Exhibit 99.1
FOR: Home Products International, Inc.
APPROVED BY: James R. Tennant, Chairman & CEO
Home Products International, Inc.
FOR IMMEDIATE RELEASE (773) 890-1010
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CONTACT: Investor Relations:
James Winslow, Executive VP & CFO
Home Products International, Inc.
(773) 890-1010
HOME PRODUCTS INTERNATIONAL ANNOUNCES
THIRD QUARTER RESULTS
Sales drop, raw material cost increases and tax asset write-offs lead to
loss in quarter
Chicago, IL, October 27, 2003 - Home Products International, Inc.
(Nasdaq SmallCap: HOMZ), (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
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Current assets 70,557 82,706
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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
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Total assets $ 183,373 $ 203,518
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Accounts payable $ 26,690 $ 22,986
Accrued liabilities 25,665 28,993
Current maturities of long term debt 158 158
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Current liabilities 52,513 52,137
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Long term debt 126,052 129,621
Other non-current liabilities 4,400 4,293
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Long term debt and other non-current liabilities 130,452 133,914
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Stockholders' equity 408 17,467
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Total liabilities and stockholders' equity $ 183,373 $ 203,518
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Home Products International, Inc.
Condensed Consolidated Statements of Operations
($ in thousands, except share and per share amounts)
(Unaudited)
Thirteen weeks Thirteen weeks Thirty-nine weeks Thirty-nine weeks
ended ended ended ended
September 27, September 28, September 27, September 28,
2003 2002 2003 2002
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Net sales $ 61,432 100.0% $ 67,799 100.0% $164,610 100.0% $178,429 100.0%
Cost of goods sold 54,492 88.7% 51,198 75.6% 141,376 85.9% 133,524 74.9%
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Gross profit 6,940 11.3% 16,601 24.5% 23,234 14.1% 44,905 25.1%
Selling, general and
administrative expenses 7,176 11.7% 7,460 11.0% 22,790 13.8% 22,965 12.9%
Amortization of intangibles 126 0.2% 127 0.2% 378 0.2% 380 0.2%
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Operating profit (loss) (362) (0.6%) 9,014 13.3% 66 0.1% 21,560 12.0%
Interest (expense) (3,384) (5.5%) (3,432) (5.1%) (10,312) (6.3%) (10,370) (5.8%)
Other income 737 1.2% 644 0.9% 806 0.5% 501 0.3%
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Earnings (loss) before
income taxes (3,009) (4.9%) 6,226 9.1% (9,440) (5.7%) 11,691 6.5%
Income tax expense (7,786) (12.7%) (133) (0.2%) (7,830) (4.8%) (433) (0.2%)
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Net earnings (loss) $(10,795) (17.6%) $ 6,093 8.9% $(17,270) (10.5%) $ 11,258 6.3%
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Net earnings (loss) per share:
Basic $(1.35) $0.78 $(2.17) $1.45
Diluted $(1.35) $0.74 $(2.17) $1.37
Number of weighted average
common shares outstanding:
Basic 7,978,326 7,795,873 7,973,434 7,785,076
Diluted 7,978,326 8,258,516 7,973,434 8,216,783