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
FULL YEAR 2003 AND FOURTH QUARTER RESULTS
Sales drop, raw material cost increases and tax asset write-offs lead to
loss for year
Chicago, IL, February 24, 2004 - Home Products International, Inc.
(Nasdaq SmallCap: HOMZ), (the "Company"), a leader in the housewares
industry, today announced financial results for its 2003 fiscal year
and fourth quarter.
Full Year 2003 Results
----------------------
For the fiscal year ended December 27, 2003, the Company reported
a net loss of $11.3 million, ($1.42) per diluted share, as compared to net
earnings a year ago of $14.3 million, $1.73 per diluted share. Results were
impacted by a decline in net sales, increased raw material costs and tax
asset write-offs.
Net sales for the year were $233.6 million, down 6% from 2002 net sales
of $249.2 million. The net sales decrease was primarily due to reduced
sales of low margin items and selling price decreases. Partially offsetting
these negative sales factors were cost decreases related to customer
deductions and programs. Such deduction and program expenses, which
are recorded as a reduction of gross sales, were 5.9 % of gross sales
in 2003 and 8.4% of gross sales in 2002.
The full year results include a $15.0 million increase in raw
materials, a $7.6 million increase in the valuation allowance related to
deferred tax assets, $1.7 million of costs related to the closing of the
Company's Eagan, Minnesota manufacturing facility, a $2.3 million gain
related to buybacks of the Company's high yield bonds and $1.2 million
of income from a change in estimate related to prior years' restructuring
actions.
Commenting on the full year results, James R. Tennant, chairman
and chief executive officer, stated, "The rising cost of raw materials,
particularly plastic resin, had a significant impact on full year results.
Raw material costs increased by $15 million between years and this was not
recovered from our customers. Accordingly, we have taken steps to shore up
the profitability of our plastic product lines. Although we have cut costs
wherever possible and will continue to do so, we cannot afford to sell our
products below cost. If we cannot sell a product profitably, then we
generally won't sell it. We began to make such changes in 2003 and this
had a negative affect on sales."
With regard to Kmart, Mr. Tennant remarked, "Kmart is one of our
largest and most important customers. Kmart reduced its store count by
18% in 2003 and this had an impact on our sales."
Fourth Quarter Results
----------------------
The Company reported net earnings of $5.9 million, $0.74 per diluted share,
for the fourth quarter ended December 27, 2003 as compared to fourth quarter
net earnings a year ago of $3.0 million, $0.37 per diluted share. Earnings
in the quarter were driven by lower deduction and customer program costs,
reductions of restructuring reserves, gains on the buyback of the Company's
high yield bonds and a decrease in the accrual for income taxes.
Net sales in the fourth quarter were $69.0 million as compared to
$70.8 million in the fourth quarter of 2002, a decrease of 2.5%. Net sales
decreased primarily due to fewer promotional opportunities. A decline in
selling prices as compared to the fourth quarter of 2002 also contributed
to the sales decrease. Cost decreases related to customer deductions and
programs resulted in a reduction of sales allowances as compared to the
fourth quarter of 2002.
Such deduction and program expenses, which are recorded as a reduction
of gross sales, were 4.1% of gross sales in the fourth quarter of 2003
and 7.4% of gross sales in the fourth quarter of 2002. The reduction in
deduction and program expenses resulted in lower costs to the Company of
$2.4 million as compared to the fourth quarter of 2002. The lower costs
are the result of the final settlement and determination of several
programs. The resulting fourth quarter expense as a percent of gross
sales is not indicative of management's future expectations regarding
deduction and program expense percentages.
The 2003 fourth quarter results also include a $1.4 million gain
related to buybacks of the Company's high yield bonds, $1.2 million of
income from changes in estimates relating to the Company's prior years'
restructuring actions and $0.8 million of income from a decrease in the
accrual for income taxes. The fourth quarter of 2002 results include $1.3
million of income for the favorable resolution of matters relating to the
Company's prior years' restructuring actions.
Commenting on fourth quarter results, James R. Tennant, chairman
and chief executive officer, stated, "While we are pleased to report net
earnings in the fourth quarter, the earnings are primarily the result of a
few items that are not reflective of ongoing operating results. Our full
year loss is more indicative of the current operating environment. Raw
material costs have continued to increase already in 2004 and competitive
pressures limit our ability to recover these cost increases with a
selling price increase. While we are continuing to reduce the number
of unprofitable items we sell, I fully expect that we will report a loss
in the first quarter of 2004."
Cash Flow
---------
The Company reported negative cash flow (which the Company defines as
the net change in cash and debt) for the year of $4.0 million. The negative
cash flow was driven by the loss for the year and an increase in working
capital. Buybacks of the Company's high yield bonds at a discount to market
reduced debt by $2.4 million, but increases in working capital together with
the reported net loss caused an overall increase in debt for the year.
The Company continues to be in compliance with all of its loan
covenants. At December 27, 2003, the Company had borrowings outstanding
under the Company's $50 million senior loan agreement of $9.8 million.
Additional availability to borrow based on the Company's asset base and
outstanding letters of credit was $35.1 million.
Proposed Transaction
--------------------
As previously reported on February 5, 2004, the Company received a
proposal letter to negotiate a transaction contemplating the acquisition
of all of the Company's outstanding shares for $1.50 cash per share by
an entity formed by James R. Tennant, the Company's chairman and chief
executive officer. A special committee of the Company's independent
directors, together with its outside counsel and financial advisors, are
considering the proposed transaction. That special committee is actively
pursuing alternatives. The Company cautions that there cannot be any
assurance that further negotiations with Mr. Tennant will result
in a completed transaction, and the terms and conditions of any such
transaction may differ materially from the terms of the proposal letter.
The Company's full year 2003 and fourth quarter results conference call will
take place Tuesday, February 24, 2004, starting at 11:00 a.m. Eastern Time
(10:00 a.m. CT, 9:00 a.m. MT and 8:00 a.m. PT). Dial 800/310-1961, and give
confirmation code 485746 approximately 10 minutes prior to conference time.
A replay of the Company's full year 2003 and fourth quarter results
conference call will be available from 2:00 p.m. Eastern Time February 24,
2004 through midnight Eastern Time March 2, 2004. Dial 888/203-1112, then
enter confirmation code 485746.
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; unanticipated difficulties and costs associated with the
financing of the proposed acquisition of the Company's shares and procuring
the approval of holders of the Company's outstanding bonds. 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 (Unaudited)
($ in thousands)
December 27, December 28,
2003 2002
-------- --------
Cash $ 797 $ 3,974
Accounts receivable, net 47,963 48,937
Inventories 17,903 25,357
Deferred income taxes - 2,559
Prepaid expenses and other current assets 2,421 1,879
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Current assets 69,084 82,706
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Fixed assets, net 32,812 37,189
Deferred income taxes - 5,207
Other non-current assets 4,019 3,553
Other intangibles, net 608 1,111
Goodwill, net 73,752 73,752
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Total assets $ 180,275 $ 203,518
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Revolving line of credit and other current debt $ 9,969 $ 158
Accounts payable 21,425 22,986
Accrued liabilities 17,976 28,993
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Current liabilities 49,370 52,137
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Long term debt 120,578 129,621
Other non-current liabilities 3,986 4,293
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Long term debt and other non-current liabilities 124,564 133,914
-------- --------
Stockholders' equity 6,341 17,467
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Total liabilities and stockholders' equity $ 180,275 $ 203,518
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Home Products International, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
($ in thousands, except share and per share amounts)
Thirteen weeks Thirteen weeks Fifty-two weeks Fifty-two weeks
ended ended ended ended
December 27, December 28, December 27, December 28,
2003 2002 2003 2002
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Net sales $ 68,992 100.0% $ 70,763 100.0% $ 233,602 100.0% $ 249,192 100.0%
Cost of goods sold 56,184 81.4% 57,108 80.7% 197,560 84.6% 190,705 76.5%
Special (income) charges, net - - (33) (0.0%) - - (106) (0.0%)
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Gross profit 12,808 18.6% 13,688 19.3% 36,042 15.4% 58,593 23.5%
Selling, general and
administrative expenses 7,011 10.2% 7,762 11.0% 29,801 12.8% 30,727 12.3%
Amortization of intangibles 125 0.2% 127 0.2% 503 0.2% 507 0.2%
Restructuring and other
(income) charges (1,245) (1.8%) (1,303) (1.8%) (1,245) (0.5%) (1,303) (0.5%)
Asset impairment charges - - 567 0.8% - - 567 0.2%
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Operating profit 6,917 10.0% 6,535 9.1% 6,983 2.9% 28,095 11.3%
Interest (expense) (3,341) (4.8%) (3,453) (4.9%) (13,653) (5.8%) (13,823) (5.5%)
Other income 1,398 2.0% 58 0.1% 2,204 0.9% 559 0.2%
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Earnings (loss) before
income taxes 4,974 7.2% 3,140 4.3% (4,466) (2.0%) 14,831 6.0%
Income tax benefit (expense) 959 1.4% (94) (0.1%) (6,871) (2.9%) (527) (0.2%)
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Net earnings (loss) $ 5,933 8.6% $ 3,046 4.2% $ (11,337) (4.9%) $ 14,304 5.8%
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Net earnings (loss) per share:
Basic $0.74 $0.39 $(1.42) $1.83
Dilute $0.74 $0.37 $(1.42) $1.73
Number of weighted average
common shares outstanding:
Basic 7,978,416 7,817,218 7,975,399 7,804,309
Dilute 7,978,416 8,294,652 7,975,399 8,286,790