Exhibit 99.2
Home Products International, Inc.
Non-GAAP Financial Measures
During our third quarter conference call to discuss financial results on October 28, 2003,
a question was asked regarding a financial covenant within our senior loan agreement.
Such covenant includes a reference to Consolidated EBITDA (see specific definition in Note
(2) below). Consolidated EBITDA is a non- GAAP financial measure within the meaning of
Regulation G promulgated by the Securities and Exchange Commission. Although Consolidated
EBITDA is not a calculation in accordance with accounting principles generally accepted
in the United States ("GAAP"), the Company believes that Consolidated EBITDA is a useful
measure, along with other measurements under GAAP, in evaluating its financial performance
and its ability to service debt, and that EBITDA is widely used as a measure of operating
performance. It should also be noted that Consolidated EBITDA, as defined in the Company's
Loan and Security Agreement, excludes certain cash charges related to restructuring
initiatives. Included below is a reconciliation of the differences between Consolidated
EBITDA and our reported net earnings (loss) for the periods presented.
Thirteen- Thirteen- Thirty-nine Thirty-nine
weeks ended weeks ended weeks ended weeks ended
September 27, September 28, September 27, September 28,
2003 2002 2003 2002
-------- -------- -------- --------
Net earnings (loss) as reported $ (10,795) $ 6,093 $ (17,270) $ 11,258
Interest expense 3,384 3,432 10,312 10,370
Interest income (2) (7) (64) (61)
Income tax expense 7,786 133 7,830 433
Depreciation and amortization (1) 2,313 2,446 6,571 7,868
Gain on bond buyback (895) - (895) -
Eagan shutdown costs 1,297 - 1,537 -
Special charges (income), net - (73) - (73)
Gain on the sale of
servingware product line - (663) - (663)
-------- -------- -------- --------
Consolidated EBITDA (2) (3) $ 3,088 $ 11,361 $ 8,021 $ 29,132
======== ======== ======== ========
(1) Excludes depreciation related to the Eagan facility shutdown which is included in
the separate caption "Eagan Shutdown Costs". Depreciation expense, related to the
Eagan facility shutdown, in the thirteen weeks and thirty-nine weeks ended September
27, 2003 was $729 and $969, respectively. These amounts represent accelerated
depreciation of property, plant and equipment that will be sold or abandoned at the
time the Company exits the Eagan facility.
(2) Consolidated EBITDA (as defined in the Company's Loan and Security Agreement) - for
any period, net earnings (loss) for such period plus, without duplication and to the
extent reflected as a charge in the statement of such net earnings (loss) for such
period, the sum of (a) income tax expense, (b) interest expense, amortization or
writeoff of debt discount and debt issuance costs and commissions, discounts and
other fees and charges associated with money borrowed (including the loans), (c)
depreciation and amortization expense, (d) amortization of intangibles (including,
but not limited to, goodwill) and organization costs, (e) any extraordinary, unusual
or non-recurring expenses or losses (including, whether or not otherwise includable
as a separate item in the statement of such net earnings (loss) for such period,
non-cash losses on sales of assets outside of the ordinary course of business), (f)
any other non-cash charges (including, without limitation, the amount of any non-cash
deduction to net earnings (loss) as a result of any grant to members of management of
any capital stock of the borrower), and (g) to the extent not included in item (e)
above, charges or expenses incurred as a result of plant or facility closures, and
minus to the extent included in the statement of such net earnings (loss) for such
period, the sum of (a) any extraordinary, unusual or non-recurring income or gains
(including, whether or not otherwise includable as a separate item in the statement
of such net earnings (loss) for such period, gains on the sales of assets outside of
the ordinary course of business), and (b) any other non-cash income, all as
determined on a consolidated basis.
(3) Although Consolidated EBITDA is not a calculation in accordance with accounting
principles generally accepted in the United States ("GAAP"), the Company believes
that Consolidated EBITDA is a useful measure, along with other measurements under
GAAP, in evaluating its financial performance and its ability to service debt, and
that EBITDA is widely used as a measure of operating performance. Nevertheless, the
measure should not be considered in isolation or as a substitute for operating
income, cash flows from operating activities or any other measure for determining
operating performance or liquidity that is calculated in accordance with GAAP. In
addition, since all companies do not calculate EBITDA in the same manner, this
measure may not be comparable to similarly titled measure reported by other
companies. Further, because Consolidated EBITDA for this purpose is specifically
defined in the Company's Loan and Security Agreement, such measure may not be
comparable to similarly titled measures under other agreements or instruments to
which the Company is a party.