 1,000,000 of its outstanding common
shares in the open market. Through December 31, 1999,
782,500 common shares were repurchased for $4,258,000.
Stock Option Plans: The Company has a Stock Option Plan
(the "Plan") whereby options to purchase up to 1,500,000
shares of common stock may be granted to key employees of the
Company, including directors and officers. The Plan
authorizes the Board of Directors of the Company to issue
incentive stock options as defined in Section 422A (b) of the
Internal Revenue Code and stock options that do not conform to
the requirements of that Section of the Code. All options
expire on the tenth anniversary of the date of grant and vest
over a range of up to five years, from the date of grant.
In June 1996, the stockholders of the Company approved
the adoption of the Lifetime Hoan Corporation 1996 Incentive
Stock Option Plan (the "ISO Plan"). The ISO Plan authorizes
the granting of options to purchase up to 250,000 shares of
common stock to officers of the Company and its subsidiaries.
No individual officer may be granted options to purchase more
than 175,000 shares of common stock. The ISO Plan authorizes
the issuance of incentive stock options as defined in Section
422 of the Internal Revenue Code. All options expire on the
fifth anniversary of the date of grant and vest in one year
from the date of grant.
F-9
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE D - CAPITAL STOCK (continued)
The Company grants stock options for a fixed number of
shares to employees with an exercise price equal to the fair
value of the shares at the date of grant. The Company
accounts for stock option grants in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and
related Interpretations because the Company believes the
alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation"
requires use of option valuation models that were not
developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings
per share is required by Statement No. 123, and has been
determined as if the Company has accounted for its employee
stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the
following weighted-average assumptions: risk-free interest
rates of 5.88%, 6.62% and 5.75% for 1999, 1998 and 1997,
respectively; 4.68% dividend yield in 1999 and 2.50% dividends
yield in both 1998 and 1997; volatility factor of the expected
market price of the Company's common stock of 0.07 in 1999,
0.39 in 1998 and 0.54 in 1997; and a weighted-average expected
life of the options of 5.1, 5.7 and 5.1 years in 1999, 1998
and 1997, respectively.
The Black-Scholes option valuation model was developed
for use in estimating the fair value of traded options which
have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly
subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its
employee stock options.
For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to expense
over the options' vesting period. The Company's pro forma
information is as follows:
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 31,
<C> <C> <C>
<S>
1999 1998 1997
Pro forma net income (in thousands) $3,720 $12,148 $9,300
Pro forma basic earnings per common share $0.30 $0.97 $0.75
Pro forma diluted earnings per common share $0.29 $0.95 $0.73
F-10
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE D - CAPITAL STOCK (continued)
A summary of the Company's stock option activity
and related information for the years ended December 31
follows:
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>Weighted- <C><C> <C>Weighted<C> <C> <C>Weighted-
Options Average Options Average Options Average
Exercise Exercise Exercise
Price Price Price
Balance-Jan 1, 1,041,545 $7.81 906,942 $6.95 868,963 $6.19
Grants 188,500 $5.71 222,000 $10.39 184,370 $9.26
Exercised (11,882) $6.70 (66,018) $4.93 (114,737) $5.10
Canceled (8,998) $8.07 (21,379) $7.38 (31,654) $6.12
Balance-DEC 31, 1,209,165 $7.49 1,041,545 $7.81 906,942 $6.95
The weighted average fair values of options
granted during the years ended December 31, 1999, 1998 and
1997 were $0.44, $3.77 and $3.98, respectively.
The following table summarizes information about
employees stock options outstanding at December 31, 1999:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C><C> <C><C> <C><C>Weighted-<C><C>
Weighted- Average Weighted-Average
Average Exercise Exercise Price -
Options Options Remaining Price- Options
Exercise Price Outstanding Exercisable Contractual Options Exercisable
$4.14 - $5.51 392,217 213,717 5.9 years $5.03 $4.63
$6.39 - $8.41 325,237 249,965 4.7 years $6.80 $6.64
$8.64 - $10.87 491,711 278,712 5.7 years $9.91 $9.99
1,209,165 742,394 5.5 years $7.49 $7.32
In connection with the grant of certain options,
the Company recorded, and is amortizing, deferred
compensation.
In connection with the exercise of options under
a stock option plan which has since expired, the Company
received cash of $255,968 and notes in the amount of $903,712.
The notes bear interest at 9% and are due no later than
December 31, 2000.
F-11
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE E - INCOME TAXES
The provision for income taxes consists of (in thousands):
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, December 31,
<S> <C> <C> <C>
1999 1998 1997
Current:
Federal $2,941 $6,957 $4,443
State and local 662 1,373 978
Foreign - Prestige
Companies 79 - -
Deferred (860) 42 579
Income tax provision $2,822 $8,372 $6,000
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amount of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components
of the Company's net deferred tax assets are as follows (in
thousands):
</TABLE>
<TABLE>
<CAPTION>
December 31,
<S> <C> <C>
1999 1998
Merchandise inventories $1,533 $973
Accounts receivable allowances 767 356
Depreciation and amortization (1,043) (927)
Other - (5)
$1,257 $397
The provision for income taxes differs from the amounts
computed by applying the applicable federal statutory rates as
follows (in thousands):
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 31,
<S> <C> <C> <C> <C> <C>
1999 1998 1997
Provision for Federal income taxes at
the statutory rate $2,306 $7,116 $5,291
Increases (decreases):
State and local income taxes net of
Federal income tax benefit 437 906 645
Other - 350 64
Foreign taxes - Prestige Companies 79 - -
Provision for income taxes $2,822 $8,372 $6,000
The Company paid income taxes (net of refunds) of
approximately $4,178,000, $7,809,000 and $6,258,000 during the
years ended December 1999, 1998, and 1997, respectively.
F-12
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE F - COMMITMENTS
Operating Leases: The Company has lease agreements for its
warehouse, showroom facilities and outlet stores which expire
through October 31, 2004. These leases provide for, among
other matters, annual base rent escalations and additional
rent for real estate taxes and other costs.
Future minimum payments under non cancelable operating
leases are as follows (in thousands):
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Year ended December 31:
2000 $4,571
2001 2,378
2002 1,596
2003 1,058
2004 485
$ 10,088
Meyer Corporation reimbursed the Company 52.0% (as amended
from 62.5% in July 1998) of the operating lease expenses of
the outlet stores in 1999, which is not a sublease commitment.
In 1999, 1998 and 1997, Meyer Corporation reimbursed
approximately $1,856,000, $1,710,000 and $861,000,
respectively, for operating lease expense to the Company.
Rental and related expenses on the operating leases were
approximately $5,554,000, $4,715,000 and $4,281,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
Amounts for 1999, 1998 and 1997 are prior to the Meyer
Corporation reimbursement described above.
The Company has issued a letter of credit of approximately
$279,000 which is held by the landlord as security for its
warehouse leases.
Royalties: The company has royalty licensing agreements
which expire through December 31, 2002. Future minimum
royalties are as follows (in thousands):
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Year ended December 31:
2000 $1,170
2001 1,300
2002 1,000
$3,470
F-13
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE F - COMMITMENTS (continued)
Employment Agreements: In April 1996, as amended in June
1997, the Company entered into employment agreements with its
President and Executive Vice President, providing for annual
salaries of $700,000 and $400,000 respectively, and for the
payment of bonuses pursuant to the Company's 1996 Incentive
Bonus Compensation Plan (the "Bonus Plan") (see below). The
employment agreements continue through April 2000 and
thereafter for additional periods of one year each unless
terminated by either the Company or the executive.
In April 1997, the Company entered into an employment
agreement with its Vice President- Distribution, which
provides for a current annual salary of $200,000. The
agreement expires April 6, 2000.
Incentive Bonus Compensation Plan: In April 1996, the
Board of Directors adopted and in June 1996, the stockholders
approved the Bonus Plan. The Bonus Plan provides for the
award of a bonus, with respect to each of the ten fiscal years
of the Company beginning with the 1996 fiscal year, to each of
the President and the Executive Vice President of the Company.
The bonus payable to each executive is an amount equal to 3.5%
of pretax income, before any provision for executive
compensation, stock options exercised during the year under
the Company's 1991 Stock Option Plan and extraordinary items.
During the years ended December 31, 1999, 1998 and 1997, the
Company recorded annual compensation expense of approximately
$600,000, $1.7 million and $1.2 million, respectively,
pursuant to the Bonus Plan.
NOTE G - RELATED PARTY TRANSACTIONS
In connection with the Roshco acquisition (see note B),
a director of the Company was paid $200,000 and received
options to purchase 100,000 shares of common stock (at an
exercise price of $10.63) as a financial advisory fee. The
fair value of the options granted, which vested immediately,
are was approximately $350,000.
NOTE H - RETIREMENT PLAN
The Company maintains a defined contribution retirement plan
("the Plan") for eligible employees under Section 401(k) of
the Internal Revenue Code. Participants can make voluntary
contributions up to a maximum of 15% of their salary. The
Company made no contributions to the Plan in 1999, 1998 and
1997.
F-14
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE I - CONCENTRATION OF CREDIT RISK
The Company maintains cash and cash equivalents with
various financial institutions.
Concentrations of credit risk with respect to trade
accounts receivable are limited due to the large number of
entities comprising the Company's customer base and their
dispersion across the United States. The Company's accounts
receivable are not collateralized. The Company periodically
reviews the status of its accounts receivable and,
accordingly, where considered necessary, establishes an
allowance for doubtful accounts.
During the years ended December 31, 1999, 1998 and 1997,
one customer accounted for approximately 14%, 17% and 15% of
net sales, respectively.
NOTE J - OTHER
Property and Equipment:
Property and equipment consist of (in thousands):
</TABLE>
<TABLE>
<CAPTION>
December 31,
<S> <C> <C>
1999 1998
Land $842 $832
Building and improvements 6,381 4,649
Machinery, furniture and equipment 12,127 12,419
Leasehold improvements 34 28
19,384 17,928
Less: accumulated depreciation and amortization 6,787 6,105
$12,597 $11,823
Accrued Expenses:
Accrued expenses consist of (in thousands):
</TABLE>
<TABLE>
<CAPTION>
December 31,
<S> <C> <C> <C> <C>
1999 1998
Commissions $910 $439
Accrued customer allowances and rebates 3,889 3,285
Obligation to Meyer Corporation 1,277 985
Due to Roshco (See Note B) 1,378 1,732
Officer and employee bonuses 604 1,507
Accrued salaries and temps 1,055 132
Other 4,578 2,183
$13,691 $10,263
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
LIFETIME HOAN CORPORATION
NOTE J - OTHER (Continued)
Sources of Supply: The Company sources its products from
approximately 40 manufacturers located primarily in the Far
East, including the People's Republic of China and Malaysia,
and to a smaller extent in the United States, India, France,
Indonesia, Taiwan, Thailand and Italy. A majority of its
cutlery was purchased from three suppliers in 1999 who
accounted for 47%, 26% and 17% of the total purchases and from
five suppliers in 1998 who accounted for 29%, 24%, 18%, 13%
and 10% of the total purchases, respectively. An interruption
of supply from any of these manufacturers could have an
adverse impact on the Company's ability to fill orders on a
timely basis. However, the Company believes other
manufacturers with whom the Company does business would be
able to increase production to fulfill the Company's
requirements.
F-16
LIFETIME HOAN CORPORATION
Schedule II - Valuation and Qualifying Accounts
Lifetime Hoan Corporation
(in thousands)
</TABLE>
<TABLE>
<CAPTION>
<S>COL. A <C> <C>COL.B <C> <C>COL.C <C> <C>COL.D <C> <C>COL.E
Additions
Balance at Charged to
Beginning of Costs and Deductions Balance at
Description Period Expenses (Describe) end of period
Year ended December 31, 1999
Deducted from asset accounts:
Allowance for doubtful
Accounts............. $420 $640 $975(a) $85
Reserve for sales
returns and allowances 1,107 5,838(c) 4,421(b) 2,524
$1,527 $6,478 $5,396 $2,609
Year ended December 31, 1998
Deducted from asset accounts:
Allowance for doubtful
accounts.................... $75 $444 $99(a) $420
Reserve for sales
returns and allowances...... 776 3,683(c) 3,352(b) 1,107
$851 $4,127 $3,451 $1,527
Year ended December 31, 1997
Deducted from asset accounts:
Allowance for doubtful
accounts.......... $75 $2,112 $2,112(a) $75
Reserve for sales
returns and allowances...... 716 3,533(c) 3,473(b) 776
$791 $5,645 $5,585 $851
(a) Uncollectible accounts written off, net of recoveries.
(b) Allowances granted.
(c) Charged to net sales.
S-1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 Cohen
Milton L. Cohen
Chairman of the Board
of Directors
(Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
</TABLE>
<TABLE>
<CAPTION>
<S>Signature <C>Title <C>Date
/s/ Milton Cohen
Milton L. Cohen Chairman of the Board of March 30, 2000
Directors
(Principal Executive Officer)
/s/ Jeffrey Siegel
Jeffrey Siegel President March 30, 2000
and Director
/s/ Craig Phillips
Craig Phillips Vice-President - Distribution, March 30, 2000
Secretary and Director
/s/ Robert McNally
Robert McNally Vice-President - Finance March 30, 2000
and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Bruce Cohen
Bruce Cohen Executive Vice-President March 30, 2000
and Director
/s/ Ronald Shiftan
Ronald Shiftan Director March 30, 2000
/s/ Howard Bernstein
Howard Bernstein Director March 30, 2000
Exhibit 21. Subsidiaries of the Registrant
Outlet Retail Stores, Inc.
Incorporated in the state of Delaware
Roshco, Inc.
Incorporated in the state of Illinois
Prestige Italiana, Spa.
Incorporated in the country of Italy
Prestige Haushaltswaren GmbH
Incorporated in the country of Germany
Exhibit 23. Consent of Ernst & Young LLPIndependent
Auditors
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-51774) of
Lifetime Hoan Corporation pertaining to the 1991 Stock
Option Plan, of our report dated February 22, 2000, with
respect to the consolidated financial statements and
schedule of Lifetime Hoan Corporation included in the
Annual Report (Form 10-K) for the year ended December 31,
1999.
Ernst & Young LLP
Melville, New York
March 30, 2000
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-K
for the twelve months ended December 31, 1999.
(in thousands)
</TABLE>
<TABLE>
<CAPTION>
<S>Item Number<C> <C>Item Description <C> <C>Amount
5-02(1) Cash and Cash Items $ 1,563
5-02(2) Marketable Securities $ 25
5-02(3)(a)(1) Notes and Accounts Receivable - Trade $ 22,528
5-02(4) Allowances for Doubtful Accounts $ 85
5-02(6) Inventory $ 54,046
5-02(9) Total Current Assets $ 82,304
5-02(13) Property, Plant and Equipment $ 19,384
5-02(14) Accumulated Depreciation $ 6,787
5-02(18) Total Assets $ 116,384
5-02(21) Total Current Liabilities $ 27,688
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 $ 118
5-02(31) Other Stockholders' Equity $ 87,690
5-02(32) Total Liabilities and Stockholers' Equity $ 116,384
5-03(b)1(a) Net Sales of Tangible Products $ 106,155
5-03(b)1 Total Revenues $ 106,761
5-03(b)2(a) Cost of Tangible Goods Sold $ 57,979
5-03(b)2 Total Costs and Expenses Applicable
to Sales and Revenues $ 57,979
5-03(b)3 Other Costs and Expenses $ 0
5-03(b)5 Provision for Doubtful Accounts and Notes $ 640
5-03(b)(8) Interest and Amortization of Debt Discount $ 0
5-03(b)(10) Income Before Taxes and Other Items $ 6,783
5-03(b)(11) Income Tax Expense $ 2,822
5-03(b)(14) Income/Loss Continuing Operations $ 3,961
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 $ 3,961
5-03(b)(20) Earnings Per Share - Primary $ 0.32
5-03(b)(20) Earnings Per Share - Fully Diluted $ 0.31
</TABLE>
