lifetime hoan corporation - library.corporate...

LIFETIME HOAN CORPORATIONA N N U A L R E P O R T 2 0 0 4

50,000

100,000

150,000

$200,000

'00'01'02'03'04

NET SALES(in thousands)

10,000

20,000

30,000

40,000

$50,000

'00'01'02'03'04

WORKING CAPITAL(in thousands)

'00'01'02'03'04

DILUTEDEARNINGS PER COMMONSHARE FROMCONTINUINGOPERATIONS

$10,000

'00'01'02'03'04

INCOME FROMCONTINUINGOPERATIONS(in thousands)

FINANCIAL HIGHLIGHTS

Lifetime Hoan Corporation is a leading designer, developer and marketer of a broadrange of branded consumer products used in the home, including Kitchenware, Cutleryand Cutting Boards, Bakeware and Cookware, Pantryware and Spices, Tabletop andBath Accessories.

COMPANY PROFILE

The KitchenAid® Cutlery Carousel; taking theworld's first silicone handle knives for a spin

During 2004, we took a number of steps to build on the strengths of our proven business model and toposition our Company for future growth. Over the years, the three essential ingredients we have used toforge our leadership position in the housewares industry are:

• An expanding portfolio of powerful brands

• A proven track record of innovation and design excellence

• Superior sourcing capabilities

Our consistent focus on each of these areas has enabled Lifetime to grow and prosper, and, we believe,will continue to provide a solid foundation for our future success.

An Expanding Portfolio of Powerful BrandsLifetime owns or licenses some of the most powerful brands in housewares, enabling us to differentiate ourproduct lines in the eyes of both our retail customers and consumers. Our two top-selling brands areKitchenAid® and Farberware®, which also rank as the #1 and #2 brands in kitchen gadgets and cutlery,according to the HFN 2003 Brand survey.

In 2004, we acquired the business and certain assets of Excel Importing Corp. This acquisition expandedour brand portfolio and, as well, added an important new product category – Tabletop. Among thebrands we acquired was Sabatier®, a highly respected, upper-end brand that we expect will be a keygrowth driver for Lifetime in the years to come.

Proven Track Record of Innovation and Design ExcellenceAt the heart of our Company is a strong culture of new product development and design excellence. Ourunique in-house Product Development and Design Team, consisting of 35 professional designers andengineers, is responsible for creating new products and packaging and merchandising concepts. ThisTeam utilizes state-of-the-art equipment that enables us to shorten product development time, expeditethe production process and “value-engineer” our products.

Lifetime has an impressive record of developing exciting new products. In 2004, we introduced over 600individual products. In addition, we applied for more than 30 utility and design patents over the past two years.

Superior Sourcing CapabilitiesWe have successfully sourced products overseas for more than 40 years. Moreover, we use our productdesign capabilities to help our suppliers to reduce their production costs and to take advantage of lower-cost raw materials. In 2004, we opened a second office in China and hired a Senior Vice President ofSourcing, based in Shanghai.

2004 Financial ResultsIn 2004, Lifetime’s net sales totaled a record $189.5 million, an increase of $29.1 million or 18% over 2003.For the year, we reported net income of $8.5 million, compared to $8.4 million for 2003. Earnings perdiluted share for 2004 came to $0.75, compared to $0.78 for 2003.

Net sales in 2004 for the three businesses we acquired over the past 18 months, :USE®, Gemco® and Excel,amounted to $14.3 million. The Company’s organic growth was driven primarily by strong sales across allclassifications of products sold under the KitchenAid® brand.

In 2004, we implemented plans to strengthen our infrastructure. In particular, we bolstered our product

DEAR FELLOW SHAREHOLDERS:

LIFETIME HOAN CORPORATION

Jeffrey Siegel

Chairman of the Board, President and Chief Executive Officer

Jeffrey Siegel (Chairman, President and CEO) and

Ronald Shiftan (Vice Chairman)

development and design, overseas sourcing and sales and marketing teams. We also added keyexecutives in each of our growing business classifications. Although the increased cost of this infrastructuredid affect the Company’s year-over-year earnings comparison, we believe these additional resources willhave a very positive impact on Lifetime’s long-term growth. In addition, it should be noted that we incurredover $900,000 in expenses related to Sarbanes-Oxley compliance work in 2004, the equivalent of $0.05 in earnings.

As of December 31, 2004, stockholders’ equity was $92.9 million, the equivalent of $8.41 in book value per share.

In summary, 2004 was a successful year for Lifetime during which we implemented many initiatives toexpand our presence in the housewares industry and accelerate our future growth. We broadened ourportfolio of licensed and owned brands, added several new classifications, developed exciting newproducts and pioneered new ways to use materials in our products.

2005 In 2005, we expect our results to reflect the benefits of the initiatives we put into place in 2004.

The goal of broadening our portfolio of powerful brands, continuing to invest in enhancing our ProductDevelopment and Design capabilities, strengthening our overseas sourcing organization and building ourinfrastructure is to be able to create, source and distribute unique products targeted to consumers atdifferent price points in every major level of trade.

For example, in our cutlery and cutting board businesses, the ability to offer products under theKitchenAid®, Cuisinart®, Sabatier®, Farberware®, Hoffritz®, DBK™-Daniel Boulud Kitchen and Laguiole™brands enables us to offer new, innovative higher-value products to which consumers can trade up, as wellas to provide better value and greater selection to consumers at more moderate price points.

We expect that a substantial portion of our growth in 2005 will come from the expansion of our shelf spacein a number of major retailers. At the beginning of the year, for example, we more than doubled our spacewith one of our leading customers for KitchenAid® products. We estimate that the increased space at thisone customer alone should produce over $10 million in additional sales for Lifetime in 2005.

Our results for 2005 should also benefit from the new categories we added in 2004. For example, theTabletop and Cookware categories that we acquired from Excel should contribute significantly in 2005. Wehave redesigned many Excel’s Tabletop lines to bring them in line with our high standards for product andpackaging quality and style.

In closing, we are proposing to change the name of our Company from Lifetime Hoan Corporation toLifetime Brands, Inc., reflecting the crucial role that well-known and well-respected brands play in ourbusiness model. We believe this new name more accurately expresses one of Lifetime’s most importantattributes and key competitive strengths. We look forward to communicating with our shareholders,customers and employees in the future using this new name to reinforce our most fundamental business strategy.

Thank you for your continued support.

Sincerely,

Jeffrey Siegel

Chairman of the Board, President and Chief Executive Officer5

Lifetime Hoan Corporation’s growth in 2004 wasmade possible, in large part, by the introductionof over 600 new products. The goal for 2005 is tointroduce no fewer than 700 new items. Thisremarkable achievement reflects our strong in-house product design and developmentcapabilities. Our Product Design andDevelopment Team, consisting of 35 professionaldesigners and engineers, enables us to extendour record of innovation and new productintroductions. This Team utilizes sophisticatedcomputer aided design technology that is alsocapable of creating product prototypes in-house.

Our designers collaborate closely with ourcustomers to create new, innovative and uniqueproducts. We monitor design trends andinnovations in the overall consumer productsindustry and attempt to apply new designconcepts to the categories in which we compete.

We also utilize our design capabilities to help oursuppliers achieve manufacturing efficiencies andwe work with our suppliers to introduce newmanufacturing technologies. We have creatednew ways to shorten development time andspeed up the production process. For example,we use state-of-the-art rapid prototypingmachinery to bring ideas to reality in a fraction ofthe time it would take using traditional modelingmethods. We also employ conceptual 3-Dpresentation, which renders concepts quickly andwith such photorealism that customers canimmediately comprehend the design and offer feedback.

We continue to invest in advanced designequipment, software and continuing education toensure that we stay current with new designtechnologies and capabilities. Together with ourongoing research into materials and materialsscience, these tools allow us to practice disruptivetechnology; designing products that are uniqueand bring a distinct and perceptible value to the consumer.

KITCHENAID®

The success of the KitchenAid® brand continuedduring 2004. We introduced over 130 new

KitchenAid® items in 2004.

Shipments of our new lines of KitchenAid® cutlerycommenced during the 4th quarter. Totaling over60 new items, each of the lines features tempered420J2 steel, a special high-carbon cutlery steelthat can be tapered to a perfect cutting edge.The cutlery is offered in a number of handlematerials to suit every preference: hollow handlestainless steel; super-strong Dupont Delrin®; triple-riveted impact-resistant ABS, and even the world’sfirst line of non-slip silicone. The cutlery is availablein open stock, in full sets and in multi-packs, suchas carving sets and steak knife sets.

Another major KitchenAid® introduction in 2004was the salad spinner. Over a year and a half indevelopment, the salad spinner was a majordesign and engineering challenge. TheKitchenAid® salad spinner requires only one handto control, can be loaded with fruits or vegetableswith no disassembly, has 2 easy-pour spouts fordispensing the extracted water, comes with 3dividers for the main basket, which allowssimultaneous spinning of multiple fruits andvegetables without having them mix together, hasa soft silicone ring on the handle and base toprevent slipping, and a clear 6-quart capacityouter bowl that can be used for both storage and serving.

Specialty tools and gadgets were also a focus forKitchenAid® in 2004. We introduced carrot andpotato peelers that use curved cutlery-grade steelblades that follow the contour of the vegetables,an oversized pancake turner, a specially shapedomelet turner and dual-purpose “turner tongs,”which can be used to effortlessly to flip an omeletor grab a piece of corn on the cob. New sets offood preparation bowls and mixing bowls werealso well received, as were a citrus juicer, gravyseparator, turkey grabbers, cheese and food milland an oversized colander. We also introduced anew line of high heat resistant nylon tools in acountertop ceramic crock as well as a series ofkitchen brushes.

In development for 2005 under the KitchenAid®

brand, is a mandoline slicer, with a unique spring-loaded blade cover system that continually

INNOVATIVE PRODUCT DESIGN AND BRAND MANAGEMENT

Reinventing the wheel with the KitchenAid® Salad Spinner;

one-handed, super-efficient function, with beauty to spare

guards the user’s hand from the slicing blade.Other kitchenware items for 2005 will be new all-stainless steel kitchen and serving tools, tools andgadgets featuring brushed stainless steel handlesand a line of copper handle kitchenware withsatin nickel accents. Other innovative products willinclude a fruit slicer with soft grip handles and acookie gun with 16 discs that conveniently storeinside the body of the cookie maker. We are alsoplanning to launch a complete line of KitchenAid®

sink accessories.

Silicone continues to grow as a significant materialin housewares. We introduced the world’s first fullline of silicone tools under the KitchenAid® brand

in 2001. In 2004, we expanded our selection toinclude a unique over-molded silicone trivet,pastry and basting brushes with easy-to-cleanheat resistant silicone bristles, an oversizedsilicone spoon rest and a non-stick coated rollingpin, featuring weighted silicone handles thatautomatically return to the horizontal position. Indevelopment for introduction in early 2005 aretwo lines of silicone handle tools and gadgets,stainless steel and nylon tongs, each featuringsilicone grips and a new series of silicone handlebarbecue equipment featuring heavy-duty zincalloy castings and stainless steel.

In addition to the world-class design, innovation2004

A garden of earthly delights; KitchenAid® rose and sunflower silicone bakeware molds

and unparalleled quality that are the hallmarks ofour line of KitchenAid® products, we have re-introduced color into the kitchen. The initialofferings of KitchenAid® kitchenware were in 8colors, and their success at retail revolutionizedthe look of kitchen accessories and heightenedthe demand for a broader selection. In 2004, weintroduced 8 new colors, ranging from “springbright” to “spice” colors, to tangerine and pink (apercentage of the sales of pink also benefit breastcancer research). This explosion of color has beeneffective at all levels of retail trade and across alllevels of consumer trends.

KitchenAid® silicone bakeware continued toexperience significant sales growth at retail. Weadded 12 more items to our silicone bakewareline in 2004, expanding into more unique shapesand specialty designs and three sizes of siliconebaking mats, perfect for baking prep work or evenas liners for the bottom of ovens. For 2005, wehave created new bakeware designs in silicone,such as a sunflower, a rose, an ornate “fancy”tube cake pan, as well as 4 sets of mini molds,organized in themes such as “holiday” or “animals”.

KitchenAid® metal bakeware continues to remainstrong at retail, with the introduction of 9 newitems for 2004. For this year, we will launch a lineof cast bakeware, featuring remarkably detailedcast sculptures, such as a Tudor Village andVictorian House that can used to create uniquecake designs. We expect this category to be amajor opportunity for growth and already haveanother group of creative designs in the works.

During 2004, we completed the designs for thenew line of KitchenAid® ceramic bakeware, whichwill consist of over 50 items and feature siliconegrips on almost every piece. The ceramicbakeware is oven, broiler, microwave and freezersafe, with oversized handles and featuring abeautiful “wave” pattern design. The silicone gripsallow for ease of handling, cool quickly if left onthe ceramic dishes in the oven, and are colormatched to the bakeware. The line will begin toship in spring of 2005 and the initial response fromretailers is overwhelmingly positive.

In 2005, we also expect to introduce a line of

KitchenAid® brand pantryware, including a spicerack and salt and pepper grinders, featuringceramic grinding mechanisms, in a variety offinishes and colors. We will also debut a papertowel holder, featuring our patented PerfectTear®

technology that enables simple, one-handed use.

FARBERWARE®

Our lineup of Farberware® cutlery and cuttingboards saw key additions in 2004 that quicklybecame major success stories. High value, largepiece-count block sets in triple-riveted lines,including new 14-piece and 23-piece ClassicForged sets were strong sellers, as were the largesets in the new Traditions series. The Japanese-inspired santoku knife, in various sizes,spearheaded sales of all levels of Farberware®

cutlery. Recognizing growing consumerpreferences for darker woods, we have created anew line of Farberware® cutlery with pakka woodhandles. We also brought to market 9 new cuttingboard designs in environmentally-friendly,plantation-grown bamboo, as well as woodboards with stainless steel handles and curvedwood paddle boards.

We introduced over 100 new Farberware® toolsand gadgets, including Farberware® Preferredand Farberware® Commercial, which featuresheavy-duty alloy castings. We createdFarberware® Innovations, perhaps the mostexciting group of Farberware® kitchenware ever tocome to market. Innovations will begin to ship inspring of 2005 and every item will be truly uniquein design and breakthrough in function. There areover 70 original items being developed and over30 will be available by end of the 2nd quarter.

We introduced 24 new Farberware® barbecueitems in 2004; including a silicone handle line ofequipment and tools in both black and red, and anewly designed instant-read digital barbecuethermometer fork. We also have designed aselection of unique Barbecue Innovations itemsthat will be available in 2005, including foldingand adjustable wire cooking grids, as well as abarbecue cutlery set and shears, each inmagnetized holders that can easily attach to the grill.

CUISINART®

Cuisinart® cutlery remains the standard-bearer forquality, performance and design. In addition tothe Continental and Ultra Edge lines, we added aTriple-Riveted series in 2004, featuring extra-widebolsters for safety and balance. We also launchedan engineering first, the patented Knife Vault™.The exterior of the Knife Vault™ is designed tocoordinate with the popular Cuisinart® countertopelectrics. The interior houses a complete 15-piececollection of Continental series cutlery. The KnifeVault™ utilizes a revolutionary locking mechanismthat makes it secure to leave on the countertopfor families with children. The Company will beintroducing a second version of the Knife Vault™ in 2005.

KAMENSTEIN®

With the release of over 150 new items, theKamenstein® brand had a number of majorsuccess stories in 2004, including the patentedPerfectTear® paper towel holder. The Companyreleased 10 versions of this unique product, whichuses an internal gearing system that allows forsimple one-handed use. By mid-2005 there will beover 35 versions available in all key basic andtrend colors, as well as the special electroplatedmetal finishes and material combinations found intoday’s kitchens; satin nickel, polished copper,burnished copper, chrome, burnished bronze,distressed black, gum metal, ceramic with wood,and wire in either black or chrome. ThePerfectTear® has transformed the countertoppaper towel holder from a kitchen basic into afunctional and decorative kitchen necessity.

In 2004, Kamenstein® also unveiled the Can-Do™line of colorful and stylish storage products, whichcombine magnetic bulletin boards in 3 sizes, witha variety of round, square, and rectangularcontainers with see-through tops that can be usedto easily sort and store a variety of items, fromspices to desk accessories. There are alsocylindrical-shaped holders, holders for paper,pens and pencils, 3 sizes of magnetic pictureframes, magnetic clips and sets of “reminder”magnets for important events or activities likebirthday parties or doctor’s appointments. For

102004

Genius loves company; the computerized SmartSpice™ rack

with built-in encyclopedia that answers any condiment query

2005, the Company will be offering countertopdisplay units that hold large numbers of theseimpulse-driven items, as well as sets of containers,and magnetic easels that can hold up to 12assorted containers.

Kamenstein® has also developed 12-, 16-, and 18-tin revolving spice racks utilizing magnetic roundtins. Also available are magnetic, rectangular,brushed stainless steel “strips” that can be hungvertically, horizontally, or at an angle to suit anydecorating need, in 3-, 5-, 6-, 9-, and 12-tin spice sets.

Other innovative new products to be sold underthe Kamenstein® brand are wipe dispensercontainers and clean-up kits, which combine aPerfectTear® paper towel holder and a wipedispenser container within a durable plasticcarrying case.

The popularity of the new Twist spice racks for2004 is reflected by the development of 15 newdesigns, mirroring many of the color and materialchoices being utilized in the next generation ofPerfectTear® paper towel holders. Other spiceracks of note are: the 15-jar, 18-jar, and 21-jarTower racks in assorted colors and finishes; a 16-jar and 20-jar stainless steel version of the Tower;Photo Frame spice racks; the nostalgic and novelFerris Wheel spice rack, and a 16-jar multi-stripedbamboo spice rack. Other exciting concepts thatwill be brought to market in the beginning of 2005are a 20-jar flat wire rack in the Chromeworkscollection, a sequel to the unusual Circa spicerack, and the fun Spice Train. Also in 2005, theCompany will begin shipping SmartSpice™, acombination spice rack and cookbook, with over200 recipes all contained in a computerized,portable, digital control module. The rack comeswith 16 premium spices in jars with easy to use siftand pour lids. Kamenstein® bottles all of its spicesin the United States in its own FDA-approvedbottling facility in Massachusetts.

For home organization and back-to-college,Kamenstein® has developed a stainless steelmessage board with a dry erase section, as wellas the Dorm Safe, a unique, compact, lockablesafe for personal items and valuables. These itemswill be available in time for the busy back-to-

school season in the 2nd and 3rd quarters of 2005.

ROSHCO®

Roshco® became a major brand in siliconebakeware in 2004, with a broad assortment of 14items in key colors, highlighted by the exclusivewire carrying “sled” that simplifies the handling ofthe larger silicone items. We will expand theassortment into specialty cake pans, mini bakingand chocolate molds, and set of mini noveltymolds in trend colors for 2005. The Company hasalso designed numerous fondues, multi-functionversions of the S’mores Maker™, a novel icecream serving set that can also be used forvarious desserts and a unique, easy-to-use cookie press.

The Roshco® division had a huge hit in 2004 withdesigns using famous Hershey’s® icons. There weretwo versions of the S’mores Maker™, each using aceramic marshmallow-shaped S’mores burner ona ceramic tray designed to resemble the famousHershey’s® Milk Chocolate bar. There was also aHershey’s® fondue in the shape of the Hershey’s®

Chocolate Kiss. For 2005, the Company will beshipping specialty silicone bakeware items suchas a 6-in-one Hershey’s® Kiss mold, a 6-in-oneHershey’s® Reese’s® Peanut Butter Cup mold, anda 4-in-one Hershey’s® Milk Chocolate Bar mold.There is also an 8-piece Kid’s Baking Set, withsilicone molds, cookie cutters and a mini rolling pin.

CASAMODA™CasaModa™ is as our primary brand for homeentertainment items. This brand features acollection of home entertaining items, such as theS’mores Maker™, the Smokeless Tabletop Griller™and ceramic serveware with candle warmers anddecorative wire stands. We are expanding theCasaModa™ barware collection to include abeautiful leather-covered grouping, a metallicgold and silver series and a unique “light up” lineof products using LED technology.

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Pièce de résistance; Sabatier® cutlery and kitchenware for the

finest in timeless French design and quality

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SABATIER®

In 2004, we acquired a license to distributeproducts under the well-known Sabatier® brand.Known for its heritage of classic French cutlery, wehave expanded the Sabatier® brand to includeFrench-inspired designs in dinnerware, flatware,cutting boards, kitchen tools and gadgets.

A key addition for 2005 will be a full line extensionof the Laguiole™ line, previously available only insteak knives known for their remarkable sharpness,distinctive shape and the famous “bee” insignia.The tremendous success of the contemporaryProSteel, a hollow handle stainless knife, hasproven that the brand has widespread appeal.We have added two new cutlery lines under theProSteel umbrella; one uses soft grip Santoprene®

and the other features never needs sharpeningblades. To compliment the line extension, theCompany will also be introducing both wood andpolypropylene cutting boards with the ProSteelhandle, as well as a full line of over 30 tools,gadgets and barbecue equipment.

We will also be expanding the traditional woodhandle Loire line to include a new cherry woodseries, and will add a full line of Loire tools andgadgets, bringing a French-inspired, updatedlook to wood tools and cutlery for the kitchen.

We are also introducing new patterns of Sabatier®

dinnerware and flatware. Sabatier® has proven tobe a brand with wide appeal. While respected forits classic heritage, retailers and consumers alikefully appreciate the updated and contemporarydesigns of Sabatier® in many categories of housewares.

:USE® - TOOLS FOR CIVILIZATION®

Originated by the renowned designer RobertSonneman, :USE® is an upscale line ofcontemporary bath and lighting products. Manyof the lines are carried by the finest bath anddecorative accessory retailers in America, andare respected for their breakthrough design andunparalleled quality. We acquired :USE® in late2003, and have taken a two-level approach toproduct development for the brand. Whilecontinuing to expand the assortment of product in

the premier lines, we have also developed threegreat collections of exciting, moderately priced,bath, closet, and bedroom storage accessories.We have received very positive feedback from allchannels of distribution for these storageaccessories, with particular interest from thoseaccounts that target the ever-expanding back-to-dorm business.

For 2005, we have introduced WetNets™, acollection of popularly priced, brightly coloredbath and shower accessories, made ofwaterproof nylon netting held within colorfulpolypropylene frames. Oversized and extra-strongsuction cups hold the WetNets™ to any smoothsurface and make installation simple and safe.WetNets™ will be available in many sizes, in sets,as wall-corner units, and in over-the-shower rod models.

JOSEPH ABBOUD ENVIRONMENTS™Joseph Abboud Environments™ takes the samecasual, understated approach to elegant fashionas Joseph Abboud does in his clothing designs. Hiskeen understanding of style, fabric, texture, andcolor, all combine into an updated classic stylethat is as flexible in its approach to dressing atable as it is when outfitting a wardrobe. For 2004,we offered over 50 items in the Abboudcollections of flatware, glassware, placemats,stainless tabletop accessories, candles anddinnerware. Both the South Beach and Ventanacollections were major successes at such upscaleretailers as Bloomingdale’s and Macy’s, and areperfect expressions of the Abboud philosophy. Byutilizing unique combinations of shapes, textures,and materials featuring a metallic “reactiveglaze” on the dinnerware that imparts aremarkable visual depth to the product, theAbboud collections create a fluid approach thatis effective for the entire range of casual to formal entertaining.

We also design and distribute the Kathy IrelandHome® Acafe collections of dinnerware, oven totable ceramics, and wooden serveware. Thedesigns and colors reflect elegant, updated tasteat affordable prices. In 2004, we launched 18items in dinnerware, both in full sets and open

142004

stock, in fashion color combinations of terra cottaand mustard, blue and mustard, and brick andmustard. We also introduced 32 oven-to-tableitems, using the same color combinations, andhighlighted by individual accent pieces such aslarge platters or ramekins done in solid colors. Aswith all fine ceramics, the Acafe collection isfreezer, oven, microwave and dishwasher safe.The wood serveware collection features honeytoned wood combined with rich, dark brownscrolled metal accents, and includes a saladbowl set, wine rack, coasters, bread basket, andserving tray.

152004

Alternative energy source; Joseph Abboud

Environments™ collection lights up any room

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162004

SELECTED FINANCIAL DATA

(in thousands, except per share data)Year Ended December 31,

2004 2003 2002 2001 2000 INCOME STATEMENT DATA:

Net sales $189,458 $160,355 $131,219 $135,068 $121,124 Cost of sales 111,497 92,918 73,145 75,626 70,189Distribution expenses 22,830 21,030 22,255 22,037 16,555Selling, general and administrative expenses 40,282 31,762 28,923 30,427 26,882Income from operations 14,849 14,645 6,896 6,978 7,498 Interest expense 835 724 1,004 1,015 730 Other income, net (60) (68) (66) (98) (82)

Income before income taxes 14,074 13,989 5,958 6,061 6,850 Income taxes 5,602 5,574 2,407 2,449 2,786 Income from continuing operations $8,472 $8,415 $3,551 $3,612 $4,064

Basic earnings per common share from continuing operations $0.77 $0.79 $0.34 $0.34 $0.37

Weighted average shares – basic 10,982 10,628 10,516 10,492 10,995

Diluted earnings per common share from continuing operations $0.75 $0.78 $0.34 $0.34 $0.37

Weighted average shares and common share equivalents – diluted 11,226 10,754 10,541 10,537 11,079

Cash dividends paid per common share $0.25 $0.25 $0.25 $0.25 $0.25

December 31,

2004 2003 2002 2001 2000 BALANCE SHEET DATA:

Current assets $102,543 $88,284 $66,189 $75,486 $73,280 Current liabilities 52,913 46,974 32,809 44,925 34,074 Working capital 49,630 41,310 33,380 30,561 39,206 Total assets 156,335 136,736 113,369 124,856 113,307 Short-term borrowings 19,400 16,800 14,200 22,847 10,746Long-term debt 5,000 - - - - Stockholders’ equity 92,938 86,081 78,309 78,061 77,517

Effective September 2002, the Company sold its51% controlling interest in Prestige Italiana, Spa(“Prestige Italy”), and, together with its minorityinterest shareholder, caused PrestigeHaushaltwaren GmbH (“Prestige Germany”, andtogether with Prestige Italy, the “PrestigeCompanies”) to sell all of its receivables andinventory to a European housewares distributor.The results of operations of the PrestigeCompanies through the date of disposal are

reflected as discontinued operations and aretherefore excluded from the selectedconsolidated income statement data presented above.

Certain selling, general and administrativeexpenses have been reclassified to distributionexpenses in 2003, 2002, 2001 and 2000 toconform with the current year’s presentation.

The Company’s Common Stock has been tradedunder the symbol “LCUT” on The NASDAQ National

Market (“NASDAQ”) since its initial public offering inJune 1991.

The following table summarizes the Company’s equity compensation plans as of December 31, 2004:

Number of securitiesremaining available forfuture issuance under

Number of securities to equity compensationbe issued upon Weighted average plans (excluding

exercise of outstanding exercise price of securities reflected inPlan category options outstanding options column (a))

(a) (b) (c)

Equity compensationplans approved by 694,807 $7.59 949,500 security holders

Equity compensationplans not approved by — — — security holders

Total 694,807 $7.59 949,500

The following table sets forth the high and low sales prices for the Common Stock of the Company for thefiscal periods indicated as reported by NASDAQ.

2004 2003 High Low High Low

First Quarter $17.65 $13.41 $7.10 $4.68 Second Quarter $22.79 $17.78 $7.93 $6.30 Third Quarter $22.98 $14.85 $10.50 $6.43 Fourth Quarter $15.90 $11.74 $17.12 $9.84

MARKET FOR THE REGISTRANT’S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The Company estimates that at December 31,2004, there were approximately 2,000 beneficialholders of the Common Stock of the Company.

The Company is authorized to issue 2,000,000shares of Series B Preferred Stock, par value ofOne Dollar ($1.00) each, none of which isoutstanding. The Company is also authorized toissue 100 shares of Series A Preferred Stock, parvalue of One Dollar ($1.00) each, none of which is outstanding.

The Company paid quarterly cash dividends of$0.0625 per share, or a total annual cashdividend of $0.25 per share, on its Common Stockduring each of 2004 and 2003. The Board ofDirectors currently intends to continue to payquarterly cash dividends of $0.0625 per share ofCommon Stock for the foreseeable future,although the Board may in its discretion determineto modify or eliminate such dividends at any time.