UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
[No Fee Required]
For the fiscal year ended December 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
[No Fee Required]
For the transition period from to
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, New York 11590
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(516) 683-6000
Securities registered pursuant to Section 12(b) of the
Act: None
Securities registered pursuant to Section (g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
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___
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to
this Form 10-K [ ].
The aggregate market value of 6,435,000 shares of the
voting stock held by non-affiliates of the registrant
as of February 28, 1999 was approximately
$65,154,000. Directors, executive officers, and
trusts controlled by said individuals are considered
affiliates for the purpose of this calculation, and
should not necessarily be considered affiliates for
any other purpose.
The number of shares of Common Stock, par value $.01
per share, outstanding as of February 28, 1999 was
12,588,264.
DOCUMENTS INCORPORATED BY REFERENCE
See Part III hereof with respect to incorporation by
reference from the registrant's definitive proxy
statement to be filed pursuant to Regulation 14A
under the Securities & Exchange Act of 1934 and the
Exhibit Index hereto.
LIFETIME HOAN CORPORATION
FORM 10-K
TABLE OF CONTENTS
PART 1
1. Business 3
2. Properties 9
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security
Holders 10
PART II
5. Market for the Registrant's Common Stock and
Related Stockholder Matters 10
6. Selected Financial Data 11
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
8. Financial Statements and Supplementary Data 16
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 16
PART III
10. Directors and Executive Officers of the
Registrant 17
11. Executive Compensation 18
12. Security Ownership of Certain Beneficial Owners
and Management 18
13. Certain Relationships and Related Transactions 18
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 18
Exhibit Index 18
Index to Financial Statements and Financial
Statement Schedule F-1
Signatures
2
PART I
ITEM 1. BUSINESS
General
Forward Looking Statements: This Annual Report on Form
10-K contains certain forward-looking statements within
the meaning of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995,
including statements concerning the Company's future
products, results of operations and prospects. These
forward-looking statements involve risks and
uncertainties, including risks relating to general
economic and business conditions, including changes which
could affect customer payment practices or consumer
spending; industry trends; the loss of major customers;
changes in demand for the Company's products; the timing
of orders received from customers; cost and availability
of raw materials; increases in costs relating to
manufacturing and transportation of products; dependence
on foreign sources of supply and foreign manufacturing;
risks relating to Year 2000 issues; and the seasonal
nature of the business as detailed elsewhere in this
Annual Report on Form 10-K 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.
Lifetime Hoan Corporation designs, markets and
distributes a broad range of household cutlery,
kitchenware, cutting boards and bakeware products. Items
are sold under both owned and licensed trade names.
Owned trade names include Hoffritzr, Tristarr, Old
Homesteadr, Roshcor, Baker's Advantager and Hoanr.
Licensed trade names include Farberwarer, Reverer and
various names under license from The Pillsbury Company.
The Farberwarer trade name is used pursuant to a 200 year
royalty-free license. As used herein, unless the context
requires otherwise, the terms "Company" and "Lifetime"
mean Lifetime Hoan Corporation and its subsidiaries.
Sales growth is stimulated by expanding product offerings
and penetrating various channels of distribution.
Lifetime has developed a strong consumer franchise by
promoting and marketing innovative products under Company
trade names and through licensing agreements. In
addition, the following acquisitions and agreements have
been made which have had a favorable impact on the
Company's business:
Hoffritzr
In September 1995, the Company acquired the Hoffritzr
trademarks and brand name. The Company uses the name on
various products including cutlery, scissors, personal
care implements, kitchen tools, bakeware, barware and
barbecue accessories. The Company believes that Hoffritzr
is a well-known, respected name with a history of
quality. The acquisition has enabled the Company to sell
products at higher price points than the rest of the
Company's products. Since acquiring the brand name, the
Company has continuously designed and developed new items
each year and currently sells approximately 300 types of
items under the Hoffritz brand name. The Company markets
these products through a "shop within a store" concept in
department and specialty stores.
3
Farberwarer
In April 1996, the Company entered into an agreement to
acquire certain assets of Farberware, Inc. ("Farberware")
for $12.7 million in cash. Under the terms of the
acquisition agreement, and a joint venture agreed to by
the Company and Syratech Corporation in connection
therewith, the Company acquired a 200 year, royalty-free,
exclusive right to use the Farberwarer name in connection
with the product lines covered by its then existing
license agreement, which included kitchen cutlery
products (excluding flatware) and kitchen tools such as
spatulas, barbecue forks and "gadgets" (but excluding
appliances), plus certain limited additional products.
This agreement enables the Company to market products
under the Farberwarer name without paying additional
royalties. The Company also acquired 50 Farberware
outlet stores. In addition, rights to license the
Farberwarer name for use by third parties in certain
product categories are held by a joint venture, owned
equally by the Company and a wholly owned subsidiary of
Syratech Corporation.
Microban
In April 1997, the Company entered into an agreement with
the Microban Products Company whereby the Company secured
exclusive rights to incorporate Microban antibacterial
protection into plastic components of cutting boards,
kitchen tools, kitchen gadgets, and cutlery. Shipments
of products incorporating the Microban technology began
in September 1997.
Meyer Agreement
In July 1997, the Company entered into an agreement with
the Meyer Corporation, regarding the operation of the
Company's Farberware retail outlet stores. Pursuant to
the agreement, the Company continues to own and operate
the Farberware retail outlet stores, which the Company
acquired in 1996 and Meyer Corporation, the licensed
manufacturer of Farberware branded cookware products,
assumes responsibility for merchandising and stocking
cookware products in the stores. Also, Meyer acquired all
cookware inventory from the Company at its carrying value
of approximately $3.1 million. Meyer Corporation
receives all revenue from sales of Farberware cookware,
and currently reimburses the Company for 52.0% of the
operating expenses attributable to the stores.
Roshco Acquisition
In August 1998, the Company acquired all of the
outstanding common stock of Roshco, Inc. ("Roshco"), a
privately held bakeware and baking-related products
distributor, located in Chicago, Illinois. Roshco
markets its bakeware and baking-related products under
the Roshco and Baker's Advantage trade names, and its
revenues were approximately $10 million in 1997. The
purchase price consisted of an initial cash payment of
$5.0 million and future payments of $1.5 million. The
Company is also obligated to make additional payments
based on annual sales volume for bakeware and baking-
related products for a period of two years. The Company
also assumed bank debt of $2.6 million that was paid on
the acquisition date.
Revere Agreement
In October 1998, the Company entered into a licensing
agreement with Corning Consumer Products Company. This
agreement allows the Company to design and market cutlery
and cutting boards under the Reverer trademark in the
United States and Canada. Shipments of products under
the Reverer name are expected to begin in the first half
of 1999.
4
Products
The Company designs, markets and distributes a broad
range of household cutlery, kitchenware, cutting boards
and bakeware, marketing its products under various trade
names including Farberwarer, Hoffritzr and Reverer.
Cutlery
The Company markets and distributes household cutlery
under a variety of trade names including Farberwarer,
Hoffritzr, Reverer and Tristarr. Cutlery is sold
individually, in blister packages, boxed sets and in sets
fitted into wooden counter blocks, resin carousels and
stainless carousels.
Cutlery is generally shipped as individual pieces from
overseas manufacturers to the Company's warehouse
facilities in central New Jersey. This permits the
Company to configure the quantity, style and contents of
cutlery sets to meet customer requirements as to product
mix and pricing. The sets are then assembled and
packaged for shipment to customers.
Kitchenware
The Company sells over 2,750 kitchenware items under
various trade names including Farberwarer, Hoffritzr,
Hoanr, Smart Choice and Pillsbury. The kitchenware items
are manufactured to the Company's specifications outside
the United States and are generally shipped fully
assembled. These items are typically packaged on a card
which can be mounted for sale on racks at the retailers'
premises for maximum display visibility. Products include
the following:
Kitchen Tools and Gadgets
Food preparation and serving tools such as metal,
plastic and wooden spoons, spatulas, serving forks,
graters, strainers, ladles, shears, vegetable and fruit
knives, juicers, pizza cutters, pie servers, and slicers;
Barbecue accessories, in sets and individual pieces,
featuring such items as spatulas, tongs, forks, skewers,
hamburger and fish grills, brushes, corn holders, food
umbrellas, and nut and lobster crackers;
Green Giantr, vegetable-related kitchen accessories
incorporating the Green Giantr character, including items
such as peelers, can openers, kitchen hooks, magnets,
spoons, steamers and strainers.
Impulse Purchase Products
J-Hook and Clip Strip merchandising systems which
enable the Company to create additional selling space in
the stores. The line consists of a variety of quality,
novelty items designed to trigger impulse buying. This
line is targeted towards supermarkets and mass merchants.
5
Cutting Boards
The Company designs, markets and distributes a full
range of cutting boards made of polyethylene, wood, glass
and acrylic. All cutting boards except for glass are
imported. Glass cutting board blanks are purchased
domestically and are finished and packaged in the
Company's warehouse facilities in central New Jersey.
Boards are also packaged with cutlery items and kitchen
gadgets.
Bakeware
The Company designs, markets and distributes a
variety of bakeware and baking related products.
This product line includes baking, measuring, and
rangetop products such as cookie sheets, muffin, cake and
pie pans, drip pans, bake, roast and loaf pans, scraper
sets, whisks, cutters, rolling pins, baking shells,
baking cups, measuring devices, thermometers, timers,
pizza stones, fondues, woks, ceramics and coasters.
These items are manufactured to the Company's
specifications outside the United States and are
generally shipped fully assembled. The Company will also
begin to design, market and distribute selected items of
this product line under the trade names of Hoffritzr and
Farberwarer beginning in the first half of 1999.
The Company also distributes bakeware under a
license from Pillsbury, one of America's best known
brands of baking accessories featuring the Poppin-FreshT
logo on such items as pastry brushes, spatulas, whisks,
spoon and cup sets, cookie cutters, mixing spoons and
magnets.
New Products
The Company has a design and development department
consisting of 11 employees who create new products,
packaging and merchandising concepts. In excess of 300
items were developed or remodeled in 1998, including the
following:
Hoffritz: The Company introduced a new line of serving
accessories and vastly expanded the barware assortment
in 1998.
Cutlery: Introduction of Farberwarer Soft Grip and
Farberwarer Millenium carousels, knife block sets and
open stock cutlery.
Gadgets: Introduction of the Farberwarer Millenium line
of kitchen tools and accessories.
Bakeware: Along with the product lines associated with
the Roshco Inc. acquisition; bakeware, pizza stones,
fondues, woks, ceramics and coasters, the Company began
distributing airshield insulated bakeware under the
Pillsbury brand name in 1998.
6
Sources of Supply
The Company sources its products from approximately 45
manufacturers located primarily in the Far East,
including the People's Republic of China, Indonesia,
Taiwan, Thailand, Malaysia, Korea and to a smaller extent
in the United States, India, France and Italy. The
majority of cutlery was purchased from five suppliers in
1998 who accounted for 29%, 24%, 18%, 13% and 10% of the
total purchases and from four suppliers in 1997 who
accounted for 30%, 21%, 18% and 18% of the total
purchases. An interruption of supply from any of these
manufacturers could have an adverse impact on the
Company's ability to fill orders on a timely basis.
However, the Company believes other manufacturers with
whom the Company does business would be able to increase
production to fulfill the Company's requirements.
The Company's policy is to maintain a large inventory
base and, accordingly, it orders products substantially
in advance of anticipated time of sale to its customers.
While the Company does not have any long-term formal
arrangements with any of its suppliers, in certain
instances, particularly in the manufacture of cutlery,
the Company places firm commitments for products up to
twelve months in advance of receipt of firm orders from
customers. Lifetime's arrangements with most
manufacturers allow for flexibility in modifying the
quantity, composition and delivery dates of each order.
All purchase orders are in United States dollars.
Marketing
The Company markets its product lines directly through
its own sales force and through a network of independent
sales representatives. The Company's products are sold
primarily in the United States to approximately 1,900
customers including national retailers, department store
chains, mass merchant retail and discount stores,
supermarket chains, warehouse clubs, direct marketing
companies, specialty chains and through other channels of
distribution. During the years ended December 31, 1998
and 1997, Walmart accounted for approximately 19% and 17%
of net sales, respectively. No other customer accounted
for 10% or more of the Company's net sales during 1998
and 1997 and no customer accounted for more than 10% of
the Company's sales in 1996.
Competition
The markets for household cutlery, kitchenware, cutting
boards and bakeware are highly competitive and include
numerous domestic and foreign competitors, some of which
are larger than the Company. The primary competitive
factors in selling such products to retailers are
consumer brand name recognition, quality, packaging,
breadth of product line, distribution capability, prompt
delivery and price to the consumer.
7
Patents and Trademarks
The Company uses a number of owned trademarks, primarily
Hoffritzr, Tristarr and Hoanr, as well as Farberwarer
which is licensed under a 200 year royalty-free
agreement, which the Company considers significant to its
competitive position. Some of these trademarks are
registered in the United States and others have become
distinctive marks as to which the Company has acquired
common law rights. The Company also has licensed
trademarks from The Pillsbury Company and Corning
Consumer Products Company which it uses in its business.
The Company also owns several design and utility patents
expiring from 2000 to 2017 on the overall design of some
of its products. The Company also acquired patents,
trademarks and copyrights as part of the Hoffritzr
purchase and Roshco acquisition, that expire from 1999 to
2022. The Company believes that the expiration of any of
its patents would not have a material adverse effect on
its business.
Seasonality
Although the Company sells its products throughout the
year, the Company has traditionally had higher net sales
during its third and fourth quarters. The following
table sets forth the quarterly net sales for the years
ended December 31, 1998, 1997 and 1996:
Net Sales (in thousands)
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
1998 $21,900 $24,200 $31,300 $39,400
1997 21,100 22,100 24,500 32,300
1996 19,300 21,000 25,100 33,000
Backlog
Lifetime receives projections on a seasonal basis from
its principal customers; however, firm purchase orders
are most frequently placed on an as needed basis. The
Company's experience has been that while there may be
some modifications of customers' projections, the Company
is able, with some degree of certainty, to predict its
product needs.
Lifetime's backlog at December 31, 1998 and 1997 was
$4,227,000 and $6,048,000, respectively. The Company
expects to fill the 1998 backlog during 1999. The Company
does not believe that backlog is indicative of its future
results of operations or prospects. Although the Company
seeks commitments from customers well in advance of
shipment dates, actual confirmed orders are typically not
received until close to the required shipment dates.
Employees
As of December 31, 1998, the Company had 673 full-time
employees, of whom 5 were employed in an executive
capacity, 54 in sales, marketing, design and product
development, 60 in financial, administrative or clerical
capacities, 313 in warehouse or distribution capacities
and 241 were outlet store personnel. None of the
Company's employees are represented by a labor union. The
Company considers its employee relations to be good.
8
ITEM 2. PROPERTIES
The Company conducts its operations from four facilities,
exclusive of the Outlet Store and Roshco subsidiaries.
The Company's corporate headquarters located in Westbury,
New York, occupy approximately 42,000 square feet and was
acquired in October 1994 at an approximate cost of
$6,850,000, inclusive of building, furniture, fixtures
and equipment.
The Company's primary warehouse and distribution facility
located in central New Jersey, occupies approximately
305,000 square feet. The facility is leased pursuant to a
net lease subject to annual automatic renewals through
January 31, 2001. The annual rent is approximately
$1,111,000.
The Company leased approximately 136,000 square feet of
additional warehouse and distribution space, located in
central New Jersey, in 1995. The additional warehouse
facility is leased through January 31, 2001. The annual
rent is approximately $441,000.
The Company is designing a new, more modern distribution
center, which it expects to commence leasing in the first
half of 2000.
The Company also leases an approximately 2,000 square
foot showroom in New York City. The annual rental is
approximately $46,000 and the lease expires on June 30,
1999.
The Company's Roshco subsidiary leases approximately
2,250 square feet of office space in Chicago. The annual
rental is approximately $30,000 and the lease expires
December 31, 2003.
The Company's Outlet Store subsidiary leases
approximately 54 stores in retail outlet centers located
in 22 states throughout the United States. The square
footage of the stores range from approximately 2,000
square feet to 4,500 square feet. The terms of these
leases range from three to five years with expiration
dates beginning in April 1999 and extending through
October 2003.
9
ITEM 3. LEGAL PROCEEDINGS
The Company is, from time to time, a party to litigation
arising in the normal course of its business. The
Company believes that there are currently no material
legal proceedings the outcome of which would have a
material adverse effect on the Company's financial
position or its results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded under the symbol
"LCUT" on The Nasdaq National Market ("Nasdaq") and has
been since its initial public offering in June 1991. On
February 5, 1997, the Board of Directors of the Company
declared a 10% stock dividend payable to shareholders of
record on February 18, 1997. All share and per share
data included in this report have been retroactively
adjusted to reflect the declaration and payment of stock
dividends.
The following table sets forth the high and low sales
prices for the Common Stock of the Company for the fiscal
periods indicated as reported by Nasdaq.
1998 1997
High Low High Low
First Quarter $11.50 $9.25 $12.25 $8.38
Second Quarter $12.56 $9.75 $8.75 $7.13
Third Quarter $11.28 $8.00 $9.63 $7.75
Fourth Quarter $11.75 $8.00 $11.00 $8.38
At December 31, 1998, the Company estimates that there
were approximately 1,100 beneficial holders of the Common
Stock of the Company.
The Company paid quarterly cash dividends of $0.0625 per
share on its Common Stock in November 1997, February
1998, May 1998, August 1998, November 1998 and February
1999. The Board of Directors currently intends to
maintain a quarterly cash dividend of $0.0625 per share
of Common Stock in the foreseeable future, although the
Board may in its discretion determine to modify or
eliminate such dividend at any time.
Currently the Board of Directors of the Company has no
plans to declare future stock dividends.
10
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below for the five
years in the period ended December 31, 1998 have been
derived from the audited financial statements of the
Company. The data for 1996 through 1998 should be read in
conjunction with "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of
Operations" and the audited financial statements and
related notes thereto included elsewhere herein.
(in thousands except per share data)
Year Ended December 31,
1998 1997 1996 1995 1994
INCOME STATEMENT DATA:
Net sales $116,746 $100,021 $98,426 $80,495 $77,449
Cost of sales 60,507 51,419 50,528 43,531 41,726
Gross profit 56,239 48,602 47,898 36,964 35,723
Selling, general and
administrative expenses 35,306 33,114 31,915 25,397 21,636
Income from operations 20,933 15,488 15,983 11,567 14,087
Interest expense 203 76 671 401 124
Other income, net (200) (149) (100) (148) (165)
Income before income taxes 20,930 15,561 15,412 11,314 14,128
Income taxes 8,372 6,000 6,060 4,387 5,498
Net income $12,558 $9,561 $9,352 $6,927 $8,630
Basic earnings per common share $1.00 $0.77 $0.75 $0.56 $0.71
Weighted average shares - basic 12,570 12,459 12,395 12,465 12,216
Diluted earnings per common $0.98 $0.75 $0.74 $0.54 $0.68
share
Weighted average shares - 12,843 12,720 12,676 12,753 12,618
diluted
Cash dividends paid per common $0.25 $0.06 - - -
share
December 31,
1998 1997 1996 1995 1994
BALANCE SHEET DATA:
Current assets $72,265 $69,709 $61,884 $62,569 $53,885
Current liabilities 13,925 12,051 13,213 13,836 8,916
Working capital 58,340 57,658 48,671 48,733 44,969
Total assets 105,072 92,957 84,772 75,756 64,696
Borrowings - - 1,000 4,600 -
Stockholders' equity 91,147 80,906 71,559 61,920 55,780
11
ITEM 7. 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.
Year Ended December 31,
1998 1997 1996
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales 51.8 51.4 51.3
Gross profit 48.2 48.6 48.7
Selling, general and adm. 30.2 33.1 32.4
Expenses
Income from operations 18.0 15.5 16.3
Interest expense 0.2 0.1 0.8
Other income (net) (0.2) (0.1) (0.1)
Income before income taxes 18.0 15.5 15.6
Income taxes 7.2 6.0 6.2
Net income 10.8 % 9.5 % 9.4 %
1998 COMPARED TO 1997
Net Sales
Net sales in 1998 were $116.7 million, an increase of
$16.7 million or 16.7% over 1997. The recent acquisition
of Roshco completed in August 1998 added $6.0 million to
net sales for the year. Excluding the impact of Roshco
product sales, net sales for the Company grew 10.7%.
This sales growth was due principally to increased
shipments of Hoffritz and Farberware branded products,
partially offset by lower sales of non-branded products.
Net sales of Farberwarer outlet stores were $8.0 million
in 1998 as compared to $8.6 million in 1997, reflecting
the restructuring of the operations of the outlet stores,
which became effective in the third quarter of 1997
pursuant to an agreement with the Meyer Corporation. In
conjunction with the agreement, the Company continues to
own and operate the Farberwarer retail outlet stores, and
Meyer Corporation, the licensed manufacturer of
Farberwarer branded cookware products, assumed
responsibility for merchandising and stocking cookware
products in the stores. As a result, Meyer Corporation
receives all revenue from sales of cookware and is
responsible for 52.0% (as amended from 62.5% in July
1998) of the operating expenses, as defined, attributable
to the stores.
Gross Profit
Gross profit for 1998 was $56.2 million, an increase of
15.7% over 1997. Gross profit as a percentage of net
sales decreased slightly to 48.2% in 1998 as compared to
48.6% in 1997, primarily as a result of the addition of
the Roshco product sales which carry lower gross profit
margins as compared to the Company's other product sales.
12
Selling, General and Administrative Expenses
Selling, general and administrative expenses for 1998
were $35.3 million, an increase of $2.2 million or 6.6%
from 1997. Selling, general and administrative expenses
for the Farberware outlet stores decreased by $810,000,
reflecting the restructuring of the operations of the
outlet stores. Excluding the expenses related to the
outlet stores and those associated with Roshco, selling,
general and administrative expenses in the Company's core
business increased by 6.1%. The higher dollar expenses
were primarily attributable to increased selling,
warehousing and distribution expenses related to the
higher sales volume, offset by decreased bad debt
expense. These expenses as a percentage of net sales
decreased to 29.5% in 1998 as compared to 31.2% in 1997.
Interest Expense
Interest expense for 1998 was $203,000, an increase of
$127,000 from 1997. This increase is due to increased
borrowings under the Company's line of credit during
1998, primarily to finance the Roshco acquisition in
August 1998. All borrowings under the Company's line of
credit were repaid by December 31, 1998.
PRELIMINARY RESULTS OF FIRST QUARTER 1999
Due to start-up problems with the installation of a new
warehouse management system that caused delays in the
shipment of customer orders, the Company expects that
revenues for the first quarter of 1999 will be approximately
15% - 18% below last year's first quarter sales of $21.9
million. As a result of the shipping delays, the Company
anticipates that it will be only nominally profitable in
the first quarter. Management believes that substantially
all significant software issues have been resolved. Since
a portion of the unfilled orders will carry over into the
second quarter, the shipping backlog will be higher than
normal going into the period.
1997 COMPARED TO 1996
Net Sales
Net sales for all products in 1997 were $100.0 million,
an increase of $1.6 million or 1.6% over 1996. Excluding
net sales from the Company's Farberware outlet stores,
net sales increased by approximately 4% in 1997. The
sales growth was due principally to increased shipments
of Hoffritzr and Farberwarer branded products, partially
offset by decreased sales of impulse purchase items and
to a lesser extent, lower volume in non-branded products.
Net sales of Farberware outlet stores were $8.6 million
in 1997 as compared to $10.4 million in 1996. This
decrease in sales resulted primarily from the July 1997
restructuring of the operations of the outlet stores,
which effectively transferred responsibility for, and the
right to receive revenues from, the sale of cookware
products and a significant portion of the store operating
expenses to the Meyer Corporation.
Gross Profit
Gross profit for 1997 was $48.6 million, an increase of
$0.7 million or 1.5% over 1996. Gross profit as a
percentage of net sales was relatively constant at 48.6%
in 1997 as compared to 48.7% in 1996. The slight
decrease in gross profit as a percentage of sales was
attributable to the change in sales product mix.
13
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $33.1
million for 1997, an increase of $1.2 million or 3.8%
over 1996. This increase was primarily attributable to
increased bad debt expense and warehouse expenses,
partially offset by reduced insurance expenses and lower
operating expenses for the outlet stores. Bad debt
expense in 1997 increased by $900,000 for the Chapter 11
bankruptcy filing of a large customer. The lower
operating expenses for the outlet stores resulted from
the restructuring of the stores operations whereby the
Meyer Corporation assumed responsibility for 62.5% of the
expenses effective July 1, 1997.
Interest Expense
Interest expense for 1997 was $76,000, a decrease of
$595,000 from 1996. This decrease was due to decreased
average borrowings under the Company's line of credit.
In 1996, the Company borrowed approximately $9.0 million
under its line of credit to finance the Farberware
acquisition and all but $1.0 million was repaid by 1996
year end.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had cash and cash
equivalents of $9.4 million, an increase of $1.7 million
from the prior year, working capital was $58.3 million,
an increase of $0.7 million from 1997, and the current
ratio was 5.2 to 1.
Cash provided by operating activities was approximately
$15.9 million, consisting primarily of net income,
decreased merchandise inventory and the combined balances
of prepaid expenses, other current assets and other
assets offset by decreased combined balances of accounts
payable, trade acceptances and accrued expenses and
increased accounts receivable. Cash used in investing
activities was $11.5 million, consisting primarily of the
Roshco acquisition and capital expenditures. Cash used in
financing activities was $2.7 million, which included the
payment of dividends of $3.1 million, offset by proceeds
from the exercise of stock options of $459,000.
Capital expenditures were $3.8 million in 1998 and $2.3
million in 1997. Capital expenditures for 1998 consisted
primarily of the new financial/accounting system, a
separate warehouse management system, machinery and
equipment for use in the warehouse, and fixtures and
point-of-sale registers for the Farberware outlet stores.
Total planned capital expenditures for 1999 are estimated
at $7.0 million. These expenditures are primarily for
equipment in the warehouse and distribution facility.
These expenditures are expected to be funded from current
operations, cash and cash equivalents and, if needed,
short term borrowings.
In August 1998, the Company acquired all of the
outstanding common stock of Roshco, a privately held
bakeware and baking-related products distributor, located
in Chicago, Illinois. The purchase price consisted of an
initial cash payment of approximately $5.0 million and
future payments of $1.5 million. The Company is also
obligated to make additional payments based on annual
sales volume for bakeware and baking-related products for
a period of two years. The Company also assumed bank
debt of $2.6 million that was paid at the acquisition
date.
The Company has available an unsecured $25,000,000 line
of credit with a bank (the "Line") which may be used for
revolving credit loans or letters of credit. Borrowings
made under the Line bear interest payable daily at a
negotiated short term borrowing rate. As of December 31,
1998, the Company had $11,234,000 of letters of credit
and trade acceptances outstanding and no borrowings under
the Line and, as a result, the availability under the
Line was $13,766,000. The Line is cancelable by either
party at any time.
Products are sold to retailers primarily on 30-day credit
terms, and to distributors primarily on 60-day credit
terms. As of December 31, 1998, the Company had an
aggregate of $788,000 of accounts receivable outstanding
in excess of 60 days or approximately 5.3% of gross
receivables, and had inventory of $44.9 million.
14
Year 2000
The Company is in the process of investigating issues
that could affect its operations regarding Year 2000
compliance issues. The Year 2000 compliance issues
revolve around the fact that most computer systems do not
recognize a year by its traditional four digit format.
Instead, computer systems recognize the last two digits
for a specified year. If not properly addressed, these
issues could potentially have an adverse material impact
on the Company's operations.
The Company is in the process of installing new
financial/accounting systems and a separate new warehouse
management system to address the financial and
operational needs of its business. These systems are
expected to be fully operational by the end of the first
half of 1999 and be Year 2000 compliant. Testing of
these systems to determine that they are in fact Year
2000 compliant has begun and should be fully completed by
the end of the second quarter in 1999. As results of
this testing process become available over the next six
months, the Company will make contingency plans where it
deems necessary.
The Company relies on third parties for inventory,
supplies, financial products and other key services.
Third party entities that could have a potential material
impact on the operations of the Company's business have
been contacted to determine the progress that each has
made in connection with Year 2000 compliance issues.
Despite the Company's efforts, there can be no guarantee
that the systems of other companies which the Company
relies on to conduct its day-to-day business will be
compliant. In such event, the Company may, among other
things, experience difficulties in obtaining inventory
and supplies. The Company will make contingency plans
for any entity it feels has not made satisfactory
progress towards being Year 2000 compliant. Contingency
plans may include increasing inventory levels, securing
alternate supply sources and taking other appropriate
measures.
The Company is also dependent upon its customers for
sales and cash flow. Interruption in our customers'
operations due to Year 2000 issues could result in
reduced sales and cash flow for the Company, and higher
inventories. The Company is monitoring the status of its
customers to determine potential risks and develop
possible alternatives.
Although the Company believes that the implementation of
the new financial/accounting and warehouse management
systems, along with the evaluation process of significant
third party entities, the possibility of significant
interruptions of normal operations should be reduced,
there can be no assurance that failure of the Company,
third party vendors or customers, to be Year 2000
compliant could have an adverse material impact on the
operations of the Company's business.
Notwithstanding Year 2000 issues, the Company decided to
install the new financial/accounting systems and a
separate new warehouse management system to accommodate
the Company's growth. Therefore, at this time, the costs
relating to Year 2000 compliance activities have not been
significant and, based on management's best estimates,
are not expected to be significant. However, due to the
complexity and pervasiveness of Year 2000 issues, in
particular the uncertainty regarding the compliance
programs of third parties, no assurance can be given that
costs will not exceed those currently anticipated by the
Company.
The Company believes that its cash and cash equivalents
plus internally generated funds and its credit
arrangements will be sufficient to finance its operations
for the next 12 months.
15
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements are included herein commencing
on page F-1.
The following is a summary of the quarterly results of
operations for the years ended December 31, 1998 and
1997.
Three Months Ended
3/31 6/30 9/30 12/31
(in thousands, except per share data)
1998
Net sales $21,868 $24,184 $31,313 $39,382
Cost of sales 11,472 12,171 16,003 20,861
Net income 1,911 2,318 3,694 4,636
Basic earnings per $0.15 $0.18 $0.29 $0.37
common share
Diluted earnings per $0.15 $0.18 $0.29 $0.36
common share
1997
Net sales $21,108 $22,133 $24,516 $32,264
Cost of sales 11,133 11,203 12,105 16,978
Net income 1,363 1,538 3,054 3,606
Basic earnings per $0.11 $0.12 $0.24 $0.29
common share
Diluted earnings per $0.11 $0.12 $0.24 $0.28
common share
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT
The following table sets forth certain information
concerning the Executive Officers and Directors of the
Company:
Director or
Executive
Officer of
Company or
Name Age Position its Predecessor
Since
Milton L. 70 Chairman of the 1958
Cohen Board of Directors
and President
Jeffrey 56 Executive Vice 1967
Siegel President
and Director
Craig 49 Vice-President - 1973
Phillips Distribution,
Secretary and
Director
Robert 52 Vice-President - 1997
McNally Finance,
and Treasurer
Bruce Cohen 40 Vice-President - 1998
National Sales
Manager and Director
Ronald 54 Director 1991
Shiftan
Howard 78 Director 1992
Bernstein
Mr. Milton L. Cohen has been continuously employed by
the Company in his present capacity since 1958.
Mr. Siegel has been continuously employed by the
Company in his present capacity since 1967.
Mr. Phillips has been continuously employed by the
Company in his present capacity since 1981.
Mr. McNally has been continuously employed by the
Company in his present capacity since October 1997. Mr.
McNally, was formerly Senior Vice President - Finance for
Cybex International, Inc., (formerly Lumex, Inc.), a
manufacturer and distributor of healthcare products and
fitness equipment. Mr. McNally held that position for 15
years prior to joining the Company.
Mr. Bruce Cohen was elected a Director for the first
time in 1998 and has been continuously employed by the
Company in his present capacity since 1991.
Mr. Shiftan has served as Deputy Executive Director of
The Port Authority of New York & New Jersey since
September 1998. Prior to becoming Deputy Executive
Director of the Port Authority of New York & New Jersey,
he had, since 1996, been Chairman of Patriot Group, LLC,
a financial advisory firm. Prior thereto, Mr. Shiftan
held executive management positions in venture capital,
investment banking and financial advisory firms.
Mr. Bernstein has been a member of the Certified Public
Accounting firm, Cole, Samsel & Bernstein LLC (and its
predecessors) for approximately forty-eight years.
Milton L. Cohen is the father of Bruce Cohen.
Jeffrey Siegel and Craig Phillips are cousins.
17
The Board of Directors has an audit committee, both of
whose members are independent directors.
The directors and officers of the Company are elected
annually by the stockholders and Board of Directors of
the Company, respectively. They serve until the next
annual meeting of the stockholders or until their
successors have been elected and qualified or until their
earlier resignation or removal.
Directors who are not employees of the Company will
receive $5,000 per year, an additional fee of $1,000 for
each Board meeting attended, plus reimbursement of
reasonable out-of-pocket expenses. Directors who are
employees of the Company do not receive compensation for
serving as directors or attending meetings. The Company
has entered into indemnification agreements with the
directors and officers of the Company.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information
to appear under the caption "Executive Compensation" in
the Company's definitive Proxy Statement for its 1999
Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information
to appear under the caption "Principal Stockholders" in
the Company's definitive Proxy Statement for its 1999
Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information
to appear under the caption "Certain Transactions" in the
Company's definitive Proxy Statement for its 1999 Annual
Meeting of Stockholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(a)(1) and (2) - see list of Financial Statements and
Financial Statement Schedule on F-1.
(b) Reports on Form 8-K in the fourth quarter of 1998.
None.
(c) Exhibits*:
Exhibit
No. Description
3.1 Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3[a] to
Form S-1 [No. 33-40154] of Lifetime Hoan
Corporation).
3.2 Amendment dated June 9, 1994 to the Restated
Certificate of Incorporation of the Company (incorporated
herein by reference to the December 31, 1994 Form 10-K
[No. 1-19254] of Lifetime Hoan Corporation).
18
3.3 By-Laws of the Company (incorporated herein by
reference to Exhibit 3[b] to Form S-1 [No. 33-40154]
of Lifetime Hoan Corporation).
10.1 Loan Agreement dated as of May 11, 1988 with Bank of
New York, as amended (incorporated by Reference to
Exhibit 10[d] to Form S-1 [No. 33-40154] of Lifetime
Hoan Corporation).
10.2 Amendment No. 6 dated as of March 5, 1992 between
Lifetime Hoan Corporation and The Bank of New York
(incorporated by reference to the December 31, 1991
Form 10-K [No. 1-19254] of Lifetime Hoan
Corporation).
10.3 Stock Option Plan for key employees of Lifetime Hoan
Corporation, as amended June 9, 1994 (incorporated
by reference to the December 31, 1994 Form 10-K [No.
1-19254] of Lifetime Hoan Corporation).
10.4 Promissory notes dated December 17, 1985 of Milton
L. Cohen, Jeffrey Siegel, Craig Phillips and Robert
Phillips, as amended (incorporated by reference to
Exhibit 10[f] to Form S-1 [No. 33-40154] of Lifetime
Hoan Corporation).
10.5 Lease to Dayton, New Jersey premises dated August
20, 1987 and amendment between the Company and
Isaac Heller (incorporated by reference to Exhibit
10[h] to Form S-1 [No. 33-40154] of Lifetime Hoan
Corporation).
10.6 License Agreement dated December 14, 1989 between
the Company and Farberware, Inc. (incorporated by
reference to Exhibit 10[j] to Form S-1 [No. 33-
40154] of Lifetime Hoan Corporation).
10.7 License Agreement dated as of April 19, 1991 between
the Company and The Pillsbury Company (incorporated
by reference to Exhibit 10[m] to Form S-1 [No. 33-
40154] of Lifetime Hoan Corporation).
10.8 Real Estate Sales Agreement dated October 28, 1993
between the Company and The Olsten Corporation
(incorporated by reference to the December 31, 1993
Form 10-K [No. 1-19254] of Lifetime Hoan
Corporation).
10.9 Amendment to the Real Estate Sales Agreement dated
September 26, 1994 between the Company and The
Olsten Corporation. (incorporated by reference to
the December 31, 1995 Form 10-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.10 Lease to additional Dayton, New Jersey premises
dated December 7, 1994. (incorporated by reference
to the December 31, 1995 Form 10-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.11 License Agreement dated December 21, 1995
between the Company and The Walt Disney Company.
10.12 Memorandum of purchase dated September 18, 1995
between the Company and Alco Capital Group, Inc.
(incorporated by reference to the September 30, 1995
Form 10-Q [No. 1-19254] of Lifetime Hoan
Corporation).
10.13 Registration Rights Agreement dated September
18, 1995 between the Company and Alco Capital Group,
Inc. (incorporated by reference to the September 30,
1995 Form 10-Q [No. 1-19254] of Lifetime Hoan
Corporation).
19
10.14 Amendment No. 1 dated September 26, 1995 to the
Lease for the additional Dayton, New Jersey
premises. (incorporated by reference to the
September 30, 1995 Form 10-Q [No. 1-19254] of
Lifetime Hoan Corporation).
10.15 Form of Extension Agreement dated as of
December 15, 1995 between Milton L. Cohen and
Lifetime Hoan Corporation (incorporated by reference
to the January 8, 1996 Form 8-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.16 Form of Extension Agreement dated as of
December 15, 1995 between Jeffrey Siegel and
Lifetime Hoan Corporation (incorporated by reference
to the January 8, 1996 Form 8-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.17 Form of Extension Agreement dated as of
December 15, 1995 between Craig Phillips and
Lifetime Hoan Corporation (incorporated by reference
to the January 8, 1996 Form 8-K [No. 1-19254] of
Lifetime Hoan Corporation).
10.18 Asset Purchase Agreement by and between
Farberware, Inc., Far-b Acquisition Corp., Syratech
Corporation and Lifetime Hoan Corporation, dated
February 2, 1996.
10.19 Joint Venture Agreement by and among Syratech
Corporation, Lifetime Hoan Corporation and Far-b
Acquisition Corp., dated February 2, 1996.
10.20 Employment Agreement dated April 7, 1996 with
Milton L. Cohen (incorporated by reference to the
March 31, 1996 10-Q).
10.21 Employment Agreement dated April 7, 1996 with
Jeffrey Siegel (incorporated by reference to the
March 31, 1996 10-Q).
10.22 Employment Agreement dated April 7, 1996 with
Craig Phillips (incorporated by reference to the
March 31, 1996 10-Q).
10.23 Lifetime Hoan 1996 Incentive Stock Option Plan
(incorporated by reference to the March 31, 1996 10-
Q).
10.24 Lifetime Hoan 1996 Incentive Bonus Compensation
Plan (incorporated by reference to the March 31,
1996 10-Q).
10.25 Meyer Operating Agreement dated July 1, 1997
between Lifetime Hoan Corporation and Meyer
Corporation and Amendment to Agreement dated July 1,
1998.
10.26 Jeffrey Siegel Employment Agreement Amendment
No. 1, dated June 6, 1997
10.27 Milton L. Cohen Employment Agreement Amendment
No. 1, dated June 6, 1997
10.28 Stock Purchase Agreement between Lifetime Hoan
Corporation and Roshco, Inc. dated August 10, 1998.
21 Subsidiaries of the registrant
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule
*The Company will furnish a copy of any of the exhibits
listed above upon payment of $5.00 per exhibit to cover
the cost of the Company furnishing the exhibits.
(d) Financial Statement Schedules - the response to this
portion of Item 14 is submitted as a separate
section of this report.
20
FORM 10-K -- ITEM 14(a)(1) and (2)
LIFETIME HOAN CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE
The following Financial Statements and Schedule of
Lifetime Hoan Corporation are included in Item 8.
Report of Independent Auditors F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3
Consolidated Statements of Income for the
Years ended December 31, 1998, 1997 and 1996 F-4
Consolidated Statements of Stockholders' Equity for the
Years ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Cash Flows for the
Years ended December 31, 1998, 1997 and 1996 F-6
Notes to Consolidated Financial Statements F-7
The following financial statement schedule of Lifetime
Hoan Corporation is included in Item 14 (d);
Schedule II - Valuation and qualifying accounts S-1
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-1
REPORT OF INDEPENDENT AUDITORS
Stockholders and Board of Directors
Lifetime Hoan Corporation
We have audited the accompanying consolidated balance
sheets of Lifetime Hoan Corporation as of December 31,
1998 and 1997 and the related consolidated statements of
income, stockholders' equity, and cash flows for each of
the three years in the period ended December 31, 1998.
Our audits also included the financial statement schedule
listed in the Index at Item 14(a). These consolidated
financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to
express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free
of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material
respects, the consolidated financial position of Lifetime
Hoan Corporation at December 31, 1998 and 1997, and the
consolidated results of its operations and its cash flows
for each of the three years in the period ended December
31, 1998, in conformity with generally accepted
accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation
to the basic financial statements taken as a whole,
presents fairly in all material respects the information
set forth therein.
Ernst & Young LLP
Melville, New York
February 19, 1999
F-2
LIFETIME HOAN CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31,
ASSETS 1998 1997
CURRENT ASSETS
Cash and cash equivalents $9,438 $7,773
Accounts receivable, less allowances of $1,527
in 1998 and $851 in 1997 13,306 13,274
Merchandise inventories 44,938 42,763
Prepaid expenses 2,956 3,290
Deferred income taxes 397 439
Other current assets 1,230 2,170
TOTAL CURRENT ASSETS 72,265 69,709
PROPERTY AND EQUIPMENT, net 11,823 9,434
EXCESS OF COST OVER NET ASSETS ACQUIRED, net 9,316 1,841
OTHER INTANGIBLES, net 10,560 10,950
OTHER ASSETS 1,108 1,023
TOTAL ASSETS $105,072 $92,957
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and trade acceptances $2,706 $5,360
Accrued expenses 10,263 6,152
Income taxes 956 539
TOTAL CURRENT LIABILITIES 13,925 12,051
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, shares authorized:
25,000,000; shares issued and outstanding:
12,588,264 in 1998 and 12,522,246 in 1997 126 125
Paid-in capital 76,115 75,307
Retained earnings 15,859 6,443
Notes receivable for shares issued to stockholders (908) (908)
Deferred compensation (45) (61)
TOTAL STOCKHOLDERS' EQUITY 91,147 80,906
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $105,072 $92,957
See notes to consolidated financial statements.
F-3
LIFETIME HOAN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands - except per share data)
Year Ended December 31,
1998 1997 1996
Net Sales $116,746 $100,021 $98,426
Cost of Sales 60,507 51,419 50,528
56,239 48,602 47,898
Selling, General and
Administrative Expenses 35,306 33,114 31,915
Income from Operations 20,933 15,488 15,983
Interest Expense................. 203 76 671
Other Income, net................. (200) (149) (100)
Income Before Income Taxes 20,930 15,561 15,412
Income Taxes................ 8,372 6,000 6,060
NET INCOME $12,558 $9,561 $9,352
BASIC EARNINGS PER COMMON SHARE $1.00 $0.77 $0.75
DILUTED EARNINGS PER COMMON SHARE $0.98 $0.75 $0.74
See notes to consolidated financial statements.
F-4
LIFETIME HOAN CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
Common Stock Paid-in Retained Notes Deferred
Shares Amount Capital Earnings Receivable Compensation Total
from
(Deficit)Stockholders
Balance at
December 31,
1995 11,257 $113 $61,103 $1,845 ($1,048) ($93) $61,920
Net income
for 1996 9,352 9,352
Exercise of
stock options 21 125 125
Exercise of
warrants 1 6 6
Repayment of
note receivable 140 140
Amortization of
deferred
compensation 16 16
Stock dividend 1,128 11 13,523 (13,534) -
Balance at
December 31,
1996 12,407 124 74,757 (2,337) (908) (77) 71,559
Net income for
1997 9,561 9,561
Exercise of
stock options 115 1 550 551
Amortization of
deferred
compensation 16 16
Cash dividends (781) (781)
Balance at
December 31,
1997 12,522 125 75,307 6,443 (908) (61) 80,906
Net income for
1998 12,558 12,558
Exercise of
stock options 66 1 458 459
Grant of stock
options 350 350
Amortization of
deferred
compensation 16 16
Cash dividends (3,142) (3,142)
Balance at
December 31,
1998 12,588 $126 $76,115 $15,859 ($908) ($45) $91,147
See notes to consolidated financial statements.
F-5
LIFETIME HOAN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
1998 1997 1996
OPERATING ACTIVITIES
Net income $12,558 $9,561 $9,352
Adjustments to reconcile net income to
net cash
provided by operating activities:
Depreciation and amortization 2,480 1,990 1,588
Deferred income taxes 42 579 168
Provision for losses on accounts 444 2,112 500
receivable
Reserve for sales returns and allowances 3,683 3,533 3,589
Changes in operating assets and
liabilities, excluding the
effects of the Roshco, Inc.
acquisition:
Accounts receivable (2,916) (4,919) (5,407)
Merchandise inventories 2,268 (5,946) 6,920
Prepaid expenses, other current assets
and other assets 1,985 317 (645)
Accounts payable, trade acceptances
and accrued expenses (5,067) 618 1,891
Income taxes 417 (780) 1,086
NET CASH PROVIDED BY OPERATING 15,894 7,065 19,042
ACTIVITIES
INVESTING ACTIVITIES
Purchases of property and equipment, net (3,777) (2,255) (2,010)
Purchase of marketable securities (256) - -
Acquisition of Roshco, Inc. (4,926) - -
Payment of note payable of acquired (2,587) - -
business
Sale of inventory to Meyer Corporation - 3,100 -
Purchase of intangibles and outlet store - - (12,700)
inventory
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (11,546) 845 (14,710)
FINANCING ACTIVITIES
Payments of short term borrowings, net - (1,000) (3,600)
Proceeds from the exercise of warrants - - 6
Proceeds from the exercise of stock 459 551 125
options
Cash dividends paid (3,142) (781) -
Repayment of note receivable from - - 140
stockholder
NET CASH (USED IN) FINANCING ACTIVITIES (2,683) (1,230) (3,329)
INCREASE IN CASH AND CASH 1,665 6,680 1,003
EQUIVALENTS
Cash and cash equivalents at beginning of 7,773 1,093 90
year
CASH AND CASH EQUIVALENTS AT END OF YEAR $9,438 $7,773 $1,093
See notes to consolidated financial statements.
F-6
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Organization and Business: The accompanying consolidated
financial statements include the accounts of Lifetime Hoan
Corporation ("Lifetime") and its wholly-owned subsidiaries,
Outlet Retail Stores, Inc. ("Outlets") and Roshco, Inc.
("Roshco"), collectively the "Company". Significant
intercompany accounts and transactions have been eliminated in
consolidation.
The Company is engaged in the design, marketing and
distribution of household cutlery, kitchenware, cutting boards
and bakeware, marketing its products under a number of trade
names, some of which are licensed. The Company sells its
products primarily to retailers throughout the United States
and to consumers through its Outlets subsidiary.
Revenue Recognition: Revenue is recognized upon the
shipment of merchandise.
Inventories: Merchandise inventories, principally finished
goods, are priced by the lower of cost (first-in, first-out
basis) or market method.
Property and Equipment: Property and equipment is stated at
cost. Property and equipment other than leasehold
improvements is being depreciated by the straight-line method
over the estimated useful lives of the assets. Building and
improvements are being depreciated over 30 years and
machinery, furniture, and equipment over 5 to 7 years.
Leasehold improvements are amortized over the term of the
lease or the estimated useful lives of the improvements,
whichever is shorter.
Cash Equivalents: The Company considers highly liquid
instruments with a maturity of three months or less when
purchased to be cash equivalents.
Use of Estimates: The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amount reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Excess of Cost Over Net Assets Acquired and Other
Intangibles: Excess of cost over net assets acquired pursuant
to acquisitions are being amortized by the straight-line
method over periods ranging from 30 to 40 years. Accumulated
amortization at December 31, 1998 and 1997 was $1,004,000 and
$839,000, respectively.
Other intangibles consist of a royalty-free license,
trademark and brand name acquired pursuant to two acquisitions
and are being amortized by the straight-line method over 30
years. Accumulated amortization at December 31, 1998 and 1997
was $1,116,000 and $726,000, respectively.
Long-Lived Assets: If there are indicators of
impairment, the Company reviews the carrying value of its long-
lived assets in determining the ultimate recoverability of
their unamortized values using future undiscounted cash flow
analyses.
Income Taxes: Income taxes have been provided using
the liability method.
F-7
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings Per Share: Basic earnings per share has been
computed by dividing net income of $12.6 million in 1998, $9.6
million in 1997 and $9.4 million in 1996 by the weighted
average number of common shares outstanding of 12,570,000 in
1998, 12,459,000 in 1997 and 12,395,000 in 1996. 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 12,843,000
in 1998, 12,720,000 in 1997 and 12,676,000 in 1996.
NOTE B - ACQUISITIONS AND LICENSES
Roshco Acquisition: In August 1998, the Company acquired
all of the outstanding common stock of Roshco, Inc.
("Roshco"), a privately-held bakeware and baking-related
products distributor. The purchase price consisted of an
initial cash payment of $5.0 million and future payments of
$1.5 million. The Company is also obligated to make
additional payments based on annual sales volume for bakeware
and baking-related products for a period of two years. The
Company also assumed bank debt of $2.6 million that was paid
on the acquisition date. This acquisition was accounted for
using the purchase method and the Company recorded excess of
cost over net assets acquired of $7,640,000.
Farberware Acquisition: In April 1996, the Company
together with an unrelated third party, Syratech Corporation,
acquired certain assets of Farberware, Inc. ("Farberware")
including the assignment to the Company of a 200 year, royalty-
free, exclusive right to use the Farberwarer name in
connection with the product lines covered by its previous
license agreement with Farberware. The Company also acquired
all of the Farberware outlet stores, including inventory.
Rights to license the Farberwarer name for use by third
parties are held by a joint venture, owned equally by the
Company and Syratech Corporation. The Company's portion of
the purchase price was $12.7 million, of which $9.2 million
was attributed to the royalty-free exclusive right to use the
Farberwarer name. The Company is jointly and severally liable
for the obligations of Syratech Corporation under the terms of
the agreement. The Company will be indemnified by Syratech
Corporation for any losses it may incur as a result of
Syratech Corporation's failure to perform such obligations.
Revere Licensing Agreement: In October 1998, the Company
entered into a licensing agreement with Corning Consumer
Products Company. This agreement allows the Company to design
and market cutlery and cutting boards under the Reverer
trademark in the United States and Canada. Shipments of
products under the Reverer assortment are expected to begin in
the first half of 1999.
F-8
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE C - LINE OF CREDIT
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, letters of credit or trade acceptances. As of
December 31, 1998, the Company had letters of credit and trade
acceptances of $11,234,000 outstanding and no outstanding
borrowings. The Line is cancelable by either party at any
time.
Borrowings made 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.
The Company paid interest of approximately $203,000,
$76,000 and $671,000 during the years ended December 31, 1998,
1997 and 1996, respectively.
NOTE D - CAPITAL STOCK
Cash Dividends: The Company paid quarterly cash
dividends of $0.0625 per share on its Common Stock in November
1997, February 1998, May 1998, August 1998 and November 1998.
The Board of Directors currently intends to maintain a
quarterly cash dividend of $0.0625 per share of Common Stock
in the foreseeable future, although the Board may in its
discretion determine to modify or eliminate such dividend at
any time.
Stock Option Plans: The Company has a Stock Option Plan
(the "Plan") whereby up to 1,500,000 options to purchase
shares of common stock may be granted to key employees of the
Company, including directors and officers. The Plan
authorizes the Board of Directors of the Company to issue
incentive stock options as defined in Section 422A (b) of the
Internal Revenue Code and stock options that do not conform to
the requirements of that Section of the Code. All options
expire on the tenth anniversary of the date of grant and vest
over a range of up to five years, from the date of grant.
In June 1996, the stockholders of the Company approved
the adoption of the Lifetime Hoan Corporation 1996 Incentive
Stock Option Plan (the "ISO Plan"). The ISO Plan authorizes
the granting of 250,000 options to purchase common stock to
officers of the Company and its subsidiaries. No individual
officer may be granted more than 175,000 options to purchase
common stock. The ISO Plan authorizes the issuance of
incentive stock options as defined in Section 422 of the
Internal Revenue Code. All options expire on the fifth
anniversary of the date of grant and vest in one year from the
date of grant.
F-9
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE D - CAPITAL STOCK (continued)
The Company grants stock options for a fixed number of
shares to employees with an exercise price equal to the fair
value of the shares at the date of grant. The Company
accounts for stock option grants in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and
related Interpretations because the Company believes the
alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation"
requires use of option valuation models that were not
developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings
per share is required by Statement 123, and has been
determined as if the Company has accounted for its employee
stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the
following weighted-average assumptions: risk-free interest
rates of 6.62%, 5.75% and 6.34% for 1998, 1997 and 1996,
respectively; 2.50% dividends yield in 1998 and 1997 and no
dividend yield in 1996; volatility factor of the expected
market price of the Company's common stock of 0.39 in 1998,
0.54 in 1997 and 0.35 in 1996; and a weighted-average expected
life of the options of 5.7, 5.1 and 4.8 years in 1998, 1997
and 1996, respectively.
The Black-Scholes option valuation model was developed
for use in estimating fair value of traded options which have
no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly
subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have
characteristics significantly different from those of traded
options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its
employee stock options.
For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to expense
over the options' vesting period. The Company's pro forma
information is as follows:
Year Ended December 31,
1998 1997 1996
Pro forma net income (in $12,148 $9,300 $9,237
thousands)
Pro forma basic earnings per $0.97 $0.75 $0.75
common share
Pro forma diluted earnings $0.95 $0.73 $0.73
per common share
F-10
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE D - CAPITAL STOCK (continued)
A summary of the Company's stock option activity
and related information for the years ended December 31
follows:
1998 1997 1996
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Options Exercise Options Exercise
Price Price Price
Balance 906,942 $6.95 868,963 $6.19 625,633 $5.43
- - Jan 1,
Grants 222,000 $10.39 184,370 $9.26 202,750 $8.45
Exercised (66,018) $4.93 (114,737) $5.10 (20,356) $5.57
Canceled (21,379) $7.38 (31,654) $6.12 (18,061) $6.30
Stock 78,997
Dividend
Balance- 1,041,545 $7.81 906,942 $6.95 868,963 $6.19
Dec 31,
The weighted average fair value of options
granted during the years ended December 31, 1998, 1997 and
1996 were $3.77, $3.98 and $3.85, respectively.
The following table summarizes information about
employees stock options outstanding at December 31, 1998:
Weighted- Weighted- Weighted-
Average Average Average
Options Options Remaining Exercise Exercise
Exercise Outstanding Exercisable Contractual Price - Price -
Price Life Options Options
Outstanding Exercisable
$4.14 - $5.51 215,365 215,365 3.4 years $4.63 $4.63
$6.39 - $8.41 339,637 219,129 5.7 years $6.80 $6.53
$8.64 - $10.87 486,543 248,531 6.7 years $9.92 $10.08
1,041,545 683,025 5.7 years $7.81 $7.22
In connection with the grant of certain options,
the Company recorded, and is amortizing, deferred
compensation.
In connection with the exercise of options under
a stock option plan which has since expired, the Company
received cash of $255,968 and notes in the amount of $903,712.
The notes bear interest at 9% and are due no later than
December 31, 2000.
F-11
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE E - INCOME TAXES
The provision for income taxes consist of (in thousands):
Year Ended
December 31,
1998 1997 1996
Current:
Federal $6,957 $4,443 $4,813
State and local 1,373 978 1,079
Deferred 42 579 168
Income tax provision $8,372 $6,000 $6,060
Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amount of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components
of the Company's net deferred tax assets are as follows (in
thousands):
December 31,
1998 1997
Merchandise $973 $1,078
inventories
Accounts receivable 356 289
allowances
Depreciation and (927) (687)
amortization
Other (5) (241)
$397 $439
The provision for income taxes differs from the amounts
computed by applying the applicable federal statutory rates as
follows (in thousands):
Year Ended December 31,
1998 1997 1996
Provision for Federal
income taxes at
the statutory rate $7,116 $5,291 $5,240
Increases (decreases):
State and local income
taxes net of Federal
income tax benefit 906 645 712
Other 350 64 108
Provision for income taxes $8,372 $6,000 $6,060
The Company paid income taxes (net of refunds) of
approximately $7,809,000, $6,258,000 and $4,830,000 during the
years ended December 1998, 1997, and 1996, respectively.
F-12
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE F - COMMITMENTS
Operating Leases: The Company has lease agreements for its
warehouse, showroom facilities and outlet stores which expire
through October 31, 2003. These leases provide for, among
other matters, annual base rent escalations and additional
rent for real estate taxes and other costs.
Future minimum payments under non cancelable operating
leases are as follows (in thousands):
Year ended
December 31:
1999 $4,073
2000 3,357
2001 1,228
2002 563
2003 260
$9,481
Meyer Corporation reimburses the Company 52.0% (as amended
from 62.5% in July 1998) of the operating lease expenses of
the outlet stores, which is not a sublease commitment. In
1998 and 1997, Meyer Corporation reimbursed approximately
$1,710,000 and $861,000, respectively, for operating lease
expense to the Company.
Rental and related expenses on the operating leases were
approximately $4,715,000, $4,281,000 and $3,570,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
Amounts for 1998 and 1997 are prior to the Meyer Corporation
reimbursement described above.
The Company has issued a letter of credit of approximately
$279,000 which is held by the landlord as security for its
warehouse leases.
Royalties: The company has royalty licensing agreements
which expire through December 31, 2002. Future minimum
royalties are as follows (in thousands):
Year ended December 31:
1999 $320
2000 1,100
2001 1,300
2002 1,000
$3,720
F-13
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE F - COMMITMENTS (continued)
Employment Agreements: In April 1996, as amended in June
1997, the Company entered into employment agreements with its
President and Executive Vice President, providing for annual
salaries of $700,000 and $400,000 respectively, and for the
payment of bonuses pursuant to the Company's 1996 Incentive
Bonus Compensation Plan (the "Bonus Plan") (see below). The
employment agreements continue through April 2000, thereafter
for additional periods of one year unless terminated by either
the Company or the executive.
In April 1997, the Company entered into an employment
agreement with its Vice President- Distribution, which
provides a current annual salary of $200,000. The agreement
expires April 6, 2000.
Incentive Bonus Compensation Plan: In April 1996, the
Board of Directors adopted and in June 1996, the stockholders
approved the Bonus Plan. The Bonus Plan provides the award of
a bonus, with respect to each of the ten fiscal years of the
Company beginning with the 1996 fiscal year, to the President
and the Executive Vice President of the Company. The bonus
payable to each executive is an amount equal to 3.5% of pretax
income, before any provision for executive compensation, stock
options exercised during the year under the Company's 1991
Stock Option Plan and extraordinary items. During the years
ended December 31, 1998, 1997 and 1996, the Company recorded
annual compensation expense of approximately $1.7 million,
$1.2 million and $1.2 million, respectively, pursuant to the
Bonus Plan.
NOTE G - RELATED PARTY TRANSACTIONS
In May 1993, the Company loaned $140,000 to a director of
the Company for the exercise of stock options. The loan had
an interest rate of 9%, payable quarterly. The loan and
accrued interest was repaid in May 1996.
In connection with the Farberware acquisition (see note
B), a director of the Company was paid $292,000 for a
financial advisory fee.
In connection with the Roshco acquisition (see note B),
a director of the Company was paid $200,000 and received
options to purchase 100,000 shares of common stock (at an
exercise price of $10.63) as a financial advisory fee. The
fair value of the options granted, which vest immediately, are
approximately $350,000.
NOTE H - RETIREMENT PLAN
The Company maintains a defined contribution retirement plan
("the Plan") for eligible employees under Section 401(k) of
the Internal Revenue Code. Participants can make voluntary
contributions up to a maximum of 15% of their salary. The
Company made no contributions to the Plan in 1998, 1997 and
1996.
F-14
LIFETIME HOAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE I - CONCENTRATION OF CREDIT RISK
The Company maintains cash and cash equivalents with
various financial institutions.
Concentrations of credit risk with respect to trade
accounts receivable are limited due to the large number of
entities comprising the Company's customer base and their
dispersion across the United States. The Company's accounts
receivable are not collateralized. The Company periodically
reviews the status of its accounts receivable and accordingly,
where considered necessary, establishes an allowance for
doubtful accounts.
During the years ended December 31, 1998 and 1997, one
customer accounted for approximately 19% and 17% of net sales,
respectively.
NOTE J - OTHER
Property and Equipment:
Property and equipment consist of (in thousands):
December 31,
1998 1997
Land $832 $832
Building and improvements 4,649 4,649
Machinery, furniture and equipment 12,419 9,439
Leasehold improvements 28 28
17,928 14,948
Less: accumulated depreciation and 6,105 5,514
amortization
$11,823 $9,434
Accrued Expenses:
Accrued expenses consist of (in thousands):
December 31,
1998 1997
Commissions $439 $489
Accrued customer allowances and 3,285 2,551
rebates
Obligation to Meyer Corporation 985 860
Note payable - Roshco (See Note B) 1,500 -
Officer and employee bonuses 1,507 829
Other 2,547 1,423
$10,263 $6,152
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
LIFETIME HOAN CORPORATION
NOTE J - OTHER (Continued)
Sources of Supply: The Company sources its products from
approximately 45 manufacturers located primarily in the Far
East, including the People's Republic of China, Indonesia,
Taiwan, Thailand, Malaysia, Korea and to a smaller extent in
the United States, India, France and Italy. The majority of
cutlery was purchased from five suppliers in 1998 who
accounted for 29%, 24%, 18%, 13% and 10% of the total
purchases and from four suppliers in 1997 who accounted for
30%, 21%, 18% and 18% of the total purchases. An interruption
of supply from any of these manufacturers could have an
adverse impact on the Company's ability to fill orders on a
timely basis. However, the Company believes other
manufacturers with whom the Company does business would be
able to increase production to fulfill the Company's
requirements.
F-16
LIFETIME HOAN CORPORATION
Schedule II - Valuation and Qualifying Accounts
Lifetime Hoan Corporation
(in thousands)
COL. A COL. B COL. C COL. D COL. E
Additions
Balance Charged
at to
Beginning Costs and Deductions Balance
of at
Description Period Expenses (Describe) end of
period
Year ended December
31, 1998
Deducted from asset
accounts:
Allowance for doubtful
accounts............. $75 $444 $99 (a) $420
Reserve for sales
returns and
allowances....... 776 3,683 (c) 3,352 (b) 1,107
$851 $4,127 $3,451 $1,527
Year ended December
31, 1997
Deducted from asset
accounts:
Allowance for doubtful
accounts............. $75 $2,112 $2,112 (a) $75
Reserve for sales
returns and
allowances....... 716 3,533 (c) 3,473 (b) 776
$791 $5,645 $5,585 $851
Year ended December
31, 1996
Deducted from asset
accounts:
Allowance for doubtful
accounts............. $75 $500 $500 (a) $75
Reserve for sales
returns and
allowances....... 588 3,589 (c) 3,461 (b) 716
$663 $4,089 $3,961 $791
(a) Uncollectible accounts written off, net of
recoveries.
(b) Allowances granted.
(c) Charged to net sales.
S-1
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 Cohen
Milton L. Cohen
Chairman of the Board of
Directors and President
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ Milton Cohen
Milton L. Cohen Chairman of the Board of March 30, 1999
Directors and President
(Principal Executive Officer)
/s/ Jeffrey Siegel
Jeffrey Siegel Executive Vice-President March 30, 1999
and Director
/s/ Craig Phillips
Craig Phillips Vice-President - Distribution, March 30, 1999
Secretary and Director
/s/ Robert McNally
Robert McNally Vice-President - Finance March 30, 1999
and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Bruce Cohen
Bruce Cohen Vice-President - National Sales March 30, 1999
Manager and Director
/s/ Ronald Shiftan
Ronald Shiftan Director March 30, 1999
/s/ Howard Bernstein
Howard Bernstein Director March 30, 1999
Exhibit 21. Subsidiaries of the Registrant
Outlet Retail Stores, Inc.
Incorporated in the state of Delaware
Roshco, Inc.
Incorporated in the state of Illinois
Exhibit 23. Consent of Ernst & Young LLP
We consent to the incorporation by reference in the
Registration Statement (Form S-8 No. 33-51774) of
Lifetime Hoan Corporation pertaining to the 1991 Stock
Option Plan, of our report dated February 19, 1999, with
respect to the consolidated financial statements and
schedule of Lifetime Hoan Corporation included in the
Annual Report (Form 10-K) for the year ended December 31,
1998.
Ernst & Young LLP
Melville, New York
March 30, 1999
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-K
for the twelve months ended December 31, 1998.
(in thousands)
Item Item Description Amount
Number
5-02(1) Cash and Cash Items $ 9,438
5-02(2) Marketable Securities $ 0
5-02(3)(a)(1) Notes and Accounts Receivable -
Trade $ 13,726
5-02(4) Allowances for Doubtful
Accounts $ 420
5-02(6) Inventory $ 44,938
5-02(9) Total Current Assets $ 72,265
5-02(13) Property, Plant and Equipment $ 17,928
5-02(14) Accumulated Depreciation $ 6,105
5-02(18) Total Assets $ 105,072
5-02(21) Total Current Liabilities $ 13,925
5-02(22) Bonds, Mortgages and Similar
Debt $ 0
5-02(28) Preferred Stock - Mandatory
Redemption $ 0
5-02(29) Preferred Stock - No Mandatory
Redemption $ 0
5-02(30) Common Stock $ 126
5-02(31) Other Stockholders' Equity $ 91,021
5-02(32) Total Liabilities and
Stockholders' Equity $ 105,072
5-03(b)1(a) Net Sales of Tangible Products $ 116,144
5-03(b)1 Total Revenues $ 116,746
5-03(b)2(a) Cost of Tangible Goods Sold $ 60,507
5-03(b)2 Total Costs and Expenses
Applicable to Sales and Revenues$ 60,507
5-03(b)3 Other Costs and Expenses $ 0
5-03(b)5 Provision for Doubtful Accounts
and Notes $ 444
5-03(b)(8) Interest and Amortization of
Debt Discount $ 0
5-03(b)(10) Income Before Taxes and Other
Items $ 20,930
5-03(b)(11) Income Tax Expense $ 8,372
5-03(b)(14) Income/Loss Continuing
Operations $ 12,558
5-03(b)(15) Discontinued Operations $ 0
5-03(b)(17) Extraordinary Items $ 0
5-03(b)(18) Cumulative effect - Changes in
Accounting Principles $ 0
5-03(b)(19) Net Income or Loss $ 12,558
5-03(b)(20) Earnings Per Share - Primary $ 1.00
5-03(b)(20) Earnings Per Share - Fully
Diluted $ 0.98
