FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
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 (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Merrick Avenue, Westbury, NY 11590
(Address of Principal Executive Offices) (Zip Code)
(516) 683-6000
(Registrant's Telephone Number, Including Area Code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No__
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act)
Yes X No _
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 Par Value 11,051,349 shares outstanding as of April 30, 2005
LIFETIME HOAN CORPORATION
FORM 10-Q
FORE THE QUARTER ENDED MARCH 31, 2005
INDEX
Part I. Financial Information Page
No.
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheet
- March 31, 2005 and December 31, 2004 3
Unaudited Condensed Consolidated Statement of
Income - Three Months Ended March 31, 2005 and 4
2004
Unaudited Condensed Consolidated Statement of
Cash Flows - Three Months Ended March 31, 2005 5
and 2003
Notes to Unaudited Condensed Consolidated 6
Financial Statements
Report of Independent Registered Public 8
Accounting Firm
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure of 13
Market Risk
Item 4. Controls and Procedures 13
Part II. Other Information
Item 6. Exhibits 14
Signatures
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<table>
<caption>
<s>
March 31,
2005 December 31,
(unaudited) 2004
<c> <c> <c>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $431 $1,741
Accounts receivable, less allowances of
$3,330 in 2005 and $3,477 in 2004 22,876 34,083
Merchandise inventories 60,317 58,934
Prepaid expenses 2,127 1,998
Other current assets 7,634 6,669
TOTAL CURRENT ASSETS 93,385 103,425
PROPERTY AND EQUIPMENT, net 20,118 20,003
GOODWILL 16,200 16,200
OTHER INTANGIBLES, net 15,188 15,284
OTHER ASSETS 2,510 2,305
TOTAL ASSETS $147,401 $157,217
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $10,700 $19,400
Accounts payable and trade acceptances 9,920 7,892
Accrued expenses 18,266 20,145
Income taxes payable 3,806 5,476
TOTAL CURRENT LIABILITIES 42,692 52,913
DEFERRED RENT & OTHER LONG-TERM LIABILITIES 2,007 2,072
DEFERRED INCOME TAX LIABILITIES 4,446 4,294
LONG-TERM DEBT 5,000 5,000
STOCKHOLDERS' EQUITY
Common Stock, $.01 par value, shares
authorized: 25,000,000; shares issued
and outstanding:11,051,349 in 2005 and
11,050,349 in 2004 111 111
Paid-in capital 65,234 65,229
Retained earnings 28,390 28,077
Notes receivable for shares issued to
stockholders (479) (479)
TOTAL STOCKHOLDERS' EQUITY 93,256 92,938
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $147,401 $157,217
</table>
See accompanying independent registered public accounting firm
review report and notes to consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
<table>
<caption>
<s>
Three Months Ended March 31,
2005 2004
<c> <c> <c>
Net Sales $43,116 $37,129
Cost of Sales 24,899 21,689
Distribution Expenses 6,115 5,647
Selling, General and Administrative Expenses 10,298 9,108
Income from Operations 1,804 685
Interest Expense 199 127
Other Income (13) (15)
Income Before Income Taxes 1,618 573
Tax Provision 615 228
NET INCOME $1,003 $345
BASIC AND DILUTED INCOME PER COMMON SHARE $0.09 $0.03
WEIGHTED AVERAGE SHARES - BASIC 11,051 10,864
WEIGHTED AVERAGE SHARES AND COMMON SHARE
EQUIVALENTS - DILUTED 11,266 11,141
</table>
See accompanying independent registered public accounting firm review
report and notes to consolidated financial statements.
LIFETIME HOAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<table>
<caption>
<s>
Three Months Ended
March 31,
2005 2004
<c> <c> <c>
OPERATING ACTIVITIES
Net income $1,003 $345
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,056 952
Deferred income taxes (110) (572)
Deferred rent and other long term liabilities (65) 46
Provision for losses on accounts receivable 168 23
Reserve for sales returns and allowances 2,121 2,567
Changes in operating assets and liabilities:
Accounts receivable 8,918 6,808
Merchandise inventories (1,477) 730
Prepaid expenses, other current assets
and other assets (1,036) 214
Accounts payable and trade acceptances
and accrued expenses 241 (4,522)
Accrued income taxes payable (1,670) (2,479)
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,149 4,112
INVESTING ACTIVITIES
Purchase of property and equipment (1,002) (457)
NET CASH USED IN INVESTING ACTIVITIES (1,002) (457)
FINANCING ACTIVITIES
Repayment of short-term borrowings, net (8,700) (3,800)
Cash dividends paid (690) (678)
Payment of capital lease obligations (72) (32)
Proceeds from the exercise of stock options 5 399
NET CASH USED IN FINANCING ACTIVITIES (9,457) (4,111)
DECREASE IN CASH AND CASH EQUIVALENTS (1,310) (456)
Cash and cash equivalents at
beginning of period 1,741 1,175
CASH AND CASH EQUIVALENTS AT END OF PERIOD $431 $719
</table>
See accompanying independent registered public accounting firm
review report and notes to consolidated financial statements.
LIFETIME HOAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(unaudited)
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by U.S. 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, 2005 are not necessarily indicative
of the results that may be expected for the year ending December
31, 2005. It is suggested that these condensed consolidated
financial statements be read in conjunction with the financial
statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2004.
Reclassifications: Certain 2004 balances have been reclassified
to conform with the current presentation. These items include the
reclassification of deferred tax assets and non-current deferred
tax liabilities from income taxes payable that represent the
impact of the state tax rate on timing differences to conform
with the classification guidelines of SFAS No 109, "Accounting
for Income Taxes".
Note B - Distribution Expenses
Distribution expenses consist primarily of warehousing expenses,
handling costs of products sold and freight-out.
Note C - Credit Facility
The Company has a $50 million, secured credit facility (the
"Credit Facility") with a group of banks that matures in July
2009. Borrowings under the Credit Facility are secured by all of
the assets of the Company. Under the terms of the Credit
Facility, the Company is required to satisfy certain financial
covenants, including limitations on indebtedness and sale of
assets; a minimum fixed charge ratio; a maximum leverage ratio
and maintenance of a minimum net worth. At March 31, 2005, the
Company was in compliance with these covenants. Borrowings under
the Credit Facility have different interest rate options that are
based on an alternate base rate, the LIBOR rate and the lender's
cost of funds rate, plus in each case a margin based on a
leverage ratio.
As of March 31, 2005, the Company had $0.4 million of letters of
credit and trade acceptances outstanding and $10.7 million of
short-term borrowings and a $5.0 million term loan under its
Credit Facility, and as a result, the availability under the
Credit Facility was $33.9 million. The $5.0 million long-term
loan is non-amortizing, bears interest at 5.07% and matures in
August 2009. Interest rates on short-term borrowings at March
31, 2005 ranged from 3.875% to 4.00%.
Note D - Capital Stock and Stock Options
Cash Dividends: In December 2004, the Board of Directors of the
Company declared a regular quarterly cash dividend of $0.0625 per
share to stockholders of record on February 4, 2005, paid on
February 18, 2005. In March 2005, the Board of Directors
declared a regular quarterly cash dividend of $0.0625 per share
to stockholders of record on May 6, 2005, to be paid on May 20,
2005.
Earnings Per Share: Basic earnings per share have been computed
by dividing net income by the weighted average number of common
shares outstanding of 11,051,000 for the three months ended March
31, 2005 and 10,864,000 for the three months ended March 31,
2004. Diluted earnings per share have been computed by dividing
net income by the weighted average number of common shares
outstanding, including the dilutive effects of stock options, of
11,266,000 for the three months ended March 31, 2005 and
11,141,000 for the three months ended March 31, 2004.
LIFETIME HOAN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
(unaudited)
Note D - Capital Stock and Stock Options (continued)
Accounting for Stock Option Plan: The Company has a stock option
plan, which is more fully described in the footnotes to the
financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2004. The Company
accounts for options granted under the plan under the recognition
and measurement principles of APB Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations. No
stock-based employee compensation cost is reflected in net
income, as all options granted under the plan had an exercise
price equal to the market values of the underlying common stock
on the dates of grant. The following table illustrates the
effect on net income and net income per share if the Company had
applied the fair value recognition provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation" to stock-based employee compensation.
<table>
<caption>
<s>
Three Months
Ended March 31,
(in thousands, except per
share data)
<c> <c> <c>
2005 2004
Net income as reported $1,003 $345
Deduct: Total stock option
employee compensation
expense determined under
fair value based method
for all awards, net of
related tax effects (34) (32)
Pro forma net income $969 $313
Income per common share:
Basic and diluted - as reported $0.09 $0.03
Basic and diluted - pro forma $0.09 $0.03
</table>
In December 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 123 (R), "Share Based Payment: and Amendment to FASB
Statements 123 and 95." This statement requires that the cost
resulting from all share-based payment transactions be recognized in
the financial statements. In April 2005, the Securities and Exchange
Commission deferred the implementation of SFAS No. 123 (R). As a
result, we plan to adopt SFAS 123 (R) effective January 1, 2006. The
Company is currently evaluating the impact of this statement on its
financial statements.
Note E - Excel Acquisition
In July 2004, the Company acquired the business and certain
assets of Excel Importing Corp., ("Excel"), a wholly-owned subsidiary
of Mickelberry Communications Incorporated. Excel marketed and
distributed a diversified line of high quality cutlery, tabletop,
cookware and barware products under well-recognized premium brand
names, including Sabatier(R), Farberware(R), Retroneu Design Studio(R),
Joseph Abboud Environments(R), DBK-Daniel Boulud Kitchen(TM) and
Legnoart(R). The Excel acquisition provided quality brand names that
the Company can use to market many of its existing product lines and
added tabletop product categories to the Company's current product
lines. The purchase price, subject to post closing adjustments,
was approximately $8.5 million, of which $7.0 million was paid in cash
at the closing. The Company has not paid the balance of $1.5 million
since it believes the total of certain estimated post closing
inventory adjustments and certain indemnification claims are in excess
of that amount.
The Company has not yet determined either the amount or the
allocation of the purchase price for the Excel acquisition since the
calculation of post closing adjustments has not yet been finalized.
The acquisition was accounted for under the purchase method and,
accordingly, acquired assets and liabilities are recorded at their
fair values. Preliminary the $7.0 million of the purchase price paid
at closing has been allocated based on management's estimates as
follows (in thousands):
<table>
<caption>
<s>
Preliminary
Purchase
Price
Allocation
<c> <c>
Accounts receivable $ 1,300
Merchandise Inventories 4,800
Current liabilities (5,400)
License intangibles 6,300
Total assets acquired $ 7,000
</table>
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Lifetime Hoan
Corporation:
We have reviewed the unaudited condensed consolidated balance
sheet of Lifetime Hoan Corporation and subsidiaries (the
"Company") as of March 31, 2005 and the related unaudited
condensed consolidated statements of income and cash flows for
the three-month periods ended March 31, 2005 and 2004. These
financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with the auditing standards of the Public
Company Accounting Oversight Board (United States), the objective
of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying unaudited
condensed consolidated financial statements referred to above for
them to be in conformity with U.S. generally accepted accounting
principles.
We have previously audited, in accordance with the standards of
the Public Accounting Oversight Board (United States), the
consolidated balance sheet of Lifetime Hoan Corporation and
subsidiaries as of December 31, 2004, and the related
consolidated statements of income, stockholders' equity, and cash
flows for the year then ended [not presented herein] and in our
report dated March 11, 2005, we expressed an unqualified opinion
on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 2004 is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it was derived.
/s/ Ernst & Young LLP
Melville, New York
April 29, 2005
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading designer, developer and marketer of a
broad range of branded consumer products used in the home,
including Kitchenware, Cutlery and Cutting Boards, Bakeware and
Cookware, Pantryware and Spices, Tabletop and Bath Accessories.
Products are marketed under brand names including Farberware(R),
KitchenAid(R), Cuisinart(R), Hoffritz(R), Sabatier(R), DBK-Daniel
Boulud Kitchen(TM), Joseph Abboud Environments(R), Roshco(R),
Baker's Advantage(R), Kamenstein(R), Casa-Moda(R), Hoan(R),
Gemco(R) and :USE(R). The Company uses the Farberware(R) brand
name for kitchenware, cutlery and cutting boards and bakeware
pursuant to a 200-year royalty-free license. The Company licenses
the KitchenAid(R), Cuisinart(R), Sabatier(R), DBK-Daniel Boulud
Kitchen(TM) and Joseph Abboud Environments(R) trade names pursuant
to licenses granted by the owners of those brands. All other brand
names listed above are owned. Several product lines are marketed
within each of the Company's product categories and under brands
primarily targeting moderate to medium price points, through every
major level of trade.
Over the last several years, sales growth has come from: (i)
expanding product offerings within current categories, (ii)
developing and acquiring product categories and (iii) entering
new channels of distribution, primarily in the United States.
Key factors in the Company's growth strategy have been, and will
continue to be, the selective use and management of strong brands
and the ability to provide a steady stream of new products and
designs.
For the three-months ended March 31, 2005, net sales were $43.1
million, which represented a 16.1% growth over the previous
year's corresponding period. Net sales in the first quarter of
2005 for the Excel business that had been acquired in July 2004,
were approximately $1.8 million. Excluding the impact of this
acquisition, net sales for the first quarter of 2005 were
approximately $41.3 million, an 11.2% growth over the
corresponsding period in 2004. The 11.2% increase in sales was
primarily attributable to higher sales of cutlery products,
including shipments of the Company's new lines of KitchenAid(R)
branded cutlery, and increased sales of Kamenstein's pantryware
products.
The Company's gross profit margin is subject to fluctuation due
primarily to product mix and, in some instances, customer mix.
In the first quarter of 2005 our gross profit margin improved
compared to 2004 due primarily to increased sales of products
that carry higher gross profit margins.
Our operating profit increased significantly in the first quarter
of 2005 compared to the first quarter of 2004 due to three
factors: (i) significant sales growth in the 2005 quarter, (ii)
improved gross profit margins due primarily to increased sales of
products that carry higher gross profit margins and (iii) the
leverage gained from distribution expenses and selling, general
and administrative expenses growing at slower rates than sales.
The Company's business and working capital needs are highly
seasonal, with a significant majority of sales occurring in the
third and fourth quarters. In 2004, 2003 and 2002, net sales for
the third and fourth quarters combined accounted for 63%, 66% and
61% of total annual net sales, respectively, and operating
profits earned in the third and fourth quarters combined
accounted for 92%, 97% and 100% of total annual operating
profits, respectively. Inventory levels increase primarily in the
June through October time period in anticipation of the pre-
holiday shipping season.
Critical Accounting Policies and Estimates
Management's Discussion and Analysis of Financial Condition and
Results of Operations discusses the unaudited condensed
consolidated financial statements which have been prepared in
accordance with U.S. generally accepted accounting principles for
interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. The preparation of these
financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. On an on-going basis, management evaluates its estimates
and judgments, including those related to inventories. Management
bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or
conditions. The Company believes that the following discussion
addresses the Company's most critical accounting policies, which
are those that are most important to the portrayal of the
Company's consolidated financial condition and results of
operations and require management's most difficult, subjective
and complex judgments. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December
31, 2004.
Merchandise inventories, consisting principally of finished
goods, are priced under the lower-of-cost (first-in, first-out
basis) or market method. The Company's management periodically
reviews and analyzes the carrying value of inventory based on a
number of factors including, but not limited to, future product
demand of items and estimated profitability of merchandise.
The Company is required to estimate the collectibility of its
accounts receivable. A considerable amount of judgment is
required in assessing the ultimate realization of these
receivables including the current credit-worthiness of each
customer. The Company maintains allowances for doubtful accounts
for estimated losses resulting from the inability of its
customers to make required payments. If the financial conditions
of the Company's customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional
allowances may be required.
Effective January 1, 2002, the Company adopted Statement of
Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 141 requires all business combinations
initiated after June 30, 2001 to be accounted for using the
purchase method. Under SFAS No. 142, goodwill and intangible
assets with indefinite lives are no longer amortized but are
reviewed at least annually for impairment. Accordingly, the
Company ceased amortizing goodwill effective January 1, 2002.
For the year ended December 31, 2004, the Company completed its
annual assessment and based upon such assessment, no impairment
to the carrying value of goodwill was identified.
Effective January 1, 2002, the Company adopted SFAS 144,
"Accounting for Impairment or Disposal of Long-Lived Assets".
SFAS 144 requires that a long-lived asset shall be tested for
impairment whenever events or changes in circumstances indicate
that its carrying amount may not be recoverable. Based upon such
review, no impairment to the carrying value of any long-lived
asset has been identified.
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.
<table>
<caption>
<s>
Three Months Ended
March 31,
2005 2004
<c> <c> <c>
Net sales 100.0 % 100.0 %
Cost of sales 57.7 58.4
Distribution expenses 14.2 15.2
Selling, general and administrative
expenses 23.9 24.6
Income from operations 4.2 1.8
Interest expense 0.5 0.3
Other income - -
Income before income taxes 3.7 1.5
Tax provision 1.4 0.6
Net income 2.3 % 0.9 %
</table>
Three Months Ended March 31, 2005
Compared to Three Months ended March 31, 2004
Net Sales
Net sales for the three months ended March 31, 2005 were $43.1
million, an increase of approximately $6.0 million, or 16.1%,
higher than the comparable 2004 period. Net sales in the first
quarter of 2005 for the Excel business, which was purchased in
July 2004, were approximately $1.8 million. Excluding the net
sales attributable to the Excel business, net sales totaled
approximately $41.3 million, an 11.2% increase over the first
quarter of 2004's sales of $37.1 million. The increase was
primarily attributable to higher sales of cutlery products,
including sales of the Company's newly introduced lines of
KitchenAid(R) branded cutlery, and increased sales of Kamenstein's
pantryware products.
The Outlet Stores sales increased to $3.5 million for the three
months ended March 31, 2005 compared to $2.7 million in the
comparable 2004 period. The Outlet Stores had an operating loss
of approximately $0.6 million in the 2005 period compared to an
operating loss of approximately $0.8 million in the 2004
comparable period.
Cost of Sales
Cost of sales for the three months ended March 31, 2005 was $24.9
million, an increase of $3.2 million, or 14.8%, from the
comparable 2004 period. Cost of sales as a percentage of net
sales decreased to 57.7% in 2005 from 58.4% in 2004, due
primarily to increased sales of products that carry higher gross
profit margins.
Distribution Expenses
Distribution expenses for the three months ended March 31, 2004
were $6.1 million, an increase of $0.5 million, or 8.3%, from the
comparable 2004 period. Distribution expenses as a percentage of
net sales were 14.2% in the first quarter of 2005 as compared to
15.2% in 2004. The improved relationship reflects primarily the
benefits of labor savings and efficiencies generated by the
Company's main distribution center in Robbinsville, New Jersey.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months
ended March 31, 2005 were $10.3 million, an increase of 13.1%, or
$1.2 million, over the comparable 2004 period. As a percentage
of net sales, selling, general and administrative expenses for
the three months ended March 31, 2005 were 23.9%, as compared to
24.6% for the three months ended March 31, 2004. The increase in
selling, general and administrative expenses resulted primarily
from higher personnel costs in the Company's selling and
marketing departments and the additional operating expenses of
the Excel business acquired in July 2004.
Tax Provision
Income tax expense in the first quarter of 2005 was $0.6 million,
compared to $0.2 million in the comparable 2004 quarter. The
increase in income tax expense is related to the increase in
income before taxes from 2005 to 2004. The Company's marginal
income tax rate has decreased to approximately 38.0% in 2005
compared to 39.8% in 2004 due to lower state apportionment
factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of cash to fund liquidity needs
are: (i) cash provided by operating activities and (ii)
borrowings available under its credit facility. Its primary uses
of funds consist of capital expenditures, acquisitions, funding
for working capital increases, payments of principal and interest
on its debt and payment of cash dividends.
The Company has a $50 million, secured credit facility (the
"Credit Facility") with a group of banks that matures in July
2009. Borrowings under the Credit Facility are secured by all of
the assets of the Company. Under the terms of the Credit
Facility, the Company is required to satisfy certain financial
covenants, including limitations on indebtedness and sale of
assets, a minimum fixed charge ratio, a maximum leverage ratio
and maintenance of a minimum net worth. At March 31, 2005 the
Company was in compliance with these covenants. Borrowings under
the Credit Facility have different interest rate options that are
based on an alternate base rate, the LIBOR rate and the lender's
cost of funds rate, plus in each case a margin based on a
leverage ratio. As of March 31, 2005, the Company had
outstanding $0.4 million of letters of credit and trade
acceptances, $10.7 million of short-term borrowings and a $5.0
million term loan under its Credit Facility and, as a result, the
availability under the Credit Facility was $33.9 million. The
$5.0 million long-term loan is non-amortizing, bears interest at
5.07% and matures in August 2009. Interest rates on short-term
borrowings at March 31, 2005 ranged from 3.875% to 4.00%.
At March 31, 2005 the Company had cash and cash equivalents of
$0.4 million compared to $1.7 million at December 31, 2004.
In March 2005, the Board of Directors declared a regular
quarterly cash dividend of $0.0625 per share to stockholders of
record on May 6, 2005, to be paid on May 20, 2005. The dividend
to be paid will be approximately $0.7 million.
The Company believes that its cash and cash equivalents,
internally generated funds and its existing credit arrangements
will be sufficient to finance its operations for at least the
next twelve 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 all of its
purchase orders with its foreign manufacturers in United States
dollars. Thus, notwithstanding any fluctuation in foreign
currencies, the cost of the Company's purchase orders is
generally 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 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss that may impact the
consolidated financial position, results of operations or cash
flows of the Company. The Company is exposed to market risk
associated with changes in interest rates. The Company's
revolving credit facility bears interest at variable rates and,
therefore, the Company is subject to increases and decreases in
interest expense on its variable rate debt resulting from
fluctuations in interest rates. There have been no changes in
interest rates that would have a material impact on the
consolidated financial position, results of operations or cash
flows of the Company for the three month period ended March 31,
2005.
Item 4. Controls and Procedures
The Chief Executive Officer and the Chief Financial Officer of
the Company (its principal executive officer and principal
financial officer, respectively) have concluded, based on their
evaluation as of March 31, 2005, that the Company's controls and
procedures are effective to ensure that information required to
be disclosed by the Company in the reports filed by it under the
Securities and Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and include controls and
procedures designed to ensure that information required to be
disclosed by the Company in such reports is accumulated and
communicated to the Company's management, including the Chief
Executive Officer and Chief Financial Officer of the Company, as
appropriate to allow timely decisions regarding required
disclosure.
There were no significant changes in the Company's internal
controls or in other factors during the most recently completed
fiscal quarter that have materially affected, or are likely to
materially affect internal controls over financial reporting.
PART II - OTHER INFORMATION
Forward Looking Statements: This Quarterly Report on Form 10-Q
contains certain forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, including statements concerning the products,
results of operations and prospects of Lifetime Hoan Corporation
and its wholly-owned subsidiaries (collectively the "Company").
These forward-looking statements involve risks and uncertainties,
including but not limited to the following:
- our relationships with key customers;
- our relationships with key licensors;
- our dependence on foreign sources of supply and foreign
manufacturing;
- the level of competition in the industry;
- changes in demand for the Company's products and the success of
new products;
- changes in general economic and business conditions which could
affect customer payment practices or consumer spending;
- industry trends;
- increases in costs relating to manufacturing and transportation
of products;
- the seasonal nature of our business;
- the departure of key personnel;
- the timing of orders received from customers
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. Except as required
by law, we undertake no obligation to publicly update or revise
forward-looking statements which may be made to reflect events or
circumstances after the date of this filing or to reflect the
occurrence of unanticipated events.
Item 6. Exhibit(s) and Reports on Form 8-K.
(a)Exhibit(s) in the first quarter of 2005:
Exhibit 31.1 Certification by Jeffrey Siegel, Chief
Executive Officer, pursuant to Rule 13a-
14(a) or Rule 15d-14(a) of the Securities
and Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Exhibit 31.2 Certification by Robert McNally, Chief
Financial Officer, pursuant to Rule 13a-
14(a) or Rule 15d-14(a) of the Securities
and Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Exhibit 32 Certification by Jeffrey Siegel, Chief
Executive Officer, and Robert McNally, Chief
Financial Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
(b)Reports on Form 8-K in the first quarter of 2005:
On March 1, 2005, the Company filed a report on Form 8-
K announcing results of operations and financial condition
for its fourth quarter and year ended December 31, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Lifetime Hoan Corporation
May 9, 2005
/s/ Jeffrey Siegel
__________________________________
Jeffrey Siegel
Chief Executive Officer and President
(Principal Executive Officer)
May 9, 2005
/s/ Robert McNally
__________________________________
Robert McNally
Vice President - Finance and Treasurer
(Principal Financial and Accounting Officer)
Exhibit 31.1
CERTIFICATION
I, Jeffrey Siegel, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lifetime
Hoan Corporation ("the registrant");
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quartlery
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-14 and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f))) for the
registrant and have:
a. designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared;
b. designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected or is reasonably likely to materially affect the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: May 9, 2005
__/s/ Jeffrey Siegel______________
Jeffrey Siegel
President and Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Robert McNally, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Lifetime
Hoan Corporation ("the registrant");
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quartlery report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-14 and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f))) for the registrant and have:
a. designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during
the period in which this quarterly report is being prepared;
b. designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
c. evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter that has materially
affected or is reasonably likely to materially affect the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant's
auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent
functions):
a. all significant deficiencies in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: May 9, 2005
___/s/ Robert McNally___________
Robert McNally
Vice President and Chief Financial Officer
EXHIBIT 32
Certification by Jeffrey Siegel, Chief Executive Officer, and
Robert McNally, Chief Financial Officer,
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
I, Jeffrey Siegel, Chief Executive Officer, and I, Robert
McNally, Chief Financial Officer, of Lifetime Hoan Corporation, a
Delaware corporation (the "Company"), each hereby certifies that:
(1) The Company's periodic report on Form 10-Q for the period
ended March 31, 2005 (the "Form 10-Q") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and
(2) The information contained in the Form 10-Q fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
/s/ Jeffrey Siegel /s/ Robert McNally
Jeffrey Siegel Robert McNally
Chief Executive Officer Chief Financial Officer
Date: May 9, 2005 Date: May 9, 2005