Home Products International Announces Third Quarter Results Sales
Drop, Raw Material Cost Increases and Tax Asset Write-Offs Lead to
Loss In Quarter CHICAGO, Oct. 27 /PRNewswire-FirstCall/ -- Home
Products International, Inc. , (the "Company"), a leader in the
housewares industry, today announced financial results for the
third quarter of its 2003 fiscal year. The Company reported a net
loss of $10.8 million, $(1.35) per diluted share, for the third
quarter ended September 27, 2003 as compared to net earnings in the
third quarter of 2002 of $6.1 million, $0.74 per diluted share. Tax
asset write-offs, increased raw material costs and a decline in
sales negatively impacted earnings. The current quarter includes a
$7.8 million increase in the valuation allowance related to
deferred tax assets ($0.97 per diluted share), $1.3 million ($0.16
per diluted share) of costs related to the planned closing of the
Company's Eagan, Minnesota manufacturing facility and a $0.9
million gain, $0.11 per diluted share, related to buybacks of the
Company's high-yield bonds. Net sales in the quarter declined to
$61.4 million from $67.8 million a year ago. The net sales decrease
of 9% was primarily due to reduced sales of low margin items,
selling price decreases and a decline in store count at Kmart, one
of the Company's key customers. The Company reported positive cash
flow (which the Company defines as the net change in cash and debt)
during the third quarter of $2.9 million. Cash flow was driven by
reductions in working capital and a buyback of high-yield bonds at
less than face value. Net availability at September 27, 2003 under
the Company's amended $50 million senior loan agreement was $47
million, and there were no borrowings outstanding under the senior
loan agreement. The Company continues to be in compliance with all
of its loan covenants. For the nine months ended September 27,
2003, the Company reported a net loss of $17.3 million, $(2.17) per
diluted share, as compared to net earnings a year ago of $11.3
million, $1.37 per diluted share. Similar to the third quarter,
nine-month results were impacted by tax asset write-offs, increased
raw material costs and a decline in net sales. The nine-month
results include the $7.8 million increase in the valuation
allowance related to deferred tax assets ($0.97 per diluted share),
$1.5 million ($0.19 per diluted share) of costs related to the
planned closing of the Company's Eagan, Minnesota manufacturing
facility and a $0.9 million gain, $0.11 per diluted share, related
to buybacks of the Company's high-yield bonds. Net sales during the
nine-month period were $164.6 million, down 8% from 2002 nine-month
sales of $178.4 million. The net sales decrease was primarily due
to reduced sales of low margin items, selling price decreases and a
decline in store count at Kmart, one of the Company's key
customers. Cash flow for the first nine months of fiscal 2003 was a
positive $2.4 million. Commenting on the results, James R. Tennant,
chairman and chief executive officer, stated, "The rising cost of
plastic resin, our primary raw material, continued to have a
significant impact on the third quarter and our nine month results.
Our sales decline is not a function of poor performance, but rather
reflects our unwillingness to compete on items where there is no
margin. Given today's high resin costs, competing on price is not
in our best interest." With regard to Kmart, Mr. Tennant remarked,
"Kmart is one of our largest customers. As such their store
closings during both 2002 and 2003 have had an impact on our
comparable sales figures." The Company's third quarter conference
call will take place Tuesday, October 28, 2003, starting at 10:00
a.m. Eastern Time (9:00 a.m. CT, 8:00 a.m. MT, and 7:00 a.m. PT).
Dial 800/310-1961 approximately 10 minutes prior to conference
time. A replay of the Company's third quarter conference call will
be available from 1:00 p.m. Eastern Time October 28, 2003 through
midnight Eastern Time November 4, 2003. Dial 888/203-1112, then
enter confirmation code 326969. Home Products International, Inc.
is an international consumer products company specializing in the
manufacture and marketing of quality diversified housewares
products. The Company sells its products through national and
regional discounters including Kmart, Wal-Mart and Target,
hardware/home centers, food/drug stores, juvenile stores and
specialty stores. This press release contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995, including statements that may concern the
Company's future growth, operating results, product development,
markets and competitive position. While management makes its best
efforts to be accurate in making these forward-looking statements,
such statements are based on management's current expectations and
are subject to risks, uncertainties and assumptions, including
those identified below as well as other risks not yet known to the
Company or not currently considered material by the Company. Should
one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may differ
materially from those expected. These risks include unanticipated
plant closing costs; unanticipated difficulties and costs
associated with the relocation of equipment and the manufacture or
sourcing of products; market risks such as increased competition
for both the Company and its end users and changes in retail
distribution channels; dependence on a few large customers;
economic risks; financial risks such as fluctuations in the price
of raw materials, future liquidity and access to debt and equity
markets. For a more detailed description of these and other risk
factors, please refer to the Company's 10-K, 10-Q and other SEC
filings. The Company undertakes no obligation to update any such
factors or to announce the results of any revision to any of the
forward-looking statements contained herein to reflect future
events or developments. Home Products International, Inc. Condensed
Consolidated Balance Sheets ($ in thousands) (Unaudited) September
27, December 28, 2003 2002 Cash $2,841 $3,974 Accounts receivable,
net 34,905 48,937 Inventories 29,418 25,357 Deferred income taxes -
2,559 Prepaid expenses and other current assets 3,393 1,879 Current
assets 70,557 82,706 Fixed assets, net 33,908 37,189 Deferred
income taxes - 5,207 Other non-current assets 4,423 3,553 Other
intangibles, net 733 1,111 Goodwill, net 73,752 73,752 Total assets
$183,373 $203,518 Accounts payable $ 26,690 $22,986 Accrued
liabilities 25,665 28,993 Current maturities of long term debt 158
158 Current liabilities 52,513 52,137 Long term debt 126,052
129,621 Other non-current liabilities 4,400 4,293 Long term debt
and other non-current liabilities 130,452 133,914 Stockholders'
equity 408 17,467 Total liabilities and stockholders' equity
$183,373 $203,518 Home Products International, Inc. Condensed
Consolidated Statements of Operations ($ in thousands, except share
and per share amounts) (Unaudited) Thirteen weeks Thirteen weeks
ended ended September 27, 2003 September 28, 2002 Net sales $61,432
100.0% $67,799 100.0% Cost of goods sold 54,492 88.7% 51,198 75.6%
Gross profit 6,940 11.3% 16,601 24.5% Selling, general and
administrative expenses 7,176 11.7% 7,460 11.0% Amortization of
intangibles 126 0.2% 127 0.2% Operating profit (loss) (362) (0.6%)
9,014 13.3% Interest (expense) (3,384) (5.5%) (3,432) (5.1%) Other
income 737 1.2% 644 0.9% Earnings (loss) before income taxes
(3,009) (4.9%) 6,226 9.1% Income tax expense (7,786) (12.7%) (133)
(0.2%) Net earnings (loss) $ (10,795) (17.6%) $6,093 8.9% Net
earnings (loss) per share: Basic $(1.35) $0.78 Diluted $(1.35)
$0.74 Number of weighted average common shares outstanding: Basic
7,978,326 7,795,873 Diluted 7,978,326 8,258,516 Thirty-nine weeks
Thirty-nine weeks ended ended September 27, 2003 September 28, 2003
Net sales $164,610 100.0% $178,429 100.0% Cost of goods sold
141,376 85.9% 133,524 74.9% Gross profit 23,234 14.1% 44,905 25.1%
Selling, general and administrative expenses 22,790 13.8% 22,965
12.9% Amortization of intangibles 378 0.2% 380 0.2% Operating
profit (loss) 66 0.1% 21,560 12.0% Interest (expense) (10,312)
(6.3%) (10,370) (5.8%) Other income 806 0.5% 501 0.3% Earnings
(loss) before income taxes (9,440) (5.7%) 11,691 6.5% Income tax
expense (7,830) (4.8%) (433) (0.2%) Net earnings (loss) $ (17,270)
(10.5%) $ 11,258 6.3% Net earnings (loss) per share: Basic $(2.17)
$1.45 Diluted $(2.17) $1.37 Number of weighted average common
shares outstanding: Basic 7,973,434 7,785,076 Diluted 7,973,434
8,216,783 DATASOURCE: Home Products International, Inc. CONTACT:
Investor Relations, James Winslow, Executive VP & CFO of Home
Products International, Inc., +1-773-890-1010 Web site:
http://www.hpii.com/
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