Lifetime Brands, Inc.

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Lifetime Brands, Inc.

One Merrick Avenue
Westbury, New York 11590-6601
U.S.A.
Telephone: (516) 683-6000
Fax: (516) 683-6116
Web site: http://www.lifetimebrands.com

Public Company
Incorporated: 1945 as Lifetime Cutlery Corporation
Employees: 751
Sales: $189.5 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: LCUT
NAIC: 321999 All Other Miscellaneous Wood Product Manufacturing; 326199 All Other Plastics Product Manufacturing; 327210 Glass and Glass Product Manufacturing; 332211 Cutlery and Flatware (Except Precious) Manufacturing; 332214 Kitchen Utensil, Pot, and Pan Manufacturing; 442299 All Other Home Furnishings Stores

Lifetime Brands, Inc., formerly Lifetime Hoan Corporation, designs, develops, markets, and distributes a wide range of household consumer products under both owned and licensed brands. These products include cutlery, kitchenware, cutting boards, bakeware, cookware, pantryware, tabletop products, and bath accessories. Among the trademarks the company owns are Hoffritz, Roshco, Baker's Advantage, Kamenstein, CasaModa, Hoan, Gemco, and USE; licensed brands include Farberware, KitchenAid, Cuisinart, Sabatier, DBK-Daniel Boulud Kitchen, and Joseph Abboud Environments. Each year, Lifetime's 35-person design department creates in excess of 600 new products, ranging from entry-level items through the mid-priced sector and to the upscale. The company farms out production to about 100 contract manufacturers located primarily in the People's Republic of China, where it maintains two showroom/offices. Lifetime sells its products primarily in the United States to about 900 customers, which include national retailers, department store chains, mass merchant retail and discount stores, supermarket chains, warehouse clubs, specialty stores, off-price retailers, and home centers—more than 33,000 individual retail locations in all. Its largest customer is the Wal-Mart Stores, Inc. chain, which accounts for about 24 percent of net sales. Through its Outlet Retail Stores, Inc. subsidiary, Lifetime Brands also owns and operates about 60 Farberware outlet stores located in 31 states. Most of Lifetime's products are shipped to its customers from the firm's 550,000-square-foot distribution center in Robbinsville, New Jersey.

Cutlery Beginnings

The founder of Lifetime Brands—and the chairman, CEO, and president of the company to the advent of the 21st century—was Milton Cohen, born in 1929, the son of a garment worker. Following high school, Cohen began working as a scissors and shears salesman. He eventually gained a position, at age 26, managing sales on the East Coast for a large cutlery firm.

Wanting to be his own boss, Cohen joined in 1957 with partner Sam Siegel to start a knife factory in Brooklyn under the name Reo Products. In 1960 Reo Products acquired 1945-founded Lifetime Cutlery Corporation, a larger distributor of knives than Reo. Cohen adopted Lifetime's name for his company.

Cohen, in a 1995 interview with the New York Times, estimated that there were about 100 cutlery manufacturers in the United States in the late 1950s, but that their numbers dwindled over the decades to three. Most of the companies failed because of increasing imports of cheap goods from Asia. A key to his company's survival, Cohen had concluded, was the 1961 decision to shift manufacturing overseas. That year the company began contracting with manufacturers in Japan for the production of parts. The parts were then shipped to the Brooklyn factory for assembly and packing. Freed from the production of basic parts, Cohen and Siegel could concentrate on design, packaging, and marketing. Over the years, Lifetime Cutlery shifted its production from one east Asian country to the next, progressing to Korea, Taiwan, the Philippines, Malaysia, Indonesia, Thailand, and China.

Between 1965 and 1967 Lifetime sold 50 million steak knives to Shell Oil for ten cents each. Shell gave one of the ivory-plastic-handled knives out to each customer coming in for a fill-up. Cohen told Business Week in 1994, "It was a lot of business and just a lot of hard work and no profit."

By staying away from such risky gimmicks and especially through relentless marketing, Cohen, Siegel, and a third partner increased sales by 1980 to $13 million. Within a year, however, both of Cohen's partners died. Needing cash for himself and to provide for his partners' families, Cohen—in collaboration with his former partners' sons, Jeffrey Siegel and Craig Phillips—executed a $16 million leveraged buyout (LBO) of the company in April 1984. Siegel and Phillips became executives at Lifetime, remaining in executive positions and on the board of directors into the early 2000s.

Acquisition of Hoan Products: Mid-1980s

Cohen and his new partners acquired a controlling interest in Hoan Products Ltd. in 1986; they soon owned the company outright, through a total investment of $4 million. Hoan Products was an unprofitable supplier of kitchen tools and gadgets generating annual sales of $14 million (whose name stood for "Housewares of All Nations"). Lifetime Cutlery became Lifetime Hoan Corporation following the takeover.

Still headquartered in low-cost Brooklyn, Lifetime Hoan moved the Hoan operation there, selling its New Jersey headquarters for $5 million. Other changes included redesigning the Hoan line, cutting the costs of manufacturing Hoan products, and selling them through Lifetime's established channels. The last of these maneuvers was particularly strategic as both Lifetime cutlery and Hoan kitchenware were positioned in the entrylevel and middle-market sectors, selling well in supermarkets, mass merchandise stores, and specialty shops. By the early 1990s half of the company's sales came from the Hoan line.

In 1987 Lifetime Hoan moved its manufacturing operation to Dayton, New Jersey, maintaining its headquarters in Brooklyn. That same year the company entered into its first licensing agreement. In a deal with The Walt Disney Company, Lifetime obtained the right to develop and market a line of Disney flatware and a line of kitchen gadgets under the Chef Mickey name. After some ups and downs, the two companies settled on profitable lines of children's housewares featuring Mickey and Minnie Mouse on such items as bag clips, party goods, bottle stoppers, and flatware.

Farberware and Pillsbury Licenses Marking Early 1990s

Revenues reached $38.5 million by 1989, while net income stood at $800,000. At this time Lifetime Hoan's cutlery lines, which included the Tristar and Old Homestead brands, remained on the lower end of the market. The company made its first move up the scale in early 1990 when it entered into a license agreement with Farberware, Inc. to market cutlery, kitchen gadgets, and barbecue accessories under the well-known and respected Farberware name. Founded in 1900, Farberware made its reputation with the stainless steel cookware it introduced soon after the end of World War II and the beginnings of the postwar boom years. In 1966 Farberware was acquired by Walter Kidde & Co., which sold the company to British conglomerate Hanson PLC in 1987. Under Hanson, Farberware began broadening the range of products bearing the famous brand, with the agreement with Lifetime Hoan a notable part of that trend. The Lifetime-created Farberware products were mid-priced and aimed at department stores and specialty shops, a retail sector already well acquainted with the Farberware name. This strategy enhanced both the probability that stores would stock the items and that consumers would buy them.

A similar licensing deal involving the leveraging of a familiar brand was reached in April 1991, this time with the Pillsbury Company for a line of moderately priced bakeware and kitchen accessories. Launched in mid-1992, the line eventually included items such as nonstick cookie sheets and pie pans, spatulas, whisks, and cookie cutters featuring the Pillsbury Doughboy logo, as well as accessories such as peelers, can openers, kitchen hooks, and steamers incorporating the Green Giant character. These products were aimed at the supermarket channel, where the Pillsbury brands were long established.

In June 1991 Lifetime Hoan sold 40 percent of the company to the public in an initial public offering (IPO) that raised $19.4 million. Portions of the proceeds were used to virtually eliminate Lifetime's outstanding debt (some stemming from the 1984 LBO) and to redeem all outstanding preferred stock, leaving about $7.7 million in working capital. The offering not only strengthened the company's balance sheet, it also positioned Lifetime to grow through continued aggressive new product development and through acquisition. In addition, the offering provided some liquidity for Cohen and the second-generation Siegel and Phillips shareholders, a lesson Cohen learned from the surprise deaths of his original partners. As of 1993, Cohen and his family held a 24 percent stake in Lifetime Hoan, while the Siegel and Phillips families held another 27 percent.

The company launched a new brand, Smart Choice, in 1993. This was a line of gadgets, packaged as impulse purchases and geared strictly for supermarkets, drugstore chains, and mass merchandisers. Smart Choice helped fuel a new product blitz whereby Lifetime introduced 500 new items in 1994, compared with 150 the previous year. By 1994 the company offered about 3,000 different products.

Company Perspectives:

Lifetime Brands, Inc. continues to grow by utilizing advanced design capabilities to emphasize innovation and quality within its portfolio of premium brands. Lifetime Hoan's in-house design and product development team, composed of 27 professionals, uses advanced training in state-of-the-art design programs to incorporate new materials and technology into our product assortments.

Sales reached $77.4 million in 1994, nearly double the figure of 1989. Profits stood at $8.6 million, which translated into a profit margin of 11.1 percent, quite impressive for a maker of mainly low-priced housewares. The Farberware license was responsible for much of the increase in both sales and profits, as the Farberware line accounted for more than a quarter of overall sales and an even larger portion of profits. The decision to sell more higher priced products (a Farberware set of knives might be priced three times higher than a similar set under one of Lifetime's other brands) was clearly beginning to pay dividends. The company's shareholders benefited thereby from a 3- for-2 stock split in late 1993.

Lifetime Hoan moved its headquarters to Westbury, New York (on Long Island), in October 1994. The company had outgrown its space in Brooklyn, but also found difficulty in attracting employees there. Of particular importance was hiring new computer-literate designers because the design department was being expanded and computerized during this period. The move to Long Island enabled Lifetime to bring in the highly skilled people it needed and to improve its productivity. The company paid $5 million for a 40,000-square-foot building, used as headquarters and for a showroom for visiting buyers. Previously, because many buyers were reluctant to venture into Brooklyn, Lifetime had had to maintain a showroom in expensive Manhattan, where high rents limited its size. At this new building, the company had a huge showroom, where buyers could tour both it and Lifetime's high-tech design shop at the same time. Meantime, Lifetime continued to contract out its manufacturing to its Asian partners, with final assembly and packaging handled at its New Jersey factory.

Mid- to Late 1990s Hoffritz, Farberware, and Roshco Deals

The mid- to late 1990s saw an ever more aggressive Lifetime Hoan complete a series of acquisitions and enter into new licensing and partnership deals. Having established itself as a leader in the entry-level and mid-priced segments of the housewares market, Hoan sought to enter the high-end market. To do so, it decided to acquire an instantly recognizable brand, rather than license one. After a two-year search, Lifetime settled upon the upscale 60-year-old Hoffritz brand, acquiring it in September 1995 from Alco Capital Group, Inc., an investment firm that had purchased Hoffritz in late 1992 from the bankrupt C.W. Acquisitions. At one time, there had been 197 Hoffritz stores selling upscale cutlery and kitchenware, but by the time Lifetime acquired the brand there were only six (and these were closed shortly thereafter).

Lifetime launched a new line of Hoffritz products in the spring of 1996, a line that within a few years exceeded 300 items. It featured knives, scissors, and shears; kitchenware, including spatulas, ladles, peelers, ice cream scoops, lemon zesters, serving spoons, graters, thermometers, and colanders; barbecue accessories; cutting boards; pepper grinders; bar accessories; and personal care implements, such as nail files and clippers, tweezers, manicure sets, and pocket knives. Lifetime marketed Hoffritz products in department and specialty stores through a "shop within a store" concept.

In 1995 Hanson spun off Farberware and 33 of its other smaller U.S. subsidiaries, forming U.S. Industries Inc. The new company soon began shopping Farberware around, having designated it a noncore asset. In April 1996 Lifetime Hoan joined with Syratech Corporation, an East Boston-based maker of tabletop and giftware products, to acquire most of the assets of Farberware for a total of about $52 million, $12.7 million of which was paid by Lifetime in cash. Syratech gained Farberware's cookware and small electrical appliances business. Lifetime and Syratech simultaneously entered into a 50–50 joint venture that gained outright ownership of the rights to the Farberware trademarks. Through this joint venture, Lifetime acquired a 200-year, royalty-free, exclusive right to the Farberware name in connection with the cutlery, kitchen gadgets, and barbecue accessories covered by the 1990 licensing agreement; in essence Lifetime thereby owned the trademark for these product categories. The company also acquired 50 Farberware outlet stores. In July 1997 Lifetime struck a deal with Meyer Corporation, the licensed manufacturer of Farberware cookware, in connection with these stores. Lifetime would continue to own and operate the stores, while Meyer and Lifetime would be jointly responsible for merchandising and stocking them, with Meyer handling the cookware and Lifetime the rest of the stock. Meyer would receive all revenue from sale of the cookware and reimburse Lifetime for 62.5 percent of the stores' operating expenses. Through this arrangement, the stores returned to profitability. In the meantime, in October 1997, Lifetime Hoan announced that it had initiated payment of cash dividends on its stock, starting with the third quarter of 1997, a move reflecting a company confident of its long-term prospects.

Key Dates:

1945:: Lifetime Cutlery Corporation is founded.
1957:: Milton Cohen and partner Sam Siegel start a knife factory in Brooklyn under the name Reo Products.
1960:: Reo acquires Lifetime Cutlery and adopts the acquired firm's name.
1961:: Company begins contracting with overseas manufacturers.
1984:: Cohen, along with Jeffrey Siegel and Craig Phillips, executes a $16 million leveraged buyout of the firm.
1986:: The partners acquire a controlling interest in Hoan Products Ltd., maker of kitchen tools and gadgets; after they gain full control of Hoan, Lifetime Cutlery is renamed Lifetime Hoan Corporation.
1987:: Lifetime enters into its first licensing agreement, with The Walt Disney Company.
1990:: Company agrees to licensing deal with Farberware, Inc.
1991:: Company completes an initial public offering (IPO), selling 40 percent of the company to the public.
1995:: Upscale Hoffritz brand is acquired.
1996:: Lifetime acquires a 200-year, royalty-free, exclusive right to the Farberware name in the cutlery, kitchen gadget, and barbecue accessory categories; as part of the deal, the company also assumes ownership of 50 Farberware outlet stores.
1998:: Company acquires Roshco, Inc., maker of better-quality bakeware under the Roshco and Baker's Advantage brands.
2000:: Pantryware/woodenware maker M. Kamenstein, Inc. is acquired; Jeffrey Siegel is named CEO.
2001:: Under license from Whirlpool Corporation, the KitchenAid line of kitchen gadgets debuts.
2002:: In agreement with Conair Corporation, Lifetime gains the right to produce Cuisinart brand cutlery.
2004:: The rights to several brands are gained through acquisition of Excel Importing Corp.
2005:: Company changes its name to Lifetime Brands, Inc.

Not resting on its laurels, Lifetime in August 1998 acquired Roshco, Inc., a Chicago-based, privately held distributor of better-quality bakeware under the Roshco and Baker's Advantage brands. The addition of Roshco, which had revenues of $10 million in 1997, not only extended the company further into the bakeware sector, it also added to the already strong array of higher-end products Lifetime could aim at department and specialty stores. In late 1998 Lifetime achieved similar aims through the signing of a license agreement with Corning Consumer Products Company for the design and marketing of cutlery and cutting boards under the well-known Revere brand. The first products from this line were introduced in early 1999.

Over the course of the 1990s Lifetime Hoan made a dramatic transition from a marketer of lower-end, lesser-known trademarks to that of higher-end, better-known brands. Farberware and Hoffritz quickly became Lifetime's most important brands, with these lines accounting for about 60 percent of overall sales in 1996, 70 percent in 1997, 75 percent in 1998, and 80 percent in 1999. The addition of the Roshco and Revere brands to the company stable were logical extensions of the same strategy. At the very end of the decade, in December 1999, Jeffrey Siegel was named president of Lifetime Hoan, having served as executive vice-president since 1967. Cohen remained chairman and CEO.

Aggressive Expansion in the Early 2000s

Lifetime stepped up its pace of expansion in the early 2000s. In September 2000 the company acquired privately held M. Kamenstein, Inc. Founded in Brooklyn, New York, by Meyer Kamenstein in 1893, M. Kamenstein produced pantryware, teakettles, and home organization accessories crafted of wood, glass, plastic, metal, and combinations thereof. A month later, Lifetime entered into a licensing agreement with Whirlpool Corporation to design, manufacture, and market a line of high-end kitchen utensils under the well-regarded KitchenAid brand. Lifetime's KitchenAid line became the company's top brand within just a couple of years. More than 470 KitchenAid items were introduced in 2001, the debut year, in what management called "the most successful introduction in the company's history." The agreement with Whirlpool was soon expanded to include bakeware, which hit store shelves in the second half of 2002. Also in 2000, after achieving only minimal sales from the Revere products, Lifetime terminated its agreement with Corning Consumer Products for the licensed Revere line. Finally, in December 2000 Siegel assumed the additional title of CEO. He was named chairman as well six months later, taking over for the retiring Cohen.

Following up on the success of the KitchenAid line, Lifetime secured the rights to produce cutlery under another prestigious brand, Cuisinart. This deal, completed in March 2002 with Conair Corporation, led to the introduction late that year of three lines of deluxe fine-edge Cuisinart brand cutlery. Also in late 2002 Lifetime created a new division called CasaModa, whose lines would feature moderately priced barware and serveware.

As the company was implementing this aggressive expansion, which along with organic growth in existing brands translated into fairly steady increases in revenues each year of about 10 percent, a major overhaul of Lifetime's warehouse management system was negatively affecting the bottom line. The systems and software were overhauled in order that the company could shift its warehousing from three separate facilities to a much larger, single, state-of-the-art warehouse in Robbinsville, New Jersey. This new facility, boasting 550,000 square feet, was finally operational in January 2003, by which time Lifetime had suffered through four straight years of depressed earnings ranging from $2.3 million to $4 million. The millions spent on the new warehouse and its critical systems paid off as net income reached $8.4 million in 2003 on record revenues of $160.4 million. Nevertheless, the resulting net profit margin of 5.2 percent, while a large improvement over the immediately preceding years, was a far cry from the 10 to 11 percent figures of the period from 1996 to 1998.

Lifetime Hoan's expansion continued apace in 2003 and 2004. The highly successful KitchenAid line was further broadened with the introductions of ceramic bakeware and serveware as well as premium barbecue tools. Late in the year the company reached an agreement with Whirlpool to expand the line again, to create premium kitchen cutlery, knife storage blocks, knife sharpeners, and wood cutting boards. These KitchenAid products debuted in 2004. One of Lifetime's most successful product introductions of 2003 was the S'mores Maker, a tabletop gadget for making the familiar campfire dessert made from graham crackers, chocolate, and marshmallows. Several different models were offered, sold under three company brands—CasaModa, Hoffritz, and Roshco. In February 2004 Lifetime entered into an agreement with Hershey Foods Corporation to begin producing and marketing S'mores Makers and chocolate fondue sets under the Hershey brand name. Another innovative tabletop item was the CasaModa Smokeless Tabletop Griller, which debuted in 2004.

Three more acquisitions broadened Lifetime's growing array of products still further. In October 2003 the company acquired the USE brand, which had been created in 1995 by noted industrial designer Robert Sonneman. This addition extended Lifetime's reach into the bathroom. USE products included decorative hardware, mirrors, lighting, and window decorations for the bath. One month later, Lifetime bought the assets of the bankrupt Gemco Ware, Inc., based in Hauppauge, New York. Gemco, whose history dated back to the late 1940s, produced a popular line of glassware that included salt and pepper shakers, sugar dispensers, and oil and vinegar cruets. In July 2004 Lifetime Hoan paid about $8.5 million for Excel Importing Corp., based in Westbury, New York. Lifetime thereby gained the license rights to several high-end brands, including Sabatier, DBK-Daniel Boulud Kitchen, and Joseph Abboud Environments, as well as extending its use of the Farberware brand into dinnerware and glassware. The Excel deal was particularly important because it expanded both Lifetime's product line, into flatware, dinnerware, and glassware, and its customer base, to include such high-end retailers as Williams-Sonoma, Crate and Barrel, and Neiman-Marcus.

The diversification drive inspired the company to change its name to Lifetime Brands, Inc. as a reflection of its expanding array of household products. The change took effect in June 2005. Further complementary acquisitions were anticipated as well as the introduction of hundreds of new products as Lifetime's annual revenues were expected to approach a quarter of a billion dollars.