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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549QUARTERLY
REPORT UNDER SECTION 13 OR
15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1996
Commission file number 1-19254
Lifetime Hoan Corporation
(Exact name of registrant as specified in its charter)
Delaware 11-2682486
(State or other jurisdiction of incorporation or organization) (I.R.S.
Employer Identification No.)
One Merrick Avenue, Westbury, NY 11590
(Address of principal executive offices) (Zip
Code)
Registrant's telephone number, including area code (516) 683-
6000
Not applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past
90 days.
Yes X No
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 11,273,199 shares outstanding as of
July 31, 1996
INDEX
LIFETIME HOAN CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995 3
Condensed Consolidated Statements of Income for the
Three and Six months ended June 30, 1996 and 1995 4
Condensed Consolidated Statement of Changes in Stockholders' Equity
for the Six months ended June 30, 1996 5
Condensed Consolidated Statements of Cash Flows for the
Six months ended June 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements for the
Six months ended June 30, 1996 7
Item 2. Management's Discussion and Analysis of Financial
Condition
and Results of Operations
8
PART II. OTHER INFORMATION
11
SIGNATURES
13
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
LIFETIME HOAN CORPORATION
June 30, December
31,
1996 1995
(unaudited (Note)
)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $476,019
$89,797
Accounts receivable, less allowances of $692,000
(1996)
and $663,000 (1995) 11,597,481
12,682,401
Merchandise inventories 43,647,308
43,337,000
Prepaid expenses 5,241,898
4,578,813
Deferred income taxes 1,116,000
1,186,000
Other current assets 1,401,798
695,241
TOTAL CURRENT ASSETS 63,480,504
62,569,252
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation
and amortization of $3,362,714 (1996) and 8,750,026
7,882,166
$2,841,202 (1995)
EXCESS OF COST OVER NET ASSETS ACQUIRED, net of
accumulated amortization of $740,700 (1996) and 1,938,502
1,971,102
$708,100 (1995)
OTHER INTANGIBLES, net of accumulated
amortization of
$140,312 (1996) and $24,000 (1995) 11,414,052
2,452,748
OTHER ASSETS 925,697
880,766
$86,508,78
$75,756,03
1
4
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and trade acceptances $3,485,442
$3,072,401
Accrued expenses 5,410,192
5,931,414
Income taxes 0
232,447
Short term borrowings 12,500,000
4,600,000
TOTAL CURRENT LIABILITIES 21,395,634
13,836,262
STOCKHOLDERS' EQUITY
Series B Preferred Stock, $1 par value,
authorized 2,000,000
shares; none issued
Common Stock, $.01 par value, authorized
25,000,000 shares;
issued and outstanding 11,273,199 (1996) and 112,732
112,573
11,257,276 (1995)
Paid-in capital 61,205,420
61,103,589
Retained earnings 4,788,500
1,845,007
66,106,652
63,061,169
Less:
Notes receivable for shares issued to 908,064
1,048,064
stockholders
Deferred compensation 85,441
93,333
65,113,147
61,919,772
$86,508,78
$75,756,03 1
4
Note: The Balance Sheet at December 31, 1995 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed consolidated financial
statements.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
LIFETIME HOAN CORPORATION
Three Months Ended Six Months
Ended
June 30, June 30,
1996 1995 1996
1995
Net sales $20,990,9 $15,555,8 $40,264,
$34,233,9
20 34 318
20
Cost of sales 10,895,17 8,251,967 21,074,8
17,915,01
1 21
3
10,095,74 7,303,867 19,189,4
16,318,90
9 97
7
Selling, general and 7,801,227 5,650,046 14,120,2
11,774,32
administrative expenses 30
7
INCOME FROM OPERATIONS 2,294,522 1,653,821 5,069,26
4,544,580
7
Other (income) deductions:
Interest expense 270,949 17,863 334,535
65,734
Other (income), net (21,019) (41,936) (53,761)
(97,341)
INCOME BEFORE INCOME TAXES 2,044,592 1,677,894 4,788,49
4,576,187
3
Provision for federal, state
and local
income taxes 775,000 655,000 1,845,00
1,787,000
0
NET INCOME $1,269,59 $1,022,89 $2,943,4
$2,789,18
2 4 93
7
NET INCOME PER SHARE $0.11 $0.09 $0.26
$0.24
WEIGHTED AVERAGE SHARES
OUTSTANDING 11,533,34 11,677,29 11,531,3
11,689,29
9 3 20
8
See notes to condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY (UNAUDITED)
LIFETIME HOAN CORPORATION
Common Stock Paid-in Retained Notes Deferr
ed
Receivable
Shares Amount Capital Earnings from Compens
ati Total
Stockholders on
Balance at
December 31, 11,257,2 $112,5 $61,103,5 $1,845,00 ($1,048,064) ($93,3
33)
$61,919,7 1995 76 73 89 7
72
Exercise of stock 14,865 148 95,695
95,843
options
Exercise of 1,058 11 6,136
6,147
warrants
Net income for
the
six months
ended
June 30, 2,943,493
2,943,493
1996
Repayment of note
receivable 140,000
140,000
Amortization of
deferred 7,
892
7,892
compensation
Balance at
June 30, 11,273,1 $112,7 $61,205,4 $4,788,50 ($908,064) ($85,4
41)
$65,113,1
1996 99 32 20 0
47
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
LIFETIME HOAN CORPORATION
Six Six
Months Months
Ended Ended
June 30, June
30, 1996 1995
OPERATING ACTIVITIES
Net income $2,943,49
3
$2,789,18
7 Adjustments t
o
reconcile net income to
net cash
provided by / (used in) operating
activities:
Depreciation and amortization 682,336
419,896
Amortization of deferred compensation 7,892
37,633
Deferred tax (benefit) 70,000
(52,000)
Provision for losses on accounts 236,073
59,678
receivable
Changes in operating assets and
liabilities:
Accounts receivable 848,847
4,047,786
Merchandise inventories (310,308)
(12,437,0
00) Prepaid expenses, other current assets
and other assets (1,414,57
(124,367)
3)
Accounts payable and trade acceptances
and accrued expenses (108,181)
(236,413)
Income taxes payable (232,447)
(900,650)
NET CASH PROVIDED BY / (USED IN)
OPERATING ACTIVITIES 2,723,132
(6,396,25
0)
INVESTING ACTIVITIES
Purchase of property and equipment, net (1,401,28
(393,850)
4)
Purchase of intangibles (9,077,61 -
6)
NET CASH (USED IN)
INVESTING ACTIVITIES (10,478,9
(393,850)
00)
FINANCING ACTIVITIES
Proceeds from short term borrowings, net 7,900,000
4,000,000
Proceeds from the exercise of warrants 6,147
43,448
Proceeds from the exercise of stock 95,843
215,179
options
Repayment of note receivable 140,000 -
NET CASH PROVIDED BY
FINANCING ACTIVITIES 8,141,990
4,258,627
INCREASE / (DECREASE) IN CASH AND CASH
EQUIVALENTS 386,222
(2,531,47
3) Cash and cash equivalents at beginning of 89,797
2,724,429
period
CASH AND CASH EQUIVALENTS AT END OF $476,019
$192,956
PERIOD...
See notes to condensed consolidated
financial statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
LIFETIME HOAN CORPORATION
Note A - Basis of PresentationThe accompanying unaudited
condensed consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for int
erim
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,
1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further
information, refer to the financial statements and
footnotes thereto included in the Company's annual report on
Form 10-K for the year ended December 31, 1995.
Note B - Inventories
Merchandise inventories, principally finished goods, are
recorded 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,
1996, the Company had $12,500,000 of borrowings and $8,642,000
of letters of credit outstanding. 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 (6.625% at June 30, 1996). The Company is charged a
nominal fee on the entire Line.
Note D - Capital Stock
Net Income Per Share: Net income per common share is based on
net income divided by the weighted average number of common
shares and equivalents outstanding during the periods.
As of June 30, 1996, 698,732 shares of Common Stock have
been reserved for issuance upon the exercise of options.
Note E - Farberware Acquisition
On April 2, 1996, the Company acquired certain assets
of Farberware, Inc. ("Farberware"). Under the terms of a
joint venture agreed to by the Company and Syratech
Corporation, the Company acquired a 99 year, royalty-free,
exclusive right to use the Farberwarer name in connection
with the product lines covered by its existing license
agreement with Farberware. The Company also acquired all of
the Farberwarer outlet stores. Rights to license the
Farberwarer name for use by third parties are to be held by a
joint venture, owned equally by the Company and a wholly owned
subsidiary of Syratech Corporation. The purchase price
consists of cash of $9.5 million plus the value of the
outlet store inventory (estimated to be $3,100,000).
Note F - Subsequent Events
In July 1996, the Company issued incentive stock options
to purchase 207,000 shares of common stock at $10.725,
representing 110% of the market value at the date of the
grant, to three officers of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the operating 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,
1996 1995 1996 1995
Net sales 100. % 100. % 100.0 % 100.
%
0 0 0
Cost of sales 51.9 53.1 52.3 52.3
Gross profit 48.1 47.0 47.7 47.7
Selling, general and 37.2 36.3 35.1 34.4
administrative expenses
Income from operations 10.9 10.7 12.6 13.3
Other (income), expense 1.2 (0.2 0.7 (0.1
) )
Income before income taxes 9.7 10.8 11.9 13.4
Income taxes 3.7 4.3 4.6 5.2
Net Income 6.1 % 6.6 % 7.3 % 8.2
%
Three Months Ended June 30, 1996
Compared to Three Months ended June 30, 1995
Net SalesNet sales for the three months ended June 30, 1996
were $21.0 million, an increase of $5.4 or 34.9% from the
comparable 1995 period. The sales growth was primarily due to
net sales from the recently acquired Farberware Outlet Stores,
net sales from the new Hoffritzr line and increased sales in
the Smart Choice line. Gross Profit
Gross profit for the three months ended June 30, 1996 was
$10.1 million, an increase of $2.8 million or 38.2% over
the comparable
1995 period. Gross profit as a percentage of net sales was
48.1% as compared to 47.0% for the 1995 period. This
increase is primarily due to a reduction of royalty
expense due to the Farberware acquisition, partially offset
by changes in product mix.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three
months ended June 30, 1996 were $7.8 million, an increase
of $2.2 million or 38.1% from the comparable 1995 period.
Selling, general and administrative expenses as a percentage
of net sales were 37.2% during this three month period in
1996 as compared to 36.3% for the 1995 period. This
percentage increase is primarily attributable to the
operations of the Farberware Outlet Stores, partially offset
by a decrease in personnel related costs.
Six Months Ended June 30, 1996
Compared to Six Months ended June 30, 1995
Net SalesNet sales for the six months ended June 30, 1996
were $40.3 million, an increase of $6.0 million or 17.6%
from the comparable 1995 period. The sales growth was primarily
due to net sales from the recently acquired Farberware Outlet
Stores, net sales from the new Hoffritzr line and increased
sales in the Smart Choice line.
Gross Profit
Gross profit for the six months ended June 30, 1996 was
$19.2 million, an increase of $2.9 million or 17.6% over
the comparable
1995 period. Gross profit as a percentage of net sales
remained constant at 47.7% for the six months ended June 30,
1996 and June 30, 1995.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six
months ended June 30, 1996 were $14.1 million, an increase
of $2.3 million or 19.9% from the comparable 1995 period.
Selling, general and administrative expenses as a percentage
of net sales were 35.1% during this six month period in 1996
as compared to 34.4%
for the 1995 period. This percentage increase is
primarily attributable to the operations of the Farberware
Outlet Stores, partially offset by a decrease in personnel
related costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company has available an unsecured $25,000,000 line of
credit with a bank (the "Line") which may be used for
short term borrowings or letters of credit.
Borrowings under the Line bear interest payable daily at
a negotiated short term borrowing rate (6.625% at June 30,
1996). The Company is charged a nominal fee on the entire
Line. As of June 30, 1996, the Company had $12,500,000 of
borrowings and $8,642,000 of letters of credit outstanding
under the Line and, as a result, the availability under the Line
was $3,858,000. The Line is cancelable by either party at any
time.
At June 30, 1996, the Company had cash and cash equivalents
of $476,000 versus $90,000 at December 31, 1995, an
increase of $386,000. The increase is primarily attributable
to the Company's decreased accounts receivable offset by an
increase in prepaid expenses, other current assets, and other
assets.
The purchase of the Farberware acquisition was funded by
short term borrowings which were subsequently reduced by
income from operations. The purchase price consists of cash of
$9.5 million plus the value of the outlet store inventory
(estimated to be $3,100,000).
Products are sold to retailers primarily on 30-day credit
terms, and to distributors primarily on 60-day credit terms.
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
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 its
purchase orders with its foreign manufacturers in United
States dollars. Thus, notwithstanding any fluctuation in
foreign currencies, the Company's cost for any purchase
order is not subject to change after the time the order is
placed. However, the weakening of the United States dollar
against local currencies could lead certain manufacturers to
increase their United States dollar prices for products. The
Company believes it would be able to compensate for any such
price increase.
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 11, 1996. At the meeting, all five director nominees were
elected and the appointment of Ernst & Young LLP as
independent auditors was ratified.
(a) The following directors were elected for a one-year
term by the votes indicated:
FOR AGAINST
ABSTAIN Milton L. Cohen 9,483,424 46,188
0 Jeffrey Siegel 9,483,424 46,188
0
Craig Phillips 9,483,924 45,688
0
Ronald Shiftan 9,484,124 45,488
0
Howard 9,479,137 50,475
0
Bernstein
(b) The appointment of Ernst & Young LLP was ratified by the
following vote:
FOR AGAINST
ABSTAIN
9,519,301 4,811
5,500
(c) The Lifetime Hoan Corporation 1996 Incentive Stock Option
Plan was ratified by the following vote:
FOR AGAINST
ABSTAIN
8,186,798 263,260
1,037,452
Broker no vote - 42,102.
(d) The Lifetime Hoan Corporation 1996 Bonus Compensation Plan
was ratified by the following vote:
FOR AGAINST
ABSTAIN
8,066,137 334,057
1,036,634
Broker no vote - 92,784.
Item 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the second quarter of 1996:
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K in the second quarter of 1996: 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
for the six months ended June 30, 1996.
Item Item Description Amount
Number
5-02(1) Cash and Cash Items $ 476,019
5-02(2) Marketable Securities $ 0
5- Notes and Accounts Receivable - $
11,672,48
02(3)(a)( Trade 1
1)
5-02(4) Allowances for Doubtful $
75,000
Accounts
5-02(6) Inventory $
43,647,30
8 5-02(9) Total
Current Assets $ 63,480,50
4 5-02(13)
Property, Plant and Equipment $ 12,112,74
0 5-02(14)
Accumulated Depreciation $ 3,362,714
5-02(18) Total Assets $
86,508,78
1 5-02(21) Total
Current Liabilities $ 21,395,63
4 5-02(22)
Bonds, Mortgages and Similar $ 0
Debt
5-02(28) Preferred Stock - Mandatory $ 0
Redemption
5-02(29) Preferred Stock - No Mandatory $ 0
Redemption
5-02(30) Common Stock $
112,732
5-02(31) Other Stockholders' Equity $
65,000,41
5 5-02(32) Total
Liabilities and $ 86,508,78
Stockholders' Equity 1
5- Net Sales of Tangible Products $
40,264,31
03(b)1(a) 8
5-03(b)1 Total Revenues $
40,264,31
8 5- Cost of
Tangible Goods Sold $ 21,074,82
03(b)2(a) 1
5-03(b)2 Total Costs and Expenses
Applicable
to Sales and Revenues $
21,074,82
1 5-03(b)3 Other
Costs and Expenses $ 0
5-03(b)5 Provision for Doubtful Accounts $
236,073
and Notes
5- Interest and Amortization of $
280,774
03(b)(8) Debt Discount
5- Income Before Taxes and Other $
4,788.493
03(b)(10) Items
5- Income Tax Expense $
1,845,000
03(b)(11)
5- Income/Loss Continuing $
2,943,493
03(b)(14) Operations
5- Discontinued Operations $ 0
03(b)(15)
5- Extraordinary Items $ 0
03(b)(17)
5- Cumulative effect - Changes in
03(b)(18) Accounting
Principles $ 0
5- Net Income or Loss $
2,943,493
03(b)(19)
5- Earnings Per Share - Primary $
.26
03(b)(20)
5- Earnings Per Share - Fully $
.26
03(b)(20) Diluted
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
/s/ Milton L. Cohen August 12, 1996
__________________________________
Milton L. Cohen
Chairman of the Board of Directors
and President
(Principal Executive Officer)
/s/ Fred Spivak August 12, 1996
__________________________________
Fred Spivak
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)