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 quarterly period ended June 30, 2003
Commission file number 1-19254
Lifetime Hoan Corporation
(Exact name of registrant as specified in its charter)
Delaware 11-2682486
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Merrick Avenue, Westbury, NY 11590
(Address of principal executive offices) (Zip Code)
(516) 683-6000
(Registrant's telephone number, including area code)
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___
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act)
Yes__No X
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 10,570,274 shares
outstanding as of July 31, 2003
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFETIME HOAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30,
2003 December 31,
(unaudited) 2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents $132 $62
Accounts receivable, less allowances of
$1,974 in 2003 and $3,888 in 2002 17,512 19,143
Merchandise inventories 46,564 41,333
Prepaid expenses 1,889 1,603
Deferred income taxes - 15
Other current assets 2,354 2,505
TOTAL CURRENT ASSETS 68,351 64,661
PROPERTY AND EQUIPMENT, net 19,939 20,850
EXCESS OF COST OVER NET ASSETS ACQUIRED 14,952 14,952
OTHER INTANGIBLES, net 8,805 9,000
OTHER ASSETS 2,090 2,123
TOTAL ASSETS $114,237 $111,586
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $15,500 $14,200
Accounts payable and trade acceptances 6,331 2,720
Accrued expenses 13,612 13,894
Income taxes payable 1,629 2,463
TOTAL CURRENT LIABILITIES 37,072 33,277
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value, authorized
25,000,000 shares; issued and outstanding
10,570,274 in 2003 and 10,560,704 in 2002 106 106
Paid-in capital 61,460 61,405
Retained earnings 16,078 17,277
Notes receivable for shares issued to
stockholders (479) (479)
TOTAL STOCKHOLDERS' EQUITY 77,165 78,309
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $114,237 $111,586
See notes to consolidated financial statements.
LIFETIME HOAN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
Net Sales $29,950 $27,281 $54,234 $51,468
Cost of Sales 17,003 14,461 30,430 27,587
Distribution Expenses 4,302 4,888 8,756 10,658
Selling, General and
Administrative Expenses 7,268 6,752 14,589 13,650
Income (Loss) from Operations 1,377 1,180 459 (427)
Interest Expense 180 221 292 448
Other Income (18) (7) (35) (29)
Income (Loss) Before Income Taxes 1,215 966 202 (846)
Tax Provision (Benefit) 491 349 82 (383)
Income (Loss) from Continuing
Operations 724 617 120 (463)
Loss from Discontinued
Operations, net of tax - (227) - (344)
NET INCOME (LOSS) $724 $390 $120 ($807)
BASIC AND DILUTED EARNINGS (LOSS)
PER COMMON SHARE FROM CONTINUING
OPERATIONS $0.07 $0.06 $0.01 ($0.04)
LOSS PER COMMON SHARE FROM
DISCONTINUED OPERATIONS - ($0.02) - ($0.04)
BASIC AND DILUTED EARNINGS (LOSS)
PER COMMON SHARE $0.07 $0.04 $0.01 ($0.08)
See notes to consolidated financial statements.
LIFETIME HOAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30,
2003 2002
OPERATING ACTIVITIES
Net income (loss) $120 $(807)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 1,733 1,766
Deferred tax provision 688 99
Provision for losses on accounts receivable 93 11
Reserve for sales returns and allowances 3,099 3,075
Minority interest - (145)
Changes in operating assets and liabilities:
Accounts receivable (1,561) 2,141
Merchandise inventories (5,231) (6,407)
Prepaid expenses, other current assets
and other assets (102) (1,159)
Accounts payable, trade acceptances
and accrued expenses 3,329 (530)
Accrued income taxes payable (1,507) -
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 661 (1,956)
INVESTING ACTIVITIES
Purchase of property and equipment, net (627) (1,089)
NET CASH USED IN INVESTING ACTIVITIES (627) (1,089)
FINANCING ACTIVITIES
Proceeds from (repayment of) short-term
borrowings, net 1,300 (753)
Proceeds from exercise of stock options 55 31
Cash dividends paid (1,319) (1,312)
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 36 (2,034)
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS - 324
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 70 (4,755)
Cash and cash equivalents at beginning of
period 62 5,021
CASH AND CASH EQUIVALENTS AT END OF PERIOD $132 $266
See notes to consolidated financial statements.
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with 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 by accounting principles
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 and six-month periods ended June 30, 2003 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 2003. 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, 2002.
Note B - Inventories
Merchandise inventories, principally finished goods, are priced
at the lower of cost (first-in, first-out basis) or market.
Note C - Distribution Expenses
Distribution expenses primarily consist of freight-out,
warehousing expenses, and handling costs of products sold. These
expenses also include relocation charges, duplicate rent and
other costs associated with the Company's move into its
Robbinsville, New Jersey warehouse, amounting to $0.1 million in
the second quarter of 2003 as compared to $0.5 million in the
second quarter of 2002 and $0.5 million for the six-month period
ended June 30, 2003 as compared to $1.5 million for the six-month
period ended June 30, 2002.
Note D - Credit Facilities
As of June 30, 2003, the Company had $1.9 million of letters of
credit and trade acceptances outstanding and $15.5 million of
borrowings under its $40 million three-year secured, reducing
revolving credit agreement (the "Agreement"), and as a result,
the availability under the Agreement was $22.6 million. Interest
rates on borrowings at June 30, 2003 ranged from 2.75% to 3.125%.
Note E - Capital Stock and Stock Options
Cash Dividends: On January 16, 2003, the Board of Directors
declared a quarterly cash dividend of $0.0625 per share to
stockholders of record on February 6, 2003, paid on February 20,
2003. On April 29, 2003, the Board of Directors declared a
quarterly cash dividend of $0.0625 per share to stockholders of
record on May 5, 2003, paid on May 20, 2003. On July 31, 2003,
the Board of Directors of the Company declared a regular
quarterly cash dividend of $0.0625 per share to stockholders of
record on August 5, 2003, to be paid on August 19, 2003.
Earnings (Loss) Per Share: Basic earnings per share has been
computed by dividing net income by the weighted average number of
common shares outstanding of 10,563,000 for the three months
ended June 30, 2003 and 10,498,000 for the three months ended
June 30, 2002. For the six month period ended June 30, 2003 and
June 30, 2002, the weighted average number of common shares
outstanding were 10,562,000 and 10,495,000, 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 10,637,000
for the three months ended June 30, 2003 and 10,574,000 for the
three months ended June 30, 2002. For the six month periods ended
June 30, 2003 and June 30, 2002, the diluted number of common
shares outstanding were 10,599,000 and 10,495,000, respectively.
For the six month period ended June 30, 2002, the effects of
outstanding stock options on the weighted average number of
common shares outstanding have been excluded for purposes of
determining diluted earnings per share as their effects would be
antidilutive.
LIFETIME HOAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note E - Capital Stock and Stock Options (continued)
Accounting for Stock Option Plan: The Company has a stock option
plan, which is more fully described in the footnotes to the
financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2002. The Company
accounts for options granted under the plan under the recognition
and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations. No
stock-based employee compensation cost is reflected in net income
(loss), as all options granted under the plans had an exercise
price equal to the market values of the underlying common stock
on the dates of grant. The following table illustrates the
effect on net earnings (loss) and net earnings (loss) per share
if the Company had applied the fair value recognition provisions
of Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation" to stock-based employee
compensation.
Three Months Six Months Ended
Ended June 30, June 30,
(in thousands, (in thousands,
except per share except per share
data) data)
2003 2002 2003 2002
Net income (loss), as reported $724 $390 $120 ($807)
Deduct: Total stock option
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects (7) (49) (23) (97)
Proforma net income (loss) $717 $341 $97 ($904)
Income (loss) per common share:
Basic and diluted - as reported $0.07 $0.04 $0.01 ($0.08)
Basic and diluted - proforma $0.07 $0.03 $0.01 ($0.09)
Note F - Sale of Prestige Companies
Effective September 27, 2002, the Company sold its 51%
controlling interest in Prestige Italiana, Spa and, together with
its minority interest shareholder, caused Prestige Haushaltswaren
GmbH (together with Prestige Italiana, Spa, the "Prestige
Companies") to sell all of its receivables and inventory to a
European housewares distributor. Accordingly, the Company has
classified the Prestige Companies business as discontinued
operations. Net sales for the Prestige Companies totaled $2.1
million for the three-month period ended June 30, 2002 and $4.3
million for the six-month period ended June 30, 2002. Net loss
from the Prestige Companies discontinued operations totaled
$227,000 for the three-month period ended June 30, 2002 and
$344,000 for the six-month period ended June 30, 2002. For all
periods in 2002, the Company has reclassified its financial
statements to reflect the results of operations of the Prestige
Companies as discontinued operations.
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 Six Months
Ended Ended
June 30, June 30,
2003 2002 2003 2002
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 56.8 53.1 56.1 53.6
Distribution expenses 14.3 17.9 16.1 20.7
Selling, general and
administrative expenses 24.3 24.7 26.9 26.5
Income (loss) from operations 4.6 4.3 0.9 (0.8)
Interest expense 0.6 0.8 0.5 0.9
Other income - - - (0.1)
Income (loss) before income taxes 4.0 3.5 0.4 (1.6)
Tax provision (benefit) 1.6 1.3 0.2 (0.7)
Income (loss) from continuing
operations 2.4 2.2 0.2 (0.9)
Loss from discontinued
operations, net of tax - (0.8) - (0.7)
Net income (loss) 2.4 % 1.4 % 0.2 % (1.6) %
Seasonality
Although the Company sells its products throughout the year, the
Company has traditionally had higher net sales during its third
and fourth quarters. Accordingly, operating results for the
three-month and six-month periods ended June 30, 2003 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 2003.
Three Months Ended June 30, 2003
Compared to Three Months ended June 30, 2002
Net Sales
Net sales for the three months ended June 30, 2003 were
approximately $30.0 million, an increase of $2.7 million or 9.8%
over net sales for the prior year's corresponding period. The
increase in sales volume was attributable primarily to higher
sales of kitchen tools and gadgets, as well as increased sales of
Kamenstein pantryware products.
Cost of Sales
Cost of sales for the three months ended June 30, 2003 was $17.0
million, an increase of $2.5 million or 17.6% from the comparable
2002 period. Cost of sales as a percentage of net sales increased
to 56.8% from 53.1%, primarily as a result of higher sales of
licensed branded products which generate lower margins due to the
added costs of royalties and, to a lesser extent, a higher cost
of sales-to-net sales relationship for Kamenstein products in the
2003 quarter.
Distribution Expenses
Distribution expenses for the three months ended June 30, 2003
were $4.3 million, a decrease of $0.6 million or 12.0% from the
comparable 2002 period. Excluding the expenses associated with
the move to the new Robbinsville, New Jersey warehouse of $0.1
million for the three months ended June 30, 2003 and $0.5 million
for the three months ended June 30, 2002, distribution expenses
decreased by approximately $0.2 million or 5.1% in the second
quarter of 2003 as compared to the second quarter of 2002. The
lower expenses were primarily decreased payroll expenses, the
result of labor efficiencies realized from the new systems in the
Company's Robbinsville, New Jersey warehouse.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended June 30, 2003 were $7.3 million, an increase of $0.5
million or 7.6% over the comparable 2002 period. The increase in
selling, general and administrative expenses was due principally
to increased personnel costs, including planned additions in the
sales and product design departments and higher professional
fees.
Six Months Ended June 30, 2003
Compared to Six Months ended June 30, 2002
Net Sales
Net sales for the six months ended June 30, 2003 were $54.2
million, an increase of $2.8 million or 5.4% as compared to the
corresponding 2002 period. The increase in sales volume was
attributable primarily to higher sales of kitchen tools and
gadgets and increased sales of Kamenstein pantryware products.
Cost of Sales
Cost of sales for the six months ended June 30, 2003 was $30.4
million, an increase of $2.8 million or 10.3% from the comparable
2002 period. Cost of sales as a percentage of net sales increased
to 56.1% from 53.6%, primarily as a result of higher sales of
licensed branded products which generate lower margins due to the
added costs of royalties and, to a lesser extent, a higher cost
of sales-to-net sales relationship of Kamenstein products for the
2003 periods.
Distribution Expenses
Distribution expenses for the six months ended June 30, 2003 were
$8.8 million, a decrease of $1.9 million or 17.8% from the
comparable 2002 period. Excluding the expenses associated with
the move to the new Robbinsville, New Jersey warehouse of
approximately $0.5 million for the six month period ended June
30, 2003 and $1.5 million for the six-month period ended June 30,
2002, distribution expenses decreased by approximately $0.9
million in the six month period ended June 30, 2003 as compared
to the six-month period ended June 30, 2002. The lower expenses
were primarily decreased payroll expenses, the result of labor
efficiencies realized from the new systems in the Company's
Robbinsville, New Jersey warehouse.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months
ended June 30, 2003 were $14.6 million, an increase of $0.9
million or 6.9% from the comparable 2002 period. The increase in
selling, general and administrative expenses was due principally
to increased personnel costs, including planned additions in the
sales and product design departments.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $40 million three-year secured, reducing
revolving credit facility under an agreement (the "Agreement")
with a group of banks. The facility matures on November 8, 2004.
Borrowings under the Agreement are secured by all of the assets
of the Company and the facility reduces to $35 million at
December 31, 2003. Under the terms of the Agreement, the Company
is required to satisfy certain financial covenants, including
limitations on indebtedness and sale of assets; a minimum fixed
charge ratio; and net worth maintenance. Borrowings under the
Agreement have different interest rate options that are based on
an alternate base rate, LIBOR rate, or the lender's cost of funds
rate. As of June 30, 2003, the Company had $1.9 million of
letters of credit and trade acceptances outstanding and $15.5
million of borrowings under the agreement and, as a result, the
availability under the Agreement was $22.6 million. Interest
rates on borrowings at June 30, 2003 ranged from 2.75% to 3.125%.
At June 30, 2003, the Company had cash and cash equivalents of
$132,000 as compared to $62,000 at December 31, 2002.
On July 31, 2003, the Board of Directors declared a regular
quarterly cash dividend of $0.0625 per share to shareholders of
record on August 5, 2003 to be paid on August 19, 2003. The
dividend to be paid will be approximately $661,000.
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 United States dollar prices for their products. The
Company believes it would be able to compensate for any such
price increase.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Market risk represents the risk of loss that may impact the
consolidated financial position, results of operations or cash
flows of the Company. The Company is exposed to market risk
associated with changes in interest rates. The Company's line of
credit bear interest at variable rates. The Company is subject
to increases and decreases in interest expense on its variable
rate debt resulting from fluctuations in the interest rates of
such debt. There have been no changes in interest rates that
would have a material impact on the consolidated financial
position, results of operations or cash flows of the Company
during the six-month period ended June 30, 2003.
Item 4. Control and Procedures
The Chief Executive Officer and the Chief Financial Officer of
the Company (its principal executive officer and principal
financial officer, respectively) have concluded, based on their
evaluation as of a date within 90 days prior to the date of the
filing of this Report on Form 10-Q, that the Company's controls
and procedures are effective to ensure that information required
to be disclosed by the Company in the reports filed by it under
the Securities and Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and include controls and
procedures designed to ensure that information required to be
disclosed by the Company in such reports is accumulated and
communicated to the Company's management, including the Chief
Executive Officer and Chief Financial Officer of the Company, as
appropriate to allow timely decisions regarding required
disclosure.
There were no significant changes in the Company's internal
controls or in other factors that could significantly affect
these controls subsequent to the date of such evaluation.
PART II - OTHER INFORMATION
Forward Looking Statements: This Quarterly Report on Form 10-Q
contains certain forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, including statements concerning the Company's
future products, results of operations and prospects. These
forward-looking statements involve risks and uncertainties,
including risks relating to general economic and business
conditions, including changes which could affect customer payment
practices or consumer spending; industry trends; the loss of
major customers; changes in demand for the Company's products;
the timing of orders received from customers; cost and
availability of raw materials; increases in costs relating to
manufacturing and transportation of products; dependence on
foreign sources of supply and foreign manufacturing; and the
seasonal nature of the business as detailed 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.
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security-Holders
The Company's annual meeting of stockholders was held on June
12, 2003. At the meeting, all six director nominees were elected
and the appointment of Ernst & Young LLP as independent auditors
was ratified.
(a) The following directors were elected to hold office until the
next annual meeting of stockholders by the votes indicated:
FOR WITHHOLD
Jeffrey Siegel 7,924,586 58,362
Bruce Cohen 7,924,086 58,862
Craig Phillips 7,924,586 58,362
Ronald Shiftan 7,924,486 58,462
Howard Bernstein 7,913,831 69,117
Leonard Florence 7,946,156 36,792
(b) The appointment of Ernst & Young as the independent
auditors to audit the Company's financial statements
for the fiscal year ending December 31, 2003 was
ratified by the following vote:
FOR WITHHOLD EXCEPTIONS/ABSTAIN
7,972,528 2,600 7,820
Item 5. Other Information
Not applicable.
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the second quarter of 2003:
Exhibit 10.37 Amendment No. 6 to Outlet Store
Operating Agreement, dated as of April 30,
2003 (the "Amendment"), made by and
between Outlet Retail Stores, Inc. and
Cookware Concepts, Inc.
Exhibit 31 Certification by Jeffrey Siegel, Chief
Executive Officer, and Robert McNally,
Chief Financial Officer, pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the
Securities and Exchange Act of 1934, as
adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32 Certification by Jeffrey Siegel,
Chief Executive Officer, and Robert
McNally, Chief Financial Officer, pursuant
to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
(b) Reports on Form 8-K:
On April 30, 2003, the Company filed a
report on Form 8-K announcing results of
operations and financial condition for its
first quarter ended March 31, 2003.
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 14, 2003
/s/ Jeffrey Siegel
__________________________________
Jeffrey Siegel
Chief Executive Officer and President
(Principal Executive Officer)
August 14, 2003
/s/ Robert McNally
__________________________________
Robert McNally
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
EXHIBIT 31
CERTIFICATIONS
I, Jeffrey Siegel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Lifetime Hoan Corporation ("the registrant");
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15e and 15d-
15e) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15f and 15d-15f) for the registrant and we
have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's second fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting,
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: August 14, 2003
__/s/ Jeffrey Siegel______________
Jeffrey Siegel
President and Chief Executive Officer
CERTIFICATIONS
I, Robert McNally, certify that:
1. I have reviewed this quarterly report on Form 10-Q of
Lifetime Hoan Corporation ("the registrant");
2. Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15e and 15d-
15e) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15f and 15d-15f) for the registrant and we
have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's second fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting,
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: August 14, 2003
___/s/ Robert McNally___________
Robert McNally
Vice President and Chief Financial Officer
EXHIBIT 32
Certification by Jeffrey Siegel, Chief Executive Officer, and
Robert McNally, Chief Financial Officer,
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
I, Jeffrey Siegel, Chief Executive Officer, and I, Robert
McNally, Chief Financial Officer, of Lifetime Hoan Corporation, a
Delaware corporation (the "Company"), each hereby certifies that:
(1) The Company's periodic report on Form 10-Q for the period
ended June 30, 2003 (the "Form 10-Q") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and
(2) The information contained in the Form 10-Q fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
/s/ Jeffrey Siegel /s/ Robert McNally
Jeffrey Siegel Robert McNally
Chief Executive Officer Chief Financial Officer
Date: August 14, 2003 Date: August 14, 2003
EXHIBIT 10.37
AMENDMENT NO. 6 TO
OUTLET STORE OPERATING AGREEMENT
This Amendment No. 6 to Outlet Store Operating Agreement, dated
as of April 30, 2003 (the "Amendment"), is made by and between
Outlet Retail Stores, Inc., a Delaware corporation having offices
at One Merrick Avenue, Westbury, New York 11590 ("ORSI"), and
Cookware Concepts, Inc., a Delaware corporation having offices at
525 Curtola Parkway, Vallejo, California 94590 ("CCI").
WHEREAS, ORSI and CCI are parties to that certain Outlet Store
Operating Agreement, dated as of June 30, 1997, effective as of
July 1, 1997 (the "Original Agreement") and amended by agreements
dated as of July 1, 1998 ("Amendment No. 1"), August 4, 1999
("Amendment No. 2"), January 1, 2000 ("Amendment No. 3",
sometimes referred to as the Salton Agreement and which by its
terms terminated on December 31, 2001), December 17, 2002
("Amendment No. 4") and March 31, 2003 ("Amendment No. 5"). The
Original Agreement together with Amendment No. 1, Amendment No.
2, Amendment No. 3, Amendment No. 4 and Amendment No. 5 are
hereinafter referred to collectively as the "Agreement".
WHEREAS, ORSI and CCI now desire to amend certain aspects of the
Agreement
WHEREAS, in consideration of the mutual benefits to be derived by
each party, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, ORSI and
CCI have agreed to further amend the Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION I. DEFINITIONS
1.1 Defined Terms. Capitalized terms used herein without
definition shall have the meanings ascribed thereto in the
Agreement.
SECTION 2. AGREEMENT CHANGES
2.1 The fourth WHEREAS clause in the recitals to the Agreement is
deleted in its entirety and replaced with the following:
"WHEREAS, ORSI and CCI wish to enter into an arrangement
whereby, among other things, 30% of the square footage of each
Farberware Outlet Store will be devoted to Meyer Products and CCI
will assume 30% of the costs and expenses of the development and
operation of Farberware Outlet Stores".
2.2 The definition of the term "Meyer Products" contained in
Section 1 of the Agreement is deleted in its entirety and
replaced with the following:
"Meyer Products" means certain Farberware-branded cookware,
namely pots and pans made of stainless steel, aluminum, anodized
aluminum or cast iron (but not including bakeware and
electrically operated cookware), sold by CCI pursuant to the
Meyer Agreement and certain non-Farberware-branded cookware,
namely pots and pans made of stainless steel, aluminum, anodized
aluminum or cast iron (but not including bakeware and
electrically operated cookware), made by or for, or sold by, CCI
that compete with such Farberware-branded products. If the
parties to this Agreement disagree as to whether any product is a
"Meyer Product" for purposes of this Agreement, the parties to
this Agreement shall discuss the matter in an attempt to resolve
thematter. If the parties to this Agreement are unable to
resolve the matter within ten days after either party shall have
advised the other party of the disagreement, ORSI shall determine
whether the product is a "Meyer Product" for purposes of this
Agreement. Notwithstanding the foregoing, (a) CCI is permitted
to sell stockpots, tea kettles made of stainless steel, aluminum
or anodized aluminum, two SKUs of enamel-on-steel tea kettles and
Circulon branded textiles in the Farberware Outlet Stores and (b)
ORSI is permitted to sell enamel-on-steel tea kettles, two SKUs
of tea kettles made of stainless steel, aluminum or anodized
aluminum and stock pots in the Farberware Outlet Stores. "
2.3 The paragraph entitled "Term" that immediately precedes
Section 3 of the Agreement is deleted in its entirety and
replaced with the following paragraph designated as Section 2:
"2. Term. This Agreement shall commence on July 1, 1997 (the
"Effective Date") and continue until September 30, 2007, (the
"Initial Term"), and shall thereafter continue for successive
renewal terms of one (1) year (each, a "Renewal Term"), unless
either party shall give written notice, not less than six (6)
months prior to the end of the Initial Term or any Renewal Term
of its intention to terminate this Agreement at the end of the
Initial Term or such Renewal Term, as the case may be."
2.4 Sections 3(a)(i), 3(a)(ii), 3(b), 6(h) and 7(d)(ii) of the
Agreement are hereby amended by deleting each reference to "50%"
and inserting in lieu thereof "30%."
2.5 Section 6(f) of the Agreement is hereby amended by deleting
the last sentence thereof in its entirety and replacing it with
the following:
"For all fixturing that is common to both companies, CCI will
pay 30% of the cost and ORSI will pay 70% of the cost."
2.6 Section 3(b)(xi) of the Agreement is hereby amended by
deleting the reference to "$40,000" and inserting in lieu thereof
"$70,000".
2.7 The new subsection added to the Agreement by Section 2.4 of
Amendment No. 2 and inadvertently incorrectly designated therein
as new Section 3(b)(xi) of the Agreement is deleted in its
entirety and replaced with the following:
"(xii) The actual costs plus estimated internal costs of LHC,
calculated in good faith, incurred in connection with design,
graphics, art and miscellaneous relating to the Farberware Outlet
Stores. It is agreed that this allocation will not exceed
$200,000 per annum."
2.8 Section 5(c) of the Agreement is hereby amended by deleting
the reference to "five (5) years" and inserting in lieu thereof
"three (3) years".
2.9 Section 5(g)(ii) of the Agreement is deleted in its entirety
and replaced with the following:
(ii) In connection with a determination by ORSI to close
down the business of the Farberware Outlet Stores, CCI shall have
a right of first refusal to acquire such business on terms no
less favorable to ORSI than it would receive upon the liquidation
of such business.
2.10 Section 5(g)(iii) of the Agreement is deleted in its
entirety and replaced with the following:
"(iii) In the event ORSI liquidates the business of the
Farberware Outlet Stores, CCI shall be entitled to receive, after
the payment of all liabilities of such business, 30% of the
remaining proceeds, if any, allocable to the capital assets of
such business."
2.11 Section 6(a) of the Agreement is hereby amended by adding
thereto the following sentences:
"Notwithstanding the foregoing, CCI shall use its best efforts to
limit the Meyer Products with which CCI shall stock any
Farberware Outlet Store to no more than 30% of the square footage
of the display space and the storage space of such Farberware
Outlet Store. Whenever ORSI shall determine that Meyer Products
exceed 30% of the square footage of the display space and the
storage space of such Farberware Outlet Store, ORSI shall notify
CCI that such a condition exists and CCI shall attempt to develop
a plan to remedy such condition as soon as practicable. In the
event that ORSI and CCI cannot agree upon such a remedy in a
timely manner, ORSI may, without further notice to CCI, (i)
refuse to accept any additional Meyer Products delivered to such
Farberware Outlet Store and (ii) package and return to CCI, at
CCI's cost, such Meyer Products as ORSI shall select, in its sole
discretion, in order that the Meyer Products with which CCI shall
have stocked such Farberware Outlet Store shall not occupy more
than 30% of the square footate of the display space and the
storage space of such Farberware Outlet Store."
2.12 The last sentence of Section 6(j) of the Agreement is
deleted in its entirety and replaced with the following:
"Furthermore, it is understood that it would be detrimental to
the Farberware Outlet Stores if CCI sold any Meyer Product [that
is Farberware licensed] at any Farberware Outlet Store at a price
greater than the price at which any competitor is selling such
Meyer Product and, accordingly, CCI agrees that it will not
knowingly sell any Meyer Product [that is Farberware licensed] at
any Farberware Outlet Store at a price greater than the price at
which any competitor is selling such Meyer Product."
2.13 Section 12(a) of the Agreement is hereby amended by
deleting the addresses and facsimile numbers set forth therein to
which notices, requests, demands or other communications to ORSI
required or permitted to be given or made under the Agreement
shall be delivered or sent and inserting in lieu thereof the
following:
"If to ORSI: Outlet Retail Stores, Inc.
One Merrick Avenue
Westbury, New York 11590
Attention: Jeffrey Siegel, President
Fax: (516) 683-6006
With a copy to: Samuel B. Fortenbaugh III
1211 Avenue of the Americas
27th Floor New York, NY 10036
Fax: (212) 596-3391"
2.14 The first sentence of Section 12(l) of the Agreement is
deleted in its entirety and replaced with the following:
"The following provisions shall survive the termination of this
Agreement: 3(b), 3(c), 3(d), 4, 5(b), 5(d), 6(c), 6(g), 6(h),
6(i), 6(k), 7(d), 8, 11, 12(a), 12(i), 12(j) and 12(k)."
SECTION 3. EFFECTIVENESS OF AMENDMENT
3.1 Effectiveness. Following the execution and delivery by the
parties hereto of this Amendment, this Amendment shall be deemed
effective as of October 1, 2003.
SECTION 4. MISCELLANEOUS
4.2 Agreement Amended. Subject to the provisions of Section 4
hereof, this Amendment shall be deemed to be an amendment to the
Agreement. All references to the Agreement in any other
document, instrument, agreement or writing hereafter shall be
deemed to refer to the Agreement as amended hereby.
4.2 Successors and Assigns. This Amendment shall be binding upon
and inure to the benefit of the parties to the Agreement and
their respective successors and assigns.
4.3 Governing Law. This Amendment and the rights and obligation
of the parties hereunder shall be construed in accordance with
and governed by the law of the State of New York, without regard
to conflict of laws principles.
4.4 Counterparts. This Amendment may be executed simultaneously
in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have each caused this
Amendment to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
OUTLET RETAIL STORES, INC.
By: _________________________________
Name: Jeffrey Siegel
Title: President and CEO
COOKWARE CONCEPTS, INC.
By: _________________________________
Name:
Title:
