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FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 2000
Commission file number 1-19254
Lifetime Hoan Corporation
(Exact name of registrant as specified in its charter)
Delaware 11-2682486
(State or other jurisdiction of (I.R.S. Identification No.)
of incorporation or organization)
One Merrice Ave Westbury, NY 11590
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 683-6000
Not applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months
(or for such shorter period that the registrant was
required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Common Stock, $.01 Par Value 10,577,139 shares outstanding as
of July 31, 2000.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30,
2000 December 31,
(unaudited) 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $747 $1,563
Accounts receivable, less allowances of
$2,055 in 2000 and $2,609 in 1999 13,401 22,443
Merchandise inventories 52,878 54,046
Prepaid expenses 2,045 2,641
Deferred income taxes 1,100 1,257
Other current assets 2,687 354
TOTAL CURRENT ASSETS 72,858 82,304
PROPERTY AND EQUIPMENT, net 12,550 12,597
EXCESS OF COST OVER NET ASSETS ACQUIRED,net 10,162 10,140
OTHER INTANGIBLES, net 9,975 10,170
OTHER ASSETS 1,173 1,173
TOTAL ASSETS $106,718 $116,384
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $10,237 $8,073
Accounts payable and trade acceptances 2,793 5,553
Accrued expenses 14,152 13,691
Income taxes -- 371
TOTAL CURRENT LIABILITIES 27,182 27,688
MINORITY INTEREST 796 888
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value, authorized
25,000,000 shares; issued and outstanding
10,607,139 in 2000 and 11,817,646 in 1999 106 118
Paid-in capital 61,871 71,957
Retained earnings 17,693 16,671
Notes receivable for shares issued to stockholders (908) (908)
Deferred compensation (22) (30)
TOTAL STOCKHOLDERS' EQUITY 78,740 87,808
TOTAL LIABILITIES AND STOCKHOLER'S EQUITY $106,718 $116,384
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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Net Sales $25,547 $26,903 $53,156 $44,720
Cost of Sales 13,252 13,525 27,769 22,689
Gross Profit 12,295 13,378 25,387 22,031
Selling, General and
Administrative Expenses.. 10,238 9,219 21,001 17,490
Other Expense(Income) 24 (274) (33) (320)
Income Before Income Taxes 2,033 4,433 4,419 4,861
Income Taxes 870 1,769 1,883 1,940
NET INCOME $1,163 $2,664 $2,536 $2,921
EARNINGS PER COMMON SHARE-
BASIC AND DILUTED $0.10 $0.21 $0.22 $0.23
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30,
2000 1999
OPERATING ACTIVITIES
Net income $2,536 $2,921
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation and amortization 1,413 1,406
Deferred tax (benefit) 157 (268)
Provision for losses on accounts receivable 1 340
Reserve for sales returns and allowances 2,201 1,804
Changes in operating assets and liabilities:
Accounts receivable 6,839 (5,184)
Merchandise inventories 1,167 (10,833)
Prepaid expenses, other current assets
and other assets (1,501) -
Accounts payable, trade acceptances
and accrued expenses (2,567) 1,599
Income taxes payable (606) 979
Minority Interest (91) -
NET CASH PROVIDED BY(USED IN) OPERATING
ACTIVITIES 9,549 (7,236)
INVESTING ACTIVITIES
Purchase of property and equipment, net (981) (1,565)
Repurchase of Common stock (10,146) -
NET CASH (USED IN) INVESTING ACTIVITIES (11,127) (1,565)
FINANCING ACTIVITIES
Proceeds from short-term borrowings, net 2,164 1,200
Proceeds from the exercise of stock options 47 76
Cash dividends paid (1,449) (1,574)
NET CASH PROVIDED BY(USED IN) FINANCING
ACTIVITIES 762 (298)
(DECREASE) IN CASH AND CASH
EQUIVALENTS (816) (9,099)
Cash and equivalents at beginning of period 1,563 9,438
CASH AND CASH EQUIVALENTS AT END OF PERIOD $747 $339
See notes to condensed consolidated financial statements.
LIFETIME HOAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance
with generally accepted accounting principles for
interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes
required by generally accepted accounting principles
for complete financial statements.In the opinion of management,
all adjustments(consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
Operating results for the six month period
ended June 30, 2000 are not necessarily indicative of
the results that may be expected for the year ending
December 31, 2000. It is suggested that these
condensed financial statements be read in
conjunction with the financial statements and
footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
Note B - Inventories
Merchandise inventories, principally finished goods,
are priced at the lower of cost (first-in, first-out
basis) or market.
Note C - Line of Credit Agreement
The Company has available an unsecured $25,000,000
line of credit with a bank (the "Line") which may
be used for short-term borrowings or letters of
credit. As of June 30, 2000, the Company had
$5,752,000 of letters of credit and trade acceptances
outstanding and $7,800,000 of borrowings. The Line is
cancelable by either party at any time. Borrowings
under the Line bear interest payable daily at a
negotiated short-term borrowing rate. The average
daily borrowing rate for the quarter was 7.52%. The
Company is also charged a nominal fee on the entire
Line.
In addition to the line above, the Prestige
Companies (the Company's 51% controlled European
subsidiaries) have three lines of credit with three
separate banks for a total available credit facility
of approximately $2.8 million. As of June 30, 2000,
the Prestige Companies had approximately $2.4
million of borrowings against these lines.
Interest rates on these lines of credits range from
3.6% to 7%.
Note D - Capital Stock
Cash Dividends: On April 27, 2000 the Board
of Directors declared a regular quarterly cash
dividend of $0.0625 per share to shareholders of
record on May 5, 2000, paid on May 19, 2000. On
July 25, 2000, the Board of Directors of the Company
declared another regular quarterly cash dividend of
$0.0625 per share to shareholders of record on
August 4, 2000, to be paid on August 18, 2000.
Earnings Per Share: Basic earnings per share has
been computed by dividing net income by the
weighted average number of common shares outstanding
of 11,115,000 for the three months ended June 30,
2000 and 12,599,000 for the three months ended June
30, 1999. For the six month periods ended June 30,
2000 and June 30, 1999, the weighted average number
of common shares outstanding were 11,459,000 and
12,595,000 respectively. Diluted earnings per
share has been computed by dividing net income by
the weighted average number of common shares
outstanding, including the dilutive effects of
stock options, of 11,235,000 for the three months
ended June 30, 2000 and 12,811,000 for the three
months ended June 30, 1999. For the six month
periods ended June 30, 2000 and June 30, 1999,
the diluted number of common shares outstanding
were 11,542,000 and 12,816,000, respectively.
Common Stock Buy Back: In June 2000, the Board of
Directors of the Company increased the authorized
amount of its Common Stock that could be bought back
from 2,000,000 common shares to a total of 3,000,000
common shares. As of June 30, 2000, a total of
2,002,500 common shares had been repurchased and
retired.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth income statement
data of the Company as a percentage of net sales
for the periods indicated below.
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 51.9 50.3 52.2 50.7
Gross profit 48.1 49.7 47.8 49.3
Selling, general and
administrative expenses 40.1 34.3 39.5 39.1
Other Expense(Income) 0.1 (1.0) 0.0 (0.7)
Income before income taxes 7.9 16.4 8.3 10.9
Tax provision 3.4 6.6 3.5 4.3
Net Income 4.5 % 9.8 % 4.8 % 6.6 %
Three Months Ended June 30, 2000
Compared to Three Months ended June 30, 1999
Net Sales
Net sales for the three months ended June 30, 2000
were $25.5 million, $1.4 million or 5.0% lower
than the comparable 1999 quarter. The quarter-to-
quarter sales comparisons were affected by problems
the Company experienced in connection with the
installation of a new warehouse management system
during 1999. The Company's inability to deliver
merchandise in a timely fashion during last
year's fourth quarter, when many retailers plan
their Spring promotions, resulted in the Company
losing some promotional business in the second
quarter of 2000. In addition, 1999's second quarter
sales benefited from an increased level of product
shipments during that period as customer shipments
had been delayed from the first quarter. Sales in
the 2000 quarter benefited from the inclusion of
the results of the Prestige Companies, acquired in
September 1999.
Gross Profit
Gross profit for the three months ended June 30,
2000 was $12.3 million, 8.0% lower than the comparable 1999
period. Gross profit as a percentage of net sales
decreased to 48.1% from49.7%. The lower margins were
primarily attributable to the impact of the Prestige
Companies sales which currently generate lower
margins. In the Company's core business the margins
are slightly lower than 1999, due to a change in
product mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the
three months ended June 30, 2000 were $10.2 million,
an increase of 11.1% from the comparable 1999
quarter. The increase was attributable to the added
selling, general and administrative expenses of
the Prestige companies which were acquired in
September 1999.
Six Months Ended June 30, 2000
Compared to Six Months ended June 30, 1999
Net Sales
Net sales for the six months ended June 30, 2000
were $53.2 million, an increase of $8.4 million or
18.9% as compared to the corresponding 1999 period.
The sales increase is primarily attributable to the
benefit from the addition of the sales of the
Company's 51% controlled subsidiaries, the
Prestige Companies acquired in September 1999 and
the resumption of normalized shipping patterns in
the first quarter of 2000 as compared to the first
quarter of 1999, when problems related to the
installation of a new warehouse management system
severely hampered the Company's ability to ship
merchandise.
Gross Profit
Gross profit for the six months ended June 30, 2000
was $25.4 million, an increase of 15.2% from the
comparable 1999 period. Gross profit as a percentage
of net sales decreased to 47.8% from 49.3% in the
comparable 1999 period. The lower margin was
primarily attributable to the impact of the
Prestige Companies which currently generate lower
margins. In the Company's core business the
margins were slightly lower than 1999 due to a
change in customer and product mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the
six months ended June 30, 2000 were $21.0 million,
an increase of 20.1% from the comparable 1999
period. The increase was primarily attributable
to the added selling, general and administrative
expense of the Prestige Companies which were
acquired in September 1999, along with higher
warehouse operating expenses.
Forward Looking Statements: This Quarterly Report
on Form 10-Q contains certain forward-looking
statements within the meaning of the "safe harbor"
provisions of the Private Securities Litigation
Reform Act of 1995, including statements concerning
the Company's future products, results of
operations and prospects. These forward-looking
statements involve risks and uncertainties,
including risks relating to general economic
and business conditions, including changes which
could affect customer payment practices or consumer
spending; industry trends; the loss of major
customers; changes in demand for the Company's
products; the timing of orders received from
customers; cost and availability of raw materials;
increases in costs relating to manufacturing and
transportation of products; dependence on foreign
sources of supply and foreign manufacturing;
risks relating to Year 2000 issues; and the seasonal
nature of the business as detailed elsewhere in this
Quarterly Report on Form 10-Q and from time to
time in the Company's filings with the Securities
and Exchange Commission. Such statements are based on
management's current expectations and are subject to
a number of factors and uncertainties which could
cause actual results to differ materially from
those described in the forward-looking statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $25,000,000 unsecured line of
credit with a bank (the "Line") which may be used
for short-term borrowings or letters of credit and
trade acceptances. Borrowings under the Line bear
interest payable daily at a negotiated short-term
borrowing rate. The Company is also charged a nominal
fee on the entire Line. As of June 30, 2000, the
Company had $5,752,000 of letters of credit and
trade acceptances outstanding under the Line and
$7,800,000 of borrowings and, as a result, the
availability under the Line was $11,448,000. The
average daily borrowing rate for the quarter was
7.52%. The Line is cancelable by either party at any
time.
In addition to the line above, the Prestige Companies
(the Company's 51% controlled European subsidiaries) have
three lines of credit with three separate banks for
a total available credit facility of approximately
$2.8 million. As of June 30, 2000, the Prestige
Companies had borrowings of approximately $2.4
million against these lines. Interest rates on
these lines of credits range from 3.6% to 7%.
At June 30, 2000, the Company had cash and cash
equivalents of $747,000 versus $1.6 million at
December 31, 1999.
Working capital, including cash and cash equivalents,
declined by $8.9 million during the first half of
2000, as the Company used these funds and most of
its earnings to repurchase $10.1 million of its
common stock.
On July 25, 2000 the Board of Directors declared
another regular quarterly cash dividend of $0.0625
per share to shareholders of record on August 4,
2000, to be paid on August 18, 2000. The
dividend to be paid will be approximately $662,000.
The Company anticipates that all capital
expenditures in 2000 will be financed from
current operations, cash and cash equivalents
and, if needed, short term borrowings.
The Company believes that its cash and cash
equivalents, internally generated funds and its
existing credit arrangements will be sufficient to
finance its operations for at least the next 12
months.
The results of operations of the Company for
the periods discussed have not been significantly
affected by inflation or foreign currency
fluctuation. The Company negotiates
predominantly all of its purchase orders with
its foreign manufacturers in United States dollars.
Thus, notwithstanding any fluctuation in foreign
currencies, the Company's cost for any purchase
order is not subject to change after the time the
order is placed. However, any 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 the installation of a new financial
accounting reporting system and a separate new
warehouse management system. As a result of those
two installations, the Company experienced no
significant disruptions in mission
critical information technology and non-information
technology systems and believes those systems
successfully responded to the Year 2000 date
change. The Company is not aware of any material
problems resulting from Year 2000 issues,
either with its products, its internal systems, or
the products and services of third parties. The
Company will continue to monitor its mission
critical computer applications and those of its
suppliers and vendors throughout the year 2000 to
ensure that any latent Year 2000 matters that may
arise are addressed promptly.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security-Holders.
The Company's annual meeting of stockholders was
held on June 8, 2000. At the meeting, all six
director nominees were elected and the appointment of
Ernst & Young, LLP as independent auditors was
ratified, the Lifetime Hoan Corporation 2000
Incentive Bonus Compensation Plan was ratified and
the Lifetime Hoan Corporation 2000 Long-term
Incentive Plan was ratified.
(a)Milton L. Cohen, Jeffrey Siegel, Craig Phillips,
Bruce Cohen, Ronald Shiftan, and Howard Bernstein
were re-elected as directors of the Company.
(b)Ernst & Young LLP was re-appointed as
independent auditors to audit the Company's
financial statements for the fiscal year ending
December 31, 2000.
(c)The Lifetime Hoan Corporation 2000
Incentive Bonus Compensation Plan was
approved and ratified.
(d)The Lifetime Hoan Corporation 2000 Long-
Term Incentive Plan was approved and
ratified.
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the second quarter of 2000:
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K in the second quarter of 2000: NONE
Exhibit 27. Financial Data Schedule
Lifetime Hoan Corporation
Financial Data Schedule
Pursuant to Item 601(c) of Regulation S-K
This schedule contains summary financial information extracted
from the financial statements included in the form 10-Q
and is qualified in its entirety by reference to such financial statements
for the Six Months ended June 30, 2000.
(in thousands, except per share data)
Item Number Item Description Amount
5-02(1) Cash and Cash Items $ 747
5-02(2) Marketable Securities $ 0
5-02(3)(a)(1) Notes and Accounts Receivable -Trade $ 13,486
5-02(4 ) Allowances for Doubtful Accounts $ 85
5-02(6) Inventory $ 52,878
5-02(9) Total Current Assets $ 72,858
5-02(13) Property, Plant and Equipment $ 20,366
5-02(14) Accumulated Depreciation $ 7,816
5-02(18) Total Assets $ 106,718
5-02(21) Total Current Liabilities $ 27,182
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 $ 106
5-02(31) Other Stockholders' Equity $ 78,634
5-02(32) Total Liabilities and Stockholders' Equity$ 106,718
5-03(b)1(a) Net Sales of Tangible Products $ 52,939
5-03(b)1 Total Revenues $ 53,156
5-03(b)2(a) Cost of Tangible Goods Sold $ 27,769
5-03(b)2 Total Costs and Expenses Apllicable
to Sales and Revenues $ 27,769
5-03(b)3 Other Costs and Expenses $ 0
5-03(b)5 Provision for Doubtful Accounts and Notes $ 4
5-03(b)(8) Interest and Amortization of Debt Discount$ 0
5-03(b)(10) Income Before Taxes and Other Items $ 4,419
5-03(b)(11) Income Tax Expense $ 1,883
5-03(b)(14) Income/Loss Continuing Operations $ 2,536
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 $ 2,536
5-03(b)(20) Earnings Per Share - Primary $ 0.22
5-03(b)(20) Earnings Per Share - Fully Diluted $ 0.22
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
August 11, 2000
/s/ Milton L. Cohen
_________________________________
Milton L. Cohen
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
August 11, 2000
/s/ Robert McNally
_________________________________
Robert McNally
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)