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, 2004
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 X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Common Stock, $.01 Par Value, 11,048,849 shares
outstanding as of July 31, 2004
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFETIME HOAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December
2004 31,
(unaudited) 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents $446 $1,175
Accounts receivable, less allowances of
$2,782 in 2004 and $3,349 in 2003 16,224 31,977
Merchandise inventories 55,827 49,294
Prepaid expenses 2,129 2,129
Other current assets 5,438 3,709
TOTAL CURRENT ASSETS 80,064 88,284
PROPERTY AND EQUIPMENT, net 19,634 20,563
EXCESS OF COST OVER NET ASSETS ACQUIRED 16,145 16,145
OTHER INTANGIBLES, net 9,266 9,530
OTHER ASSETS 2,033 2,214
TOTAL ASSETS $127,142 $136,736
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $14,800 $16,800
Accounts payable and trade acceptances 6,591 8,405
Accrued expenses 12,344 17,156
Income taxes payable 1,970 4,613
TOTAL CURRENT LIABILITIES 35,705 46,974
DEFERRED RENT & OTHER LONG-TERM LIABILITIES 1,718 1,593
DEFERRED INCOME TAX LIABILITIES 3,214 2,088
STOCKHOLDERS' EQUITY
Common Stock, $0.01 par value, authorized
25,000,000 shares; issued and outstanding
11,030,849 in 2004 and 10,842,540 in 2003 110 109
Paid-in capital 64,644 63,409
Retained earnings 22,230 23,042
Notes receivable for shares issued to
stockholders (479) (479)
TOTAL STOCKHOLDERS' EQUITY 86,505 86,081
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $127,142 $136,736
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,
2004 2003 2004 2003
Net Sales $33,029 $29,950 $70,158 $54,234
Cost of Sales 19,154 17,003 40,843 30,430
Distribution Expenses 4,264 4,302 9,445 8,756
Selling, General and
Administrative Expenses 9,149 7,268 18,723 14,589
Income from Operations 462 1,377 1,147 459
Interest Expense 141 180 268 292
Other Income (16) (18) (31) (35)
Income Before Income Taxes 337 1,215 910 202
Tax Provision 134 491 362 82
NET INCOME $203 $724 $548 $120
BASIC AND DILUTED EARNINGS PER
COMMON SHARE $0.02 $0.07 $0.05 $0.01
WEIGHTED AVERAGE SHARES - BASIC 10,967 10,563 10,916 10,562
WEIGHTED AVERAGE SHARES AND COMMON
SHARE EQUIVALENTS - DILUTED 11,230 10,637 11,186 10,599
See notes to consolidated financial statements.
LIFETIME HOAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
June 30,
2004 2003
OPERATING ACTIVITIES
Net income $548 $120
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,920 1,733
Deferred income taxes (516) 688
Deferred rent and other long term liabilities 125 62
Provision for losses on accounts receivable 18 93
Reserve for sales returns and allowances 3,922 3,099
Changes in operating assets and liabilities:
Accounts receivable 11,813 (1,561)
Merchandise inventories (6,533) (5,231)
Prepaid expenses, other current assets
and other assets 95 (102)
Accounts payable, trade acceptances
and accrued expenses (6,563) 3,267
Accrued income taxes payable (2,643) (1,507)
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,186 661
INVESTING ACTIVITIES
Purchase of property and equipment, net (727) (627)
NET CASH USED IN INVESTING ACTIVITIES (727) (627)
FINANCING ACTIVITIES
(Repayment of) proceeds from short-term
borrowings, net (2,000) 1,300
Proceeds from exercise of stock options 1,236 55
Payment of capital lease obligations (63) -
Cash dividends paid (1,361) (1,319)
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (2,188) 36
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (729) 70
Cash and cash equivalents at beginning of
period 1,175 62
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 446 $132
See notes to consolidated financial statements.
LIFETIME HOAN CORPORATION
NOTES TO CONDENSED 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, 2004 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 2004. 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, 2003.
Note B - Distribution Expenses
Distribution expenses primarily consist of warehousing expenses,
handling costs of products sold and freight-out. During 2003,
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 and $0.5 million for the six-month
period ended June 30, 2003. No such relocation charges were
incurred during the three-month period or six-month period ended
June 30, 2004.
Note C - Credit Facilities
As of June 30, 2004, the Company had outstanding $1.1 million of
letters of credit and trade acceptances and $14.8 million of
borrowings under its $35 million three-year secured, reducing
revolving credit agreement (the "Agreement") and, as a result,
the availability under the Agreement was $19.1 million. Interest
rates on borrowings at June 30, 2004 ranged from 2.625% to
3.0625%. The Company's obligations under the Agreement were
secured by all of the assets of the Company.
On July 28, 2004, the Company entered into a $50 million five-
year, secured credit facility (the "Credit Facility") with a
group of banks and, in conjunction therewith, canceled its $35
million secured, reducing revolving credit facility which was due
to mature in November 2004. Borrowings under the Credit Facility
are secured by all of the assets of the Company. Under the terms
of the Credit Facility, the Company is required to satisfy
certain financial covenants, including limitations on
indebtedness and sale of assets; a minimum fixed charge ratio; a
maximum leverage ratio and maintenance of a minimum net worth.
Borrowings under the Agreement have different interest rate
options that are based on an alternate base rate, the LIBOR rate
and the lender's cost of funds rate, plus in each case a margin
based on a leverage ratio.
Note D - Capital Stock and Stock Options
Cash Dividends: On January 30, 2004, the Board of Directors
declared a quarterly cash dividend of $0.0625 per share to
stockholders of record on February 6, 2004, paid on February 20,
2004. On April 12, 2004, the Board of Directors declared a
quarterly cash dividend of $0.0625 per share to stockholders of
record on May 4, 2004, paid on May 20, 2004. On July 28, 2004,
the Board of Directors of the Company declared a regular
quarterly cash dividend of $0.0625 per share to stockholders of
record on August 4, 2004, to be paid on August 20, 2004.
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 10,967,000 for the three months
ended June 30, 2004 and 10,563,000 for the three months ended
June 30, 2003. For the six month period ended June 30, 2004 and
June 30, 2003, the weighted average number of common shares
outstanding were 10,916,000 and 10,562,000, 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 11,230,000
for the three months ended June 30, 2004 and 10,637,000 for the
three months ended June 30, 2003. For the six month periods ended
June 30, 2004 and June 30, 2003, the diluted number of common
shares outstanding were 11,186,000 and 10,599,000, respectively.
LIFETIME HOAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note D - 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, 2003. 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, 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 and net earnings 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 except per
share data) share data)
2004 2003 2004 2003
Net income, as reported $203 $724 $548 $120
Deduct: Total stock option
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects (91) (8) (123) (16)
Proforma net income $112 $716 $425 $104
Income per common share:
Basic and diluted - as
reported $0.02 $0.07 $0.05 $0.01
Basic and diluted - proforma $0.01 $0.07 $0.04 $0.01
Note E - Acquisition
Excel Importing Corp. Acquisition: On July 23, 2004, the Company
acquired the business and certain assets of Excel Importing
Corp., ("Excel"), a wholly-owned subsidiary of Mickelberry
Communications Incorporated. Excel markets and distributes a
diversified line of high quality cutlery, tabletop, cookware and
barware products under well-recognized premium names, including
Sabatier(R), Farberware(R), Retroneu Design Studio(R), Joseph Abboud
Environments(R), DBK-Daniel Boulud Kitchen(TM) and Legnoart(R). The
purchase price, subject to post closing adjustments, is
approximately $8.5 million.
Report of Independent Registered Public Accounting Firm
We have reviewed the condensed consolidated balance sheet of
Lifetime Hoan Corporation and subsidiaries (the "Company") as of
June 30, 2004 and the related condensed consolidated statements
of operations for the three-month and six-month periods ended
June 30, 2004, and the condensed consolidated statement of cash
flows for the six months ended June 30, 2004. These interim
financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures to financial data and of making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with the standards of the Public Company
Accounting Oversight Board, the objective of which is the
expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to such condensed consolidated
interim financial statements for them to be in conformity with
U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Melville, New York
July 27, 2004
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading designer, developer and marketer of a
broad range of branded consumer products used in the home,
including Kitchenware, Cutlery and Cutting Boards, Bakeware, At-
Home Entertaining Accessories, Pantryware and Spices, Functional
Glassware and Bath Accessories. Products are marketed under some
of the most well-respected and widely-recognized brand names in
the U.S. housewares industry, including Farberware(R), Kitchen-
Aid(R), Cuisinart(R), Hoffritz(R), Roshco(R), Baker's Advantage(R),
Kamenstein(R), Casa-Moda(R), Hoan(R), Gemco(R) and :USE(R). The
Farberware brand name is used pursuant to a 200 year royalty-free
license, and the Company licenses the Kitchen-Aid and Cuisinart
brands from Whirlpool Corporation and Conair Corporation, respectively.
All other brand names listed above are owned. Several product
lines are marketed within each of the Company's product
categories and under brands primarily targeting moderate to
medium price points, through every major level of trade. A main
focus of the Company is innovation and new product development.
Over the last several years, sales growth has come from: (i)
expanding product offerings within current categories, (ii)
developing and acquiring product categories and (iii) entering
new channels of distribution, primarily in the United States.
Key factors in the Company's growth strategy have been and will
continue to be, the selective use and management of strong brands
and the ability to provide a steady stream of new products and
designs.
The Company's gross profit margin is subject to fluctuation due
primarily to product mix and, in some instances, customer mix.
The Company's business and working capital needs are highly
seasonal, with a significant majority of sales occurring in the
third and fourth quarters. In 2003 and 2002, net sales for the
third and fourth quarters combined accounted for 66.2% and 60.8%
of total annual net sales, respectively, and operating profit
earned in the third and fourth quarters combined accounted for
96.8% and 100% of total annual profits, respectively. Inventory
levels increase primarily in the June through October time period
in anticipation of the pre-holiday shipping season.
Because of the seasonality of the Company's business and other
factors, results for any interim period are not necessarily
indicative of the results that may be achieved for the full
fiscal year.
CRITICAL ACCOUNTING POLICIES
Management's Discussion and Analysis of Financial Condition and
Results of Operations discusses the unaudited consolidated
financial statements which 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. The preparation of these
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. On an on-going basis, management evaluates its estimates
and judgments, including those related to inventories.
Management bases it estimates and judgments on historical
experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different
assumptions or conditions. The Company believes that the
following discussion addresses the most critical accounting
policies, which are those that are most important to the
portrayal of the Company's financial condition and results of
operations and require management's most difficult, subjective
and complex judgments. 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, 2003.
Merchandise inventories, principally finished goods, are priced
by the lower of cost (first-in, first-out basis) or market
method. Reserves for excess or obsolete inventory reflected in
the consolidated balance sheets at June 30, 2004 and December 31,
2003 are determined to be adequate by management; however, there
can be no assurance that these reserves will prove adequate over
time to provide for ultimate losses in connection with the
Company's inventory. Management periodically reviews and
analyzes inventory reserves based on a number of factors
including, but not limited to, future product demand for items
and estimated profitability of merchandise.
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations", and SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 141 requires all business combinations
initiated after June 30, 2001 to be accounted for using the
purchase method. Under SFAS No. 142, goodwill and intangible
assets with indefinite lives are no longer amortized but are
reviewed at least annually for impairment. For each of the years
ended December 31, 2003 and December 31, 2002, an assessment was
completed. Based upon such reviews, no impairment to the
carrying value of goodwill was identified, and the Company ceased
amortizing goodwill effective January 1, 2002.
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,
2004 2003 2004 2003
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 58.0 56.8 58.2 56.1
Distribution expenses 12.9 14.3 13.5 16.1
Selling, general and
administrative expenses 27.7 24.3 26.7 26.9
Income from operations 1.4 4.6 1.6 0.9
Interest expense 0.4 0.6 0.4 0.5
Other income - - (0.1) -
Income before income taxes 1.0 4.0 1.3 0.4
Tax provision 0.4 1.6 0.5 0.2
Net income 0.6 % 2.4 % 0.8 % 0.2 %
Three Months Ended June 30, 2004
Compared to Three Months ended June 30, 2003
Net Sales
Net sales for the three months ended June 30, 2004 were
approximately $33.0 million, an increase of $3.1 million or 10.3%
over net sales for the prior year's corresponding period. Gemco
and :USE product lines that were acquired in the fourth quarter
of 2003 contributed $2.0 million in net sales to the 2004 second
quarter. Excluding net sales from the Gemco and :USE product
lines, net sales increased by 3.6% over the second quarter of
2003.
The Outlet Stores also had increased sales, primarily as a result
of the Company occupying 70% of the space in each store in the
second quarter of 2004 as compared to 50% of the space in each
store during the second quarter of 2003. Outlet Stores sales for
the 2004 quarter, which were less than 10% of the Company's total
net sales, were lower than expected, resulting in an operating
loss for the Outlet Stores for the period.
Cost of Sales
Cost of sales for the three months ended June 30, 2004 was $19.2
million, an increase of $2.2 million or 12.7% over the comparable
2003 period. Cost of sales as a percentage of net sales increased
to 58.0% from 56.8%, primarily as a result of sales of an
unfavorable product mix of products, higher rates of sales of
products that carry lower margins, including bakeware, pantryware
and Gemco functional glassware products.
Distribution Expenses
Distribution expenses for the three months ended June 30, 2004
were $4.3 million, a decrease of 0.9% from the comparable 2003
period. Excluding the expenses associated with the move to the
new Robbinsville, New Jersey warehouse, which were $0.1 million
for the three months ended June 30, 2003, distribution expenses
increased by approximately $0.1 million or 2.2% in the second
quarter of 2004 as compared to the second quarter of 2003.
Distribution expenses as a percentage of net sales decreased in
the second quarter of 2004 as compared to the 2003 period. This
improved relationship reflects the continued benefits of labor
savings generated by the new systems in the Company's
Robbinsville, New Jersey distribution center and lower freight-
out costs, which are included in distribution expense, the result
of a greater number of customers in the 2004 quarter with freight
collect terms as opposed to freight prepaid.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended June 30, 2004 were $9.1 million, an increase of $1.9
million or 25.9% over the comparable 2003 period. The increase
in selling, general and administrative expenses resulted
primarily from higher personnel costs including planned personnel
increases in the product design group, the overseas sourcing
department and the sales and marketing departments. The
operations of Gemco and :USE also accounted for a portion of the
increase in selling, general and administrative expenses in the
2004 second quarter, as did the Outlet Stores, primarily as a
result of the Company being responsible for 70% of the space and
expenses in each store in the second quarter of 2004 as compared
to 50% in each store during the second quarter of 2003.
Tax Provision
Income tax expense for the second quarter of 2004 was $0.1
million as compared to $0.5 million in the comparable 2003
quarter. The decrease in income tax expense is directly related
to the decrease in income before taxes from 2004 to 2003. Income
taxes as a percentage of income before taxes remained consistent
from year-to-year at approximately 40%.
Six Months Ended June 30, 2004
Compared to Six Months ended June 30, 2003
Net Sales
Net sales for the six months ended June 30, 2004 were $70.2
million, an increase of $15.9 million or 29.4% as compared to the
corresponding 2003 period. Sales of Gemco and :USE product
lines, which were acquired in the fourth quarter of 2003, were
approximately $3.5 million for the 2004 period. Excluding net
sales from the Gemco and :USE product lines, net sales increased
by 22.9% over the six-month period ended June 30, 2003. The
increase in sales volume was attributable primarily to higher
sales of KitchenAid branded products, Farberware branded
kitchenware products and increased shipments of Kamenstein
pantryware products.
The Outlet Stores also had increased sales, primarily as a result
of the Company occupying 70% of the space in each store in the
2004 as compared to 50% of the space in each store during 2003.
Outlet Stores sales for the first six months of 2004, which were
less than 10% of the Company's total net sales, were lower than
expected, resulting in an operating loss for the Outlet Stores
for the period.
Cost of Sales
Cost of sales for the six months ended June 30, 2004 was $40.8
million, an increase of 34.2% over the comparable 2003 period.
Cost of sales as a percentage of net sales increased to 58.2%
from 56.1%, primarily as a result of higher sales of KitchenAid
branded products, which generate lower margins due to the added
costs of royalties and higher sales of pantryware and Gemco
functional glassware products, which generate lower gross profit
margins than the Company's other major product categories.
Distribution Expenses
Distribution expenses for the six months ended June 30, 2004 were
$9.4 million, an increase of $0.7 million or 7.9% from the
comparable 2003 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, distribution expenses increased by approximately $1.2
million in the six month period ended June 30, 2004 as compared
to the six-month period ended June 30, 2003. The higher expenses
were primarily due to increased personnel and freight-out costs
related to the increased level of shipments. Distribution
expenses as a percentage of net sales decreased in the six-months
ended June 30, 2004 as compared to the six-months ended June 30,
2003. This improved relationship reflects the continued benefits
of labor savings generated by the new systems in the Company's
Robbinsville, New Jersey distribution center.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months
ended June 30, 2004 were $18.7 million, an increase of $4.1
million or 28.4% from the comparable 2003 period. The increase
in selling, general and administrative expenses resulted
primarily from higher personnel costs including planned increases
in the product design group, the overseas sourcing department and
the sales and marketing departments. The operations of Gemco and
:USE also accounted for a portion of the increase in selling,
general and administrative expenses for the six-month period
ended June 30, 2004, as did the Outlet Stores, primarily as a
result of the Company being responsible for 70% of the space and
expenses in each store for the six months ended June 30, 2004 as
compared to 50% in each store during 2003.
Tax Provision
Income tax expense for the six months ended June 30, 2004 was
$0.3 million as compared to $0.1 million in the comparable 2003
period. The increase in income tax expense is directly related
to the increase in income before taxes from 2003 to 2004. Income
taxes as a percentage of income before taxes remained consistent
from year-to-year at approximately 40%.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2004, the Company had a $35 million three-year
secured, reducing revolving credit facility under an agreement
(the "Agreement") with a group of banks. Borrowings under the
Agreement were secured by all of the assets of the Company.
Under the terms of the Agreement, the Company was 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 had
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, 2004, the Company had $1.1 million of letters of credit
and trade acceptances outstanding and $14.8 million of borrowings
under the agreement and, as a result, the availability under the
Agreement was $19.1 million. Interest rates on borrowings at
June 30, 2004 ranged from 2.625% to 3.0625%.
On July 28, 2004, the Company entered into a $50 million five-
year, secured credit facility (the "Credit Facility") with a
group of banks and, in conjunction therewith, canceled its $35
million secured, reducing revolving credit facility which was due
to mature in November 2004. Borrowings under the Credit Facility
are secured by all of the assets of the Company. Under the terms
of the Credit Facility, the Company is required to satisfy
certain financial covenants, including limitations on
indebtedness and sale of assets; a minimum fixed charge ratio; a
maximum leverage ratio and maintenance of a minimum net worth.
Borrowings under the credit facility have different interest rate
options that are based on an alternate base rate, the LIBOR rate
and the lender's cost of funds rate, plus in each case a margin
based on a leverage ratio.
At June 30, 2004, the Company had cash and cash equivalents of
$0.4 million as compared to $1.2 million at December 31, 2003.
On July 28, 2004, the Board of Directors declared a regular
quarterly cash dividend of $0.0625 per share to shareholders of
record on August 4, 2004 to be paid on August 20, 2004. The
dividend to be paid will be approximately $0.7 million.
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 bears 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 were no changes in interest rates that had 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, 2004.
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
8, 2004. At the meeting, all nine 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 7,041,565 447,866
Bruce Cohen 7,041,745 447,686
Craig Phillips 7,033,565 455,866
Ronald Shiftan 6,992,851 496,580
Howard Bernstein 7,347,494 141,937
Leonard Florence 7,367,844 121,587
Cherrie Nanninga 7,396,444 92,987
Sheldon Misher 7,444,161 45,270
William Westerfield 7,439,761 49,670
(b) The appointment of Ernst & Young as the independent
auditors to audit the Company's financial statements
for the fiscal year ending December 31, 2004 was
ratified by the following vote:
FOR WITHHOLD EXCEPTIONS/ABSTAIN
7,406,535 77,875 5,021
Item 5. Other Information
Not applicable.
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the second quarter of 2004:
Exhibit 31.1 Certification by Jeffrey Siegel, Chief
Executive 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 31.2 Certification by 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 in the second quarter of 2004:
On April 29, 2004, the Company filed a
report on Form 8-K announcing results of
operations for and financial condition as
of the end of its first quarter ended
March 31, 2004.
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 5, 2004
/s/ Jeffrey Siegel
__________________________________
Jeffrey Siegel
Chief Executive Officer and President
(Principal Executive Officer)
August 5, 2004
/s/ Robert McNally
__________________________________
Robert McNally
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
Exhibit 31.1
CERTIFICATION
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 quarterly 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 quarterly
report:
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly 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 quarterly 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-14 and 15d-
14) for the registrant and 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 quarterly report is being prepared;
b. 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
c. disclosed in this report any change in the registrant's
internal controls over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected or is reasonably likely to materially affect the
registrant's internal controls over financial reporting; and
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal
controls 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 controls 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 controls over financial reporting.
Date: August 5, 2004
__/s/ Jeffrey Siegel______________
Jeffrey Siegel
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION
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 quarterly 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 quarterly
report:
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly 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 quarterly 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-14 and 15d-
14) for the registrant and 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 quarterly report is being prepared;
b. 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
c. disclosed in this report any change in the registrant's
internal controls over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected or is reasonably likely to materially affect the
registrant's internal controls over financial reporting; and
5. The registrant's other certifying officers and I
have disclosed, based on our most recent evaluation of
internal controls 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 controls over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report 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 controls over financial reporting.
Date: August 5, 2004
___/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, 2004 (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 5, 2004 Date: August 5, 2004
