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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, 2001
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 NoX
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 10,487,130 shares outstanding as of April 30,
2001
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, December
31,
2001 2000
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $2,649 $1,325
Accounts receivable, less allowances of
$3,745 in 2001 &$3,582 in 2000 16,419 18,158
Merchandise inventories 49,391 45,595
Prepaid expenses 3,278 3,477
Deferred income taxes 717 870
Other current assets 2,376 2,667
TOTAL CURRENT ASSETS 74,830 72,092
PROPERTY AND EQUIPMENT, net 16,666 13,085
EXCESS OF COST OVER NET ASSETS 15,924 15,906
ACQUIRED, net
OTHER INTANGIBLES, net 9,682 9,780
OTHER ASSETS 1,514 1,256
TOTAL ASSETS $118,616 $112,119
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $14,258 $10,746
Accounts payable and trade Acceptances 13,086 6,709
Accrued expenses 13,423 16,619
TOTAL CURRENT LIABILITIES 40,767 34,074
MINORITY INTEREST 460 528
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, shares
Authorized 25,000,000;Share
Issued and outstanding 10,4492,130 in
2001 and 10,501,630 in 2000 105 105
Paid-in capital 61,092 61,155
Retained earnings 17,341 17,359
Notes receivable for shares issued to
stockholders (908) (908)
Accumulated other comprehensive loss (231) (180)
Deferred compensation (10) (14)
TOTAL STOCKHOLDERS' EQUITY 77,389 77,517
TOTAL LIABILITIES AND STOCKHOLDERS' $118,616 $112,119
EQUITY
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
2001 2000
Net Sales $31,307 $27,609
Cost of Sales 17,367 14,517
Gross Profit 13,940 13,092
Selling, General & Administrative 12,692 10,762
Expenses
Other Expense (Income) 118 (56)
Income Before Income Taxes 1,130 2,386
Income Taxes 491 1,013
NET INCOME $639 $1,373
EARNINGS PER COMMON SHARE-BASIC AND $0.06 $0.12
DILUTED
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
2001 2000
OPERATING ACTIVITIES
Net income $639 $1,373
Adjustments to reconcile net income to
net cash
provided by / (used in) operating
Activities:
Depreciation and amortization 845 754
Deferred tax (benefit) 153 23
Provision for losses on accounts receivable (9) 2
Reserve for sales returns and allowances 1,692 1,289
Minority interest (68) 93
Changes in operating assets and liabilities:
Accounts receivable 56 3,115
Merchandise inventories (3,796) 1,365
Prepaid expenses, other current assets
and other assets 232 (88)
Accounts payable and trade acceptances
and accrued expenses 3,182 (1,179)
Income taxes payable - 411
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,926 7,158
INVESTING ACTIVITIES
Purchase of property and equipment, net (4,180) (514)
Acquisition of M. Kamenstein, Inc. (164) -
NET CASH USED IN INVESTING ACTIVITIES (4,344) (514)
FINANCING ACTIVITIES
Proceeds(repayment) of short-term borrowings 3,512 (6,808)
Repurchase of common stock (63) (544)
Cash dividends paid (656) (737)
NET CASH PROVIDED BY(USED IN)
FINANCING ACTIVITIES 2,793 (8,089)
EFFECT OF EXCHANGE RATE ON CASH AND
CASH EQUIVALENTS (51) -
INCREASE(DECREASE) IN CASH AND CASH
EQUIVALENTS 1,324 (1,445)
Cash and cash equivalents at beginning of period 1,325 1,563
of period
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,649 $118
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
generally accepted in the United States 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 accounting principles by
generally accepted in the United States 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, 2001 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 2001. 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, 2000.
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,
2001 was 7%. As of March 31, 2001, the Company had letters of
credit and trade acceptances of $8,177,000 outstanding and
$11,200,000 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 April 2001, the Company obtained an additional $10,000,000
line of credit with another bank which may be used for short-term
borrowings.
In addition to the lines of credit above, the Prestige Companies
(the Company's 51% controlled European subsidiaries) have three
lines of credit with three separate banks for total available
credit facilities of approximately $3.3 million. As of March 31,
2001, the Prestige Companies had borrowings of approximately $3.1
million against these lines. Interest rates on these lines of
credits ranged from 6.125% to 8.9%.
Note D - Capital Stock
Cash Dividends: On January 3, 2001, the Board of Directors of
the Company declared a quarterly cash dividend of $0.0625 per
share to stockholders of record on February 6, 2001, paid on
February 20, 2001. On May 1, 2001, the Board of Directors
declared another regular quarterly cash dividend of $0.0625 per
share to stockholders of record on May 4, 2001, to be paid on May
18, 2001.
Earnings Per Share: Basic earnings per share has been computed by
dividing net income by the weighted average number of common
shares outstanding of 10,497,000 for the three months ended March
31, 2001 and 11,802,000 for the three months ended March 31,
2000. Diluted earnings per share has been computed by dividing
net income by the weighted average number of common shares
outstanding, plus the dilutive effects of stock options, of
10,561,000 for the three months ended March 31, 2001 and
11,850,000 for the three months ended March 31, 2000.
Common Stock Buy Back: The Board of Directors of the Company has
authorized a repurchase of up to 3,000,000 of its outstanding
common shares in the open market. As of March 31, 2001, a total
of 2,123,000 common shares were repurchased and retired for
approximately $15,210,000.
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.
Three Months Ended
March 31,
2000 2000
Net Sales 100.0 % 100.0 %
Cost of sales 55.5 52.6
Gross profit 44.5 47.4
Selling, general and admin. expenses 40.5 39.0
Other expense (income) 0.5 (0.2)
Income before income taxes 3.5 8.6
Income taxes 1.5 3.6
Net Income 2.0 % 5.0 %
Three Months Ended March 31, 2001
Compared to Three Months ended March 31, 2000
Net Sales
Net sales for the three months ended March 31, 2001 were $31.3
million, an increase of $3.7 million or 13.4% over the comparable
2000 period. The sales increase was attributable to the M.
Kamenstein, Inc. business, acquired in September 2000, which
contributed $4.1 million of net sales to first quarter results.
Sales in the Company's regular business were lower in the 2001
quarter as expected.
Gross Profit
Gross profit for the three months ended March 31, 2001 was $13.9
million, an increase of 6.5% from the comparable 2000 period.
Gross profit as a percentage of net sales decreased to 44.5% from
47.4%, as a result of the impact of the added sales of M.
Kamenstein, Inc., which currently generate lower gross margins
than the Company's regular business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended March 31, 2000 were $12.7 million, an increase of 17.9%
from the comparable 2000 period. The increase was primarily
attributable to the added selling, general and administrative
expenses of the M. Kamenstein, Inc. business acquired in
September 2000.
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 shor-
term borrowing rate. The effective interest rate at March 31,
2001 was 7%. As of March 31, 2001, the Company had letters of
credit and trade acceptances of $8,177,000 outstanding and
$11,200,000 of borrowings under the Line and, as a result, the
availability under the Line was $5,623,000. The Company is
charged a nominal fee on the entire Line. The line is cancelable
by either party at any time.
In April 2001, the Company obtained an additional $10,000,000
line of credit with another bank which may be used for short-term
borrowings.
In addition to the Lines above, the Prestige Companies (the
Company's 51% controlled European subsidiaries) have three lines
of credit with three separate banks for total available credit
facilities of approximately $3.3 million. As of March 31, 2001,
the Prestige Companies had borrowings of approximately $3.1
million against these lines. Interest rates on these lines of
credits range from 6.125% to 8.9%.
At March 31, 2001, the Company had cash and cash equivalents of
$2.6 million versus $1.3 million at December 31, 2000. The
increase in cash is due to increased borrowings under the
Company's lines of credit and increased accounts payable and
trade acceptances which were partially offset by the purchases of
fixed assets and increased inventory levels.
On May 1, 2001 the Board of Directors declared another regular
quarterly cash dividend of $0.0625 per share to stockholders of
record on May 4, 2001, to be paid on May 18, 2001. The dividend
to be paid will be approximately $656,000.
The Company expects that all capital expenditures expected to be
incurred in 2001 will be financed from current operations, cash
and cash equivalents and additional 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
purchase orders is generally 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.
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 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.
PART II - OTHER INFORMATION
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the first quarter of 2001: NONE
(b) Reports on Form 8-K in the first quarter of 2001: NONE
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, 2001
/s/ Jeffrey Siegel
__________________________________
Jeffrey Siegel
Chief Executive Officer and President
(Principal Executive Officer)
May 14, 2001
/s/ Robert McNally
__________________________________
Robert McNally
Vice President - Finance and Treasurer
(Principal Financial and Accounting
Officer)