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Page 1 of 13
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended March 31, 1997
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 12,444,649 shares outstanding as of
April 30, 1997
INDEX
LIFETIME HOAN CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996 3
Condensed Consolidated Statements of Income for the
Three months ended March 31, 1997 and 1996 4
Condensed Consolidated Statement of Changes in Stockholders'
Equity for the
Three months ended March 31, 1997 5
Condensed Consolidated Statements of Cash Flows for the
Three months ended March 31, 1997 and 1996 6
Notes to Condensed Consolidated Financial Statements for the
Three months ended March 31, 1997 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
December
March 31, 31,
1997 1996
(unaudited) (Note)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $604,314 $1,093,432
Accounts receivable, less allowances of $789,000
(1997)
and $791,000 (1996) 12,016,397 14,000,366
Merchandise inventories 41,595,421 39,916,990
Prepaid expenses 4,676,089 4,930,194
Deferred income taxes 1,045,000 1,018,000
Other current assets 790,789 925,181
TOTAL CURRENT ASSETS 60,728,010 61,884,163
PROPERTY AND EQUIPMENT, at cost, net of
accumulated depreciation
and amortization of $4,301,730 (1997) and 8,737,410 8,696,802
$4,016,403 (1996)
EXCESS OF COST OVER NET ASSETS ACQUIRED, net of
accumulated amortization of $789,600 (1997) and 1,889,602 1,905,902
$773,300 (1996)
OTHER INTANGIBLES, net of accumulated
amortization of
$433,000 (1997) and $335,250 (1996) 11,243,134 11,340,884
OTHER ASSETS 962,046 944,164
$83,560,202 $84,771,915
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and trade acceptances $2,766,706 $4,012,132
Accrued expenses 6,841,385 6,882,422
Income taxes 898,503 1,318,728
Short term borrowings - 1,000,000
TOTAL CURRENT LIABILITIES 10,506,594 13,213,282
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 12,429,649 (1997) and 124,297 124,065
12,406,509 (1996)
Paid-in capital 74,884,818 74,756,842
Retained earnings (973,840) (2,336,661)
74,035,275 72,544,246
Less:
Notes receivable for shares issued to 908,064 908,064
stockholders
Deferred compensation 73,603 77,549
73,053,608 71,558,633
$83,560,202 $84,771,915
Note: The Balance Sheet at December 31, 1996 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
March 31,
1997 1996
Net sales $21,108,129 $19,273,398
Cost of sales 11,132,951 10,179,650
9,975,178 9,093,748
Selling, general and 7,737,431 6,319,003
administrative expenses
INCOME FROM OPERATIONS 2,237,747 2,774,745
Other (income) deductions:
Interest expense 23,100 63,584
Other (income), net (40,174) (32,742)
INCOME BEFORE INCOME TAXES 2,254,821 2,743,903
Provision for federal, state
and local
income taxes 892,000 1,070,000
NET INCOME $1,362,821 $1,673,903
NET INCOME PER SHARE $0.11 $0.13
WEIGHTED AVERAGE SHARES
OUTSTANDING 12,800,486 12,604,472
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
LIFETIME HOAN CORPORATION
Common Stock Paid-in Retained Notes Deferred
Receivable
Shares Amount Capital Earnings from Compensat Total
Stockholders ion
Balance at
December 31,1996 12,406,509 $124,065 $74,756,842 ($2,336,661) ($908,064) ($77,549) $71,558,633
Exercise of 23,140 232 127,976 128,208
stock options
Net income for
the
three months
ended
March 31, 1997 1,362,821 1,362,821
Amortization of 3,946 3,946
deferred
compensation
Balance at
March 31, 1997 12,429,649 $124,297 $74,884,818 ($973,840) ($908,064) ($73,603) $73,053,608
See notes to condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
LIFETIME HOAN CORPORATION
Three Three
Months Months
Ended Ended
March 31, March 31,
1997 1996
OPERATING ACTIVITIES
Net income $1,362,821 $1,673,903
Adjustments to reconcile net income to
net cash
provided by / (used in) operating
activities:
Depreciation and amortization 399,380 266,673
Amortization of deferred compensation 3,946 3,946
Deferred tax (benefit) (27,000) (87,000)
Provision for losses on accounts 114,562 221,958
receivable
Changes in operating assets and
liabilities:
Accounts receivable 1,869,407 (856,876)
Merchandise inventories (1,678,431) 619,000
Prepaid expenses, other current assets
and other assets 370,615 (937,837)
Accounts payable and trade acceptances
and accrued expenses (1,286,463) 159,126
Income taxes payable (420,225) 973,979
NET CASH PROVIDED BY
OPERATING ACTIVITIES 708,612 2,036,872
INVESTING ACTIVITIES
Purchase of property and equipment, net (325,938) (271,340)
NET CASH (USED IN)
INVESTING ACTIVITIES (325,938) (271,340)
FINANCING ACTIVITIES
Repayment of short term borrowings, net (1,000,000) (1,400,000)
Proceeds from the exercise of stock 128,208 5,892
options
NET CASH (USED IN)
FINANCING ACTIVITIES (871,792) (1,394,108)
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (489,118) 371,424
Cash and cash equivalents at beginning of
period 1,093,432 89,797
CASH AND CASH EQUIVALENTS AT END OF
PERIOD...
$604,314 $461,221
See notes to condensed consolidated
financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
LIFETIME HOAN CORPORATION
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three month period
ended March 31, 1997 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997. 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, 1996.
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 March 31, 1997, the
Company had no borrowings and $10,194,000 of letters of credit and
trade acceptances 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. 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.
Recent Accounting Pronouncement: In February 1997, the Financial
Accounting Standards Board issued Statement No. 128, Earnings per
Share, which is required to be adopted on December 31, 1997. At
that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all
prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options will be
excluded. It is expected to have no impact on the first quarter
ended March 31, 1997 primary earnings per share and increase
primary earnings per share by $0.01 for the first quarter ended
March 31, 1996. There is no expected impact of Statement 128 on
the calculation of fully diluted earnings per share for these
quarters.
On February 5, 1997, the Board of Directors of the Company
declared a 10% stock dividend to shareholders of record on
February 18, 1997, paid February 26, 1997. The stock dividend was
recorded at its market value, $12.00 per share. All common stock
data in the condensed consolidated financial statements gives
retroactive effect to the February 1997 stock dividend.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND 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
Ended
March 31,
1997 1996
Net sales 100.0 % 100.0 %
Cost of sales 52.7 52.8
Gross profit 47.3 47.2
Selling, general and 36.7 32.8
administrative expenses
Income from operations 10.6 14.4
Other (income), expense (0.1) 0.1
Income before income taxes 10.7 14.3
Income taxes 4.2 5.6
Net Income 6.5 % 8.7 %
Three Months Ended March 31, 1997
Compared to Three Months Ended March 31, 1996
Net Sales
Net sales for the three months ended March 31, 1997 were $21.1
million, an increase of $1.8 million or 9.5% from the comparable
1996 period. The sales growth was primarily due to net sales from
the Farberware Outlet Stores acquired in April 1996 and increased
net sales of branded products, offset by a decline in shipments
of our "impulse-purchase" product line.
Gross Profit
Gross profit for the three months ended March 31, 1997 was $10.0
million, an increase of $0.9 million or 9.7% over the comparable
1996 period. Gross profit as a percentage of net sales remained
relatively constant at 47.3% for the 1997 period as compared to
47.2% for the 1996 period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended March 31, 1997 were $7.7 million, an increase of $1.4
million or 22.4% from the comparable 1996 period. Selling, general
and administrative expenses as a percentage of net sales were
36.7% during the 1997 period as compared to 32.8% for the 1996
period. This increase is primarily attributable to the operations
of the Farberware Outlet Stores. Selling, general and
administrative expenses as a percentage of net sales excluding the
Farberware Outlet Stores were 33.0% for the three months ended
March 31, 1997.
Net Income
Net Income for the three months ended March 31, 1997 was $1.4
million, a decrease of $0.3 million or 18.6% below the comparable
quarter. This decrease is primarily attributable to the
operations of the Farberware Outlet Stores.
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 elsewhere in this Quarterly Report on Form 10-
Q and from time to time in the Company's filings with the
Securities and Exchange Commission. Such statements are based on
management's current expectations and are subject to a number of
factors and uncertainties which could cause actual results to
differ materially from those described in the forward-looking
statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has 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. The Company is charged a
nominal fee on the entire Line. As of March 31, 1997, the Company
had no borrowings and $10,194,000 of letters of credit and trade
acceptances outstanding under the Line and, as a result, the
availability under the Line was $14,806,000. The Line is
cancelable by either party at any time.
At March 31, 1997, the Company had cash and cash equivalents of
$604,000 versus $1.1 million at December 31, 1996, a decrease of
$489,000. The decrease is primarily attributable to increased
inventory levels, decreased accounts payable and trade acceptances
and repayment of borrowings, partially offset by decreased
accounts receivables.
The Company estimates capital expenditures for 1997 to be $9.0
million. These expenditures are primarily for the new state of
the art distribution facility and the implementation of a new
financial reporting system. These expenditures will be financed
from current operations and, if needed, short term borrowings.
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 long term
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 6. Exhibit(s) and Reports on Form 8-K.
(a) Exhibit(s) in the first quarter of 1997:
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K in the first quarter of 1997: NONE
Exhibit 27. Financial Data Schedule
Lifetime Hoan Corporation
Financial Data Schedule
Pursuant to Item 601(c) of Regulation S-K
This schedule contains summary financial information extracted
from the financial statements included in the form 10-Q
and is qualified in its entirety by reference to such financial
statements
for the three months ended March 31, 1997.
Item Item Description Amount
Number
5-02(1) Cash and Cash Items $ 604,314
5-02(2) Marketable Securities $ 0
5- Notes and Accounts Receivable - $ 12,091,397
02(3)(a)( Trade
1)
5-02(4) Allowances for Doubtful $ 75,000
Accounts
5-02(6) Inventory $ 41,595,421
5-02(9) Total Current Assets $ 60,728,010
5-02(13) Property, Plant and Equipment $ 13,039,140
5-02(14) Accumulated Depreciation $ 4,301,730
5-02(18) Total Assets $ 83,560,202
5-02(21) Total Current Liabilities $ 10,506,594
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 $ 124,297
5-02(31) Other Stockholders' Equity $ 72,929,311
5-02(32) Total Liabilities and $ 83,560,202
Stockholders' Equity
5- Net Sales of Tangible Products $ 21,058,183
03(b)1(a)
5-03(b)1 Total Revenues $ 21,108,129
5- Cost of Tangible Goods Sold $ 11,132,951
03(b)2(a)
5-03(b)2 Total Costs and Expenses
Applicable
to Sales and Revenues $ 11,132,951
5-03(b)3 Other Costs and Expenses $ 0
5-03(b)5 Provision for Doubtful Accounts $ 10,163
and Notes
5- Interest and Amortization of $ 23,100
03(b)(8) Debt Discount
5- Income Before Taxes and Other $ 2,254,821
03(b)(10) Items
5- Income Tax Expense $ 892,000
03(b)(11)
5- Income/Loss Continuing $ 1,362,821
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 $ 1,362,821
03(b)(19)
5- Earnings Per Share - Primary $ 0.11
03(b)(20)
5- Earnings Per Share - Fully $ 0.11
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 May 14, 1997
__________________________________
Milton L. Cohen
Chairman of the Board of Directors
and President
(Principal Executive Officer)
/s/ Fred Spivak May 14, 1997
__________________________________
Fred Spivak
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
