SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: September 8, 1998
(Date of the earliest event reported)
Home Products International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-17237 36-4147027
(State or other jurisdiction of (Commission (I.R.S. Employer
Incorporation or organization) File Number) Identification No.)
4501 West 47th Street Chicago, IL 60632
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (773) 890-1010
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Unless the context otherwise requires, references to (i) "HPI" or
the "Company" is to Home Products International, Inc. a Delaware
corporation, and its wholly owned subsidiaries, including Prestige
Plastics, Inc. (as defined), (ii) Prestige Plastics, Inc., ("Prestige"),a
Minnesota corporation, is to the wholly owned subsidiary of HPI created
to execute the acquisition of certain assets from Newell Co.
("Newell"), and (iii) the "Asset Acquisition" is to the acquisition by
HPI and the subsequent assignment to Prestige of substantially all of the
assets and certain liabilities of Newell's two operating units, Anchor
Hocking Plastics ("AHP") and Plastics Inc. ("PI"). AHP and PI are
collectively referred to herein as "Plastics".
On September 8, 1998 in accordance with the terms of an Asset
Purchase and Sale Agreement among, HPI, Plastics, and Newell, HPI
executed the Asset Acquisition with an all cash purchase price of
$78,000,000. The final purchase price is subject to a tangible net worth
adjustment.
In conjunction with the Asset Acquisition, HPI amended and restated
its $100,000,000 revolving credit agreement dated May 14, 1998, (the
"Prior Credit Agreement") among HPI, the several lenders from time to
time parties thereto and The Chase Manhattan Bank, as administrative
agent, to add, among other items, a $50,000,000 term loan, (the "Term
Loan"). The $150,000,000 Amended and Restated Credit Agreement, dated
September 8, 1998, (the "New Credit Agreement") among HPI, the several
lenders from time to time parties thereto and The Chase Manhattan Bank,
as administrative agent left the $100,000,000 revolving credit agreement
substantially the same as it was under the Prior Credit Agreement.
Financing for the Acquisition was obtained from the New Credit
Agreement. A portion of the total $78,000,000 cash consideration was
obtained from the Term Loan, and the remaining $28,000,000 was obtained
from the revolving credit facility portion of the New Credit Agreement.
Remaining availability under the New Credit Agreement after accounting
for the Acquisition was approximately $52,000,000.
AHP is a leading supplier of food storage containers sold through
mass-market chains, while PI is a leading supplier of upscale, disposable
plastic servingware distributed through institutional and retail markets.
It is HPI's intention to continue to utilize the assets acquired in the
same manor as they were used prior to the Asset Acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial statements of business acquired.
The following audited financial statements are filed herewith:
PRESTIGE PLASTICS, INC.(formerly Plastics, Inc.) - As of and For the
Years Ended December 31, 1997, 1996 and 1995
Report of Arthur Andersen LLP
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
The following unaudited financial statements are filed herewith:
PRESTIGE PLASTICS, INC.(formerly Plastics, Inc.) - Interim Financial
Statements
Condensed Consolidated Balance Sheet as of June 27,1998
Condensed Consolidated Statements of Operations for the
Six Months Ended June 27, 1998 and 1997
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 27, 1998 and 1997
Notes to Condensed Consolidated Financial Statements
b) Pro forma financial information.
The following unaudited pro forma financial statements are filed
herewith:
HOME PRODUCTS INTERNATIONAL, INC :
Unaudited Pro Forma Condensed Combined Balance Sheet as of
June 27, 1998
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Six Months Ended June 27, 1998
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
Unaudited Pro Forma Condensed Combined Balance Sheet as
of December 27, 1997
Unaudited Pro Forma Condensed Combined Statement of
Operations for the Year Ended December 27, 1997
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements
c) Exhibits
Exhibit Index
2. Asset Purchase and Sale Agreement among Plastics, Inc
and Home Products International, Inc. and Newell Co.
dated as of July 31, 1998.
10.1 $150,000,000 Amended and Restated Credit Agreement
among Home Products International, Inc. as Borrower,
the Several Lenders from time to time parties hereto,
and The Chase Manhattan Bank, as Administrative Agent
dated September 8, 1998.
10.2 Assignment and Assumption Agreement by and between
Home Products International, Inc. and Prestige
Plastics, Inc.
23. Consent of Arthur Andersen L.L.P.
PLASTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
AS OF DECEMBER 31, 1997, 1996 AND 1995
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Plastics, Inc.:
We have audited the accompanying consolidated balance sheets of Plastics,
Inc. (a Delaware corporation and wholly owned subsidiary of Newell Co.)
as of December 31, 1997, 1996 and 1995, and the related consolidated
statements of income, stockholder's equity and cash flows for each of the
three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Plastics, Inc. as of December 31, 1997, 1996 and 1995, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
July 23, 1998.
PLASTICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
AS OF DECEMBER 31, 1997, 1996 AND 1995
ASSETS 1997 1996 1995
-------- -------- --------
CURRENT ASSETS:
Cash $ 2 $ 2 $ 2
Accounts receivable, net 9,146 8,188 10,070
Inventories, net 8,000 10,287 11,629
Prepaid expenses and other 345 1,745 689
Current deferred tax asset - 154 445
-------- -------- --------
Total current assets 17,493 20,376 22,835
PROPERTY, PLANT AND EQUIPMENT, NET 15,952 14,730 12,417
-------- -------- --------
Total assets $33,445 $35,106 $35,252
======== ======== ========
LIABILITIES AND STOCKHOLDER'S 1997 1996 1995
-------- -------- --------
CURRENT LIABILITIES:
Accounts payable $ 849 $ 1,041 $ 1,212
Accrued compensation 649 801 1,572
Other accrued liabilities 3,161 3,158 3,405
Deferred tax liabilities 637 - -
-------- -------- --------
Total current liabilities 5,296 5,000 6,189
NONCURRENT DEFERRED TAX LIABILITIES 1,216 1,418 1,110
STOCKHOLDER'S EQUITY:
Common stock 393 393 393
Parent division equity (27,735) (18,326) (11,064)
Retained earnings 54,275 46,621 38,624
-------- -------- --------
Total stockholder's equity 26,933 28,688 27,953
-------- -------- --------
Total liabilities and $33,445 $35,106 $35,252
stockholder's equity ======= ======= =======
The accompanying notes are an integral part of these balance sheets.
PLASTICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
------- ------- -------
NET SALES $73,243 $72,320 $73,362
COST OF PRODUCTS SOLD 46,345 45,167 44,371
------- ------- -------
Gross income 26,898 27,153 28,991
SELLING, GENERAL AND 14,366 14,036 14,234
ADMINISTRATIVE EXPENSES
------- ------- -------
Operating income 12,532 13,117 14,757
NONOPERATING EXPENSE:
Other, net 91 123 338
------- ------- -------
Income before income taxes 12,441 12,994 14,419
INCOME TAXES 4,787 4,997 5,545
------- ------- -------
Net income $7,654 $7,997 $8,874
======= ======= =======
The accompanying notes are an integral part of these statements.
PLASTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(In thousands)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Parent
Common Division Retained
Stock Equity Earnings Total
----- -------- ------- -------
BALANCE, December 31, 1994 $393 $ (5,932) $29,750 $24,211
Changes in parent division - (5,132) - (5,132)
equity
Net income - - 8,874 8,874
----- -------- ------- -------
BALANCE, December 31, 1995 393 (11,064) 38,624 27,953
Changes in parent division - (7,262) - (7,262)
equity
Net income - - 7,997 7,997
----- -------- ------- -------
BALANCE, December 31, 1996 393 (18,326) 46,621 28,688
Changes in parent division - (9,409) - (9,409)
equity
Net income - - 7,654 7,654
----- -------- ------- -------
BALANCE, December 31, 1997 $393 $(27,735) $54,275 $26,933
===== ======== ======= =======
The accompanying notes are an integral part of these statements.
PLASTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
------- ------- -------
OPERATING ACTIVITIES:
Net income $7,654 $7,997 $8,874
Adjustments to reconcile net income to
net cash provided by operating
activities-
Depreciation and amortization 3,529 2,647 2,391
Deferred income taxes 589 599 684
(Gain) loss on sale of equipment - 4 (49)
Changes in current accounts-
Accounts receivable (958) 1,882 (1,603)
Receivable from/payable to parent, net (9,409) (7,262) (5,132)
Inventories 2,287 1,342 (1,390)
Prepaid expenses and other 1,400 (1,056) (681)
Accounts payable (192) (171) 618
Accrued expenses and other (149) (1,018) (541)
------- ------- -------
Net cash provided by operating activities 4,751 4,964 3,165
------- ------- -------
INVESTING ACTIVITIES:
Expenditures for property, plant and (4,751) (4,978) (3,277)
equipment
Proceeds from disposals of property, - 14 106
plant and equipment
------- ------- -------
Net cash used in investing activities (4,751) (4,964) (3,165)
------- ------- -------
Net change in cash - - -
CASH, beginning of year 2 2 2
------- ------- -------
CASH, end of year $ 2 $ 2 $ 2
======= ======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid during the year for-
Income taxes $4,779 $5,571 $4,888
The accompanying notes are an integral part of these statements.
PLASTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(1) Description of the Business-
Plastics, Inc. (the "Company"), a wholly owned subsidiary of Newell
Co. ("Newell"), is a leading manufacturer and marketer of plastic
food storage and servingware products sold to the consumer and
commercial foodservice markets located in St. Paul, Minnesota. The
Company is comprised of two operating units, Anchor Hocking Plastics
("AHP") and Plastics Inc. ("PI").
(2) Significant Accounting Policies-
Principles of consolidation-
The consolidated results of the Company include the accounts of both
AHP and PI. All intercompany accounts between the two operating units
are eliminated in consolidation.
Use of estimates-
The preparation of these financial statements required the use of
certain estimates by management in determining the Company's assets,
liabilities, revenue and expenses and related disclosures.
Revenue recognition-
Sales of merchandise are recognized upon shipment to customers.
Allowances for doubtful accounts-
Historically, write-offs for the Company have been insignificant;
therefore, no bad debt expense or allowance for bad debt has been
recorded in the accompanying financial statements.
Inventories-
Inventories are stated at the lower of cost or market value. Cost of
inventories was determined by the "last in, first-out" ("LIFO")
method. If the "first-in, first out" ("FIFO") inventory valuation
method had been used, inventories would have increased by $423,000,
$397,000 and $1,003,000 at December 31, 1997, 1996, and 1995,
respectively.
The components of inventories at December 31, net of the LIFO reserve,
were as follows:
1997 1996 1995
---------- ---------- ----------
Materials and supplies $1,896,000 $2,716,000 $2,202,000
Work in process 2,689,000 3,044,000 3,520,000
Finished products 3,415,000 4,527,000 5,907,000
---------- ---------- ----------
$8,000,000 $10,287,000 $11,629,000
========== =========== ===========
Inventory reserves at December 31, totaled $824,000 in 1997,
$1,064,000 in 1996, and $2,103,000 in 1995.
Property, plant and equipment-
Property, plant and equipment at December 31 consisted of the
following:
1997 1996 1995
------------ ------------ ------------
Land $232,000 $232,000 $232,000
Buildings and improvements 3,275,000 3,258,000 3,124,000
Machinery and equipment 40,134,000 36,316,000 34,914,000
Furniture and fixtures 1,065,000 1,055,000 924,000
Construction in process 3,912,000 3,488,000 199,000
Accumulated depreciation (32,666,000) (29,619,000) (26,976,000)
------------ ------------ ------------
$15,952,000 $14,730,000 $12,417,000
=========== =========== ===========
Replacements and improvements are capitalized. Expenditures for
maintenance and repairs are charged to expense. The components of
depreciation are provided by annual charges to income calculated to
amortize on the straight-line basis, the cost of the depreciable
assets over their depreciable lives. Estimated useful lives
determined by the Company are as follows:
Buildings and improvements 20-40 years
Machinery and equipment 5-12 years
Accrued liabilities-
Other accrued liabilities at December 31 included the following:
1997 1996 1995
---------- ---------- ----------
Customer accruals $2,153,000 $1,795,000 $2,341,000
Other accruals 1,008,000 1,363,000 1,064,000
---------- ---------- ----------
$3,161,000 $3,158,000 $3,405,000
========== ========== ==========
Customer accruals are promotional allowances and rebates given to
customers in exchange for their selling efforts.
At December 31, the Company has minimum rental payments through the
year 2003 under noncancellable operating leases as follows:
Minimum
Year Payments
------------ ----------
1998 $916,000
1999 148,000
2000 6,000
2001 6,000
2002 6,000
Thereafter 1,000
----------
$1,083,000
==========
Total rental expense for all operating leases was approximately
$1,186,000, $1,215,000 and $1,250,000 in 1997, 1996 and 1995,
respectively.
(5) Retirement and Other Post-Retirement Benefit Plans-
Salaried and hourly employees that meet certain requirements are
eligible to participate in the Newell Pension Plan for Salaried and
Clerical Employees. The pension plan is administered by Newell.
Newell pays the Company's portion of the plans' costs and funding
requirements. The Company reimburses Newell for these costs. Total
expense under this plan was $497,000, $439,000 and $488,000 for 1997,
1996, and 1995.
The employees of the Company are also eligible to participate in the
Newell Co. Long-Term Savings and Investment Plan. The Company matches
a portion of the employees contribution. Profit sharing expense was
$242,000, $280,000 and $212,000 for 1997, 1996 and 1995.
Employees of the Company are eligible to receive other post-retirement
benefits, primarily health benefits, under the Newell Co. Health and
Welfare Plan. Newell Co. charges the Company an annual expense
calculated by Newell Co.'s actuaries. Expense related to this plan
was $93,000, $85,000 and $138,000 in 1997, 1996 and 1995,
respectively.
(6) Income Taxes-
The Company accounts for income taxes as prescribed by SFAS No. 109,
"Accounting for Income Taxes." For U.S. income tax purposes, the
Company's income is included in Newell Co.'s consolidated Federal
income tax return. As a result, the Company records Federal taxes as
an intercompany transaction with Newell.
The provision for income taxes for the years ended December 31
consists of the following (computed on the basis of the Company as a
standalone entity for U.S. Federal income tax purposes):
1997 1996 1995
---------- ---------- ----------
Current-
Federal $3,932,000 $4,118,000 $4,504,000
State 266,000 280,000 357,000
---------- ---------- ----------
4,198,000 4,398,000 4,861,000
Deferred 589,000 599,000 684,000
---------- ---------- ----------
Total $4,787,000 $4,997,000 $5,545,000
========== ========== ==========
(7) Other Nonoperating Expense-
Total other nonoperating expense consists of the following expense
(income) items for the years ended December 31:
1997 1996 1995
-------- --------- ---------
Management bonuses $91,000 $134,000 $545,000
Gain on sale of machinery - (10,000) (57,000)
Sales and use tax refund - - (163,000)
Other - (1,000) 13,000
-------- --------- ---------
$91,000 $123,000 $338,000
======== ========= =========
(8) Significant Customer-
Sales to four customers accounted for 43%, 46% and 43% of net sales in
1997, 1996, and 1995. At December 31, 1997, 1996 and 1995,
receivables from these customers accounted for 43%, 38% and 46% of the
Company's net trade accounts receivable, respectively.
(9) Transactions with Newell Co.-
Newell Co. provides centralized services to the Company including
treasury management, cash management, receivables processing, payables
processing, computer information services and payroll processing. No
costs related to these services have been allocated by Newell Co. to
the Company.
Newell Co. also maintains worker's compensation reserves at the
Corporate level. Newell Co. charges the Company an annual expense
representing the Company's share of the Newell Co. expense. Worker's
compensation expense of the Company was $190,000, $371,000 and
$310,000 for the years ended 1997, 1996 and 1997, respectively.
(10) Significant Event-
Subject to an order of condemnation by the City of St. Paul,
Minnesota, the Company will be forced to relocate its Ryan Avenue
facility. The Company is presently in the process of negotiating the
final terms for the relocation with the city.
PRESTIGE PLASTICS, INC.
(formerly Plastics, Inc.)
Interim Financial Statements - Unaudited
Condensed Consolidated Balance Sheet as of June 27, 1998.....6
Condensed Consolidated Statements of Operations for the Six
Months Ended June 27, 1998 and 1997.........................7
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 27, 1998 and 1997.........................8
Notes to Condensed Consolidated Financial Statements.........9
PRESTIGE PLASTICS, INC.
Condensed Consolidated Balance Sheet
As of June 27, 1998
(unaudited)
(in thousands)
Assets
Current assets:
Cash and cash equivalents .................. $ 2
Accounts receivable, net ................... 7,272
Inventories, net ........................... 7,345
Prepaid expenses and other current assets .. 451
------
Total current assets ..................... $15,070
Property, plant and equipment, net............ 15,129
------
Total assets.................................. $30,199
======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ........................... $ 1,409
Accrued liabilities ........................ 5,742
-----
Total current liabilities ................ 7,151
-----
Stockholders' equity:
Common Stock .............................. 393
Additional paid-in capital ................. 1,569
Retained earnings .......................... 21,086
------
Total stockholders' equity ............... 23,048
------
Total liabilities and stockholders' equity.... $30,199
======
The accompanying notes are an integral part of the financial statements.
PRESTIGE PLASTICS, INC.
Condensed Consolidated Statements of Operations
For the Six Months Ended June 27, 1998 and 1997
(unaudited)
(in thousands)
1998 1997
------ ------
Net sales .............................. $32,357 $37,355
Cost of goods sold ..................... 18,851 22,952
------ ------
Gross profit ........................ 13,506 14,403
Operating expenses ..................... 8,867 9,324
------ ------
Operating profit .................... 4,639 5,079
Other income, (expense) ................ (141) (154)
------ ------
Earnings before income taxes ........... 4,498 4,925
Income tax (expense) benefit ........... (1,508) (1,687)
------ ------
Net earnings $ 2,990 $ 3,238
====== ======
The accompanying notes are an integral part of the financial statements.
PRESTIGE PLASTICS, INC.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 27, 1998 and 1997
(unaudited)
(in thousands)
1998 1997
------- -------
Cash flows from operating activities:
Net earnings .......................... $ 2,990 $ 3,238
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization ........ 1,549 2,049
Changes in assets and liabilities:
Decrease in accounts receivable .... 1,695 321
Decrease in inventories ............ 372 539
Decrease (increase )in prepaids and
other assets ....................... 73 (101)
Receivable from/ payable to parent,
net ................................ (6,875) (3,752)
Increase in accounts
payable and accrued liabilities .... 2,161 704
Other operating activities, net .... 585 (864)
------- -------
Net cash provided by operating activities 2,550 2,134
Cash flows from investing activities:
Capital expenditures, net (2,550) (2,134)
------- -------
Net increase in cash and cash equivalents $ - $ -
Cash and cash equivalents at beginning of
period ................................ 2 2
------- -------
Cash and cash equivalents at end of
period ................................ $ 2 $ 2
======= =======
The accompanying notes are an integral part of the financial statements.
PRESTIGE PLASTICS, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
(in thousands)
Note Prestige Plastics, Inc. ("Prestige"), a wholly owned subsidiary
1. of Newell Co., prior to acquisition by Home Products
International, Inc. on September 8, 1998, was named Plastics, Inc.
and is a leading manufacturer and marketer of plastic food storage
and servingware products sold to the consumer and commercial
foodservice markets. Prestige is comprised of two operating units,
Anchor Hocking Plastics ("AHP") and Plastics Inc.("PI").
The consolidated results of Prestige include the accounts of
both AHP and PI. All intercompany accounts between the two
operating units have been eliminated in consolidation.
The unaudited condensed consolidated financial statements included
herein as of June 27, 1998 and 1997 reflect, in the opinion of
Prestige management, all adjustments (which include normal
recurring adjustments) necessary for the fair presentation of the
financial position, the results of operations and cash flows.
The results of the interim periods are not necessarily indicative
of the results to be expected for the full year.
Note Inventories are stated at the lower of cost or market. Costs of
2. inventories were determined by the "last-in-first-out" ("LIFO")
method. If the "first-in-first-out" method had been used,
inventories would have increased by $706 as of June 27, 1998.
Prestige maintains resrves for slow moving and obsolete inventory
which are adjusted throughout the year as determined necessary
by management.
Note The provision for income taxes is determined by applying an
3. estimated annual effective tax rate to income before income
taxes. The estimated annual effective tax rate is based upon
the most recent annualized forecast of pretax income and
permanent book/tax differences.
HOME PRODUCTS INTERNATIONAL, INC
Unaudited Pro Forma Condensed Combined Financial Statements
Contents
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 27, 1998
......................................................................11
Unaudited Pro Form Condensed Combined Statement of Operations for the
Six Months Ended June 27, 1998........................................12
Notes to Unaudited Pro Forma Condensed Combined Financial Statements.....13
HOME PRODUCTS INTERNATIONAL, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 27, 1998
(in thousands)
HPI PRESTIGE Pro Forma Pro Forma
Historical Historical Adjustments Combined
--------- ---------- ------- -------
Assets
Current assets:
Cash and cash equivalents $ 3,832 $ 2 $ (2) (p) $ 3,832
Accounts receivable, net 36,444 7,272 - 43,716
Inventories, net ....... 27,554 7,345 706 (a) 35,605
Prepaid expenses and
other current assets... 1,377 451 - 1,828
------- ------ ------- -------
Total current assets 69,207 15,070 704 84,981
Property, plant and
equipment, net......... 40,719 15,129 (967) (p) 54,881
Intangible and other
assets................. 123,848 - 55,000 (b) 179,348
500 (c)
------- ------ ------- -------
Total assets............ $233,774 $30,199 $ 55,237 $319,210
======= ====== ======= =======
Liabilities and
Stockholders' Equity
Current liabilities:
Current maturities of
long-term obligations... $ 991 $ - $ 750 (d) $ 1,741
Accounts payable ....... 15,818 1,409 - 17,227
Accrued liabilities .... 20,624 5,742 285 (e) 26,651
------- ------ ------- -------
Total current liabilities 37,433 7,151 1,035 45,619
Long-term obligations -
net of current maturities 134,314 - 77,250 (f) 211,564
Other long-term
liabilities 6,273 - - 6,273
Stockholders' equity
Common Stock ........... 80 393 (393) (g) 80
Additional paid-in
capital................ 48,304 1,569 (1,569) (g) 48,304
Retained earnings ...... 7,784 21,086 (21,086) (g) 7,784
Common Stock held in
treasury - at cost..... (264) - - (264)
Currency translation
adjustments......... (150) - (150)
------- ------ ------- -------
Total stockholders' equity 55,754 23,048 (23,048) 55,754
------- ------ ------- -------
Total liabilities and
stockholders' equity...... $233,774 $30,199 $ 55,237 $319,210
======= ====== ======= =======
The accompanying notes are an integral part of the financial statements.
HOME PRODUCTS INTERNATIONAL, INC.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Six Months Ended June 27, 1998
(in thousands, except per share amounts)
HPI PRESTIGE Pro Forma Pro Forma
Historical Historical Adjustments Combined
------- ------- ------ -------
Net sales ........ $107,393 $ 32,357 $ (2,500) (h) $137,250
Cost of goods sold 72,561 18,851 (2,000) (h) 89,129
(283) (i)
------- ------- ------ -------
Gross profit .. 34,832 13,506 (217) 48,121
Operating expenses 21,298 8,867 (373) (j) 31,253
773 (k)
688 (l)
------- ------- ------ -------
Operating profit 13,534 4,639 (1,305) 16,868
Interest (expense)... (6,388) - (2,897) (m) (9,285)
Other income (expense) 107 (141) - (34)
------- ------- ------ -------
Earnings (loss) before 7,253 4,498 (4,202) 7,549
income taxes ...
Income tax (expense) (2,978) (1,508) 1,392 (n) (3,094)
Benefit ........
------- ------- ------ -------
$ 4,275 $ 2,990 $ (2,810) $ 4,455
Net earnings (loss) ======= ======= ====== =======
from continuing
operations .......
Net earnings from
continuing operations
per share - basic $ 0.54 (o) $ 0.56 (o)
======= ======
Net earnings from
continuing operations
per share - diluted $ 0.52 (o) $ 0.54 (o)
======= ======
Weighted average
common shares
outstanding - basic 7,938 7,938
diluted 8,300 8,300
The accompanying notes are an integral part of the financial statements.
HOME PRODUCTS INTERNATIONAL, INC.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(in thousands)
The accompanying Unaudited Pro Forma Condensed Combined Balance
Sheet as of June 27, 1998 gives effect to the Asset Acquisition and the
New Credit Agreement as if each had occurred on June 27, 1998. The
Unaudited Pro Forma Condensed Combined Statement of Operations for the
Six Months Ended June 27, 1998 gives effect to the Asset Acquisition and
the New Credit Agreement as if each occurred on December 28, 1997.
The pro forma data does not purport to represent what the Company's
actual results of operations or financial position would have been had
such transactions occurred on such dates. The pro forma statement of
operations also does not purport to project the results of operations of
the Company for the current year or for any other period.
Pro forma adjustments relating to the Asset Acquisition and the New
Credit Agreement are as follows:
(a) Reflects adjustment to inventories to record on a FIFO basis
rather than the LIFO basis used prior to the Asset
Acquisition.
(b) Reflects the Asset Acquisition at an all cash purchase price
of $78,000 as if it occurred on June 27, 1998. The Asset
Acquisition was accounted for as a purchase; therefore, the
purchase price will be allocated to the assets and liabilities
assumed based upon their fair values. Certain transaction
fees and expenses totaling $1,000 that were incurred in
connection with the Asset Acquisition are included in the
excess of purchase price over the fair value of the net assets
acquired (i.e., goodwill). The preliminary pro forma
calculation of the excess of the purchase price over the fair
value of the net assets acquired is $55,000 which will be
amortized over a period of forty years.
(c) Deferred financing fees related to the closing of the New
Credit Agreement were $500 and will be amortized over the life
of the Term Loan which is six years.
(d) Reflects the adjustment to long-term debt to report the
current maturity of the Term Loan entered into as a part of
the Asset Acquisition.
(e) Reflects accruals established for financing fees and expenses
incurred as a part of the Asset Acquisition, but not paid as
of such date, the elimination of liabilities not assumed as
part of the Asset Acquistion and certain immaterial items.
(f) Reflects the additional long-term debt incurred in connection
with the Asset Acquisition. A total of $750 of the Term Loan
was classified as current.
(g) Reflects the elimination of Prestige's equity accounts.
(h) Reflects elimination of intercompany sales and cost of sales
between Prestige and Newell. It is anticipated that Newell
will no longer purchase these items from Prestige.
(i) Reflects elimination of the change in the LIFO reserve from
December 27, 1997 to June 27, 1998.
(j) Reflects elimination of administrative costs charged by Newell
for providing Prestige with the following services; (i)
treasury management, (ii) cash management, (iii) receivables
processing, (iv) payables processing, (v) computer services
and (vi) payroll processing.
(k) Reflects the additional costs to be incurred by Prestige to
replace the functions that were previously performed by Newell
(those items listed in footnote (j) above).
(l) Reflects increased goodwill amortization as a result of the
Asset Acquisition. Goodwill is amortized over forty years.
(m) Reflects the estimated increase in interest expense as if the
Asset Acquisition and the New Credit Agreement had occurred on
December 28, 1997. The components of pro forma interest
expense are as follows:
In Thousands
Six months of interest expense on $78,000
cash purchase price................................ $ 2,925
Six months of deferred financing fee
amortization on $500 of fees....................... 42
Reduction of Unused Commitment Fees as a
result of additional borrowings under the
New Credit Agreement............................... (70)
-------
Net pro forma adjustment to interest expense $ 2,897
=======
(n) The adjustment to pro forma income tax expense is to adjust the
Pro Forma Combined income tax expense to reflect HPI's estimated
combined statutory rate of 41%.
(o) Weighted average common shares outstanding used in the
calculation of earnings per share - basic were 7,938, and used
in the calculation of earnings per share - diluted were 8,300.
(p) Item was not acquired or assumed as a part of the Asset Acquisition.
HOME PRODUCTS INTERNATIONAL, INC
Unaudited Pro Forma Condensed Combined Financial Statements
Contents
Unaudited Pro Forma Condensed Combined Balance Sheet as of
December 27, 1997........................................ 16
Unaudited Pro Forma Condensed Combined Statement of
Operations for the Year Ended December 27, 1997.......... 17
Notes to Unaudited Pro Forma Condensed Combined
Financial Statements..................................... 18
HOME PRODUCTS INTERNATIONAL, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of December 27, 1997
(in thousands)
HPI Pro Forma PRESTIGE Pro Forma Pro Forma
Historical Seymour Historical Adjustments Combined
Assets ------- ------- ------ ------- -------
Current assets:
Cash and cash
equivalents $ 583 $ 2,208 $ 2 $ (2) (p) $ 2,791
Accounts
receivable,net 20,882 12,386 9,146 - 42,414
Inventories, net 12,797 11,598 8,000 423 (a) 32,818
Prepaids and other
current assets 428 358 345 1,131
------- ------- ------ ------- -------
Total current assets 34,690 26,550 17,493 421 79,154
Property, plant and
equipment, net 28,380 12,121 15,952 (967) (p) 55,486
Intangible and other 55,000 (b)
assets 36,273 89,168 - 500 (c) 180,941
------- ------- ------ ------- -------
Total assets ..... $ 99,343 $127,839 $33,445 $ 54,954 $315,581
======= ======= ====== ======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of
long-term obligations $ 3,850 $ 2,737 $ - $ 750 (d) $7,337
Accounts payable 9,664 2,532 850 - 13,046
Accrued liabilities 12,913 10,333 5,662 3,887 (e) 32,795
------- ------- ------ ------- -------
Total current
liabilities 26,427 15,602 6,512 4,637 53,178
Long-term obligations
- net of current
maturities 30,700 96,987 - 77,250 (f) 204,937
Other long-term
liabilities - 6,270 - - 6,270
Stockholders' equity
Common Stock... 67 13 393 (393) (g) 80
Additional paid-in
capital 33,956 14,267 1,569 (1,569) (g) 48,223
Retained earnings... 8,616 (5,300) 24,971 (24,971) (g) 3,316
Common Stock held
in treasury-at cost (264) - - - (264)
Currency translation
adjustments ..... (159) - - (159)
------- ------- ------ ------- -------
Total stockholders'
equity 42,216 8,980 26,933 (26,933) 51,196
------- ------- ------ ------- -------
Total liabilities and
stockholders' equity $ 99,343 $127,839 $33,445 $ 54,954 $315,581
======= ======= ====== ======= =======
The accompanying notes are an integral part of the financial statements.
HOME PRODUCTS INTERNATIONAL, INC.
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Year Ended December 27, 1997
(unaudited)
(in thousands, except per share amounts)
HPI Pro Forma PRESTIGE Pro Forma Pro Forma
Historical Seymour Historical Adjustments Combined
------- ------- ------- ------ -------
-
Net sales ....... $129,324 $ 92,963 $ 73,243 $(4,387) (h) $291,143
Cost of goods sold 88,888 68,900 46,345 (6,431) (h) 197,676
(26) (i)
------- ------- ------- ------ -------
Gross profit 40,436 24,063 26,898 2,070 93,467
Operating expenses 27,688 21,462 14,366 5,827 (j) 69,343
------- ------- ------- ------ -------
Operating profit 12,748 2,601 12,532 (3,757) 24,124
Interest (expense)... (5,152) (10,385) - (5,565) (k) (21,102)
Other income (expense) 70 (802) (91) - (823)
------- ------- ------- ------ -------
Earnings (loss)
before income taxes 7,666 (8,586) 12,441 (9,322) 2,199
------- ------- ------- ------ -------
Income tax (expense)
benefit before Change
in valuation allowance (3,489) 3,857 (4,787) 3,729 (l) (690)
Change in valuation
allowance ...... 3,143 - - - 3,143
------- ------- ------- ------ -------
Total income tax
expense (benefit) (346) 3,857 (4,787) 3,729 2,453
Net earnings (loss)
from continuing
operations ...... $ 7,320 $ (4,729) $ 7,654 $(5,593) $ 4,652
======= ======= ======= ====== =======
Net earnings from
continuing operations
per share - basic $ 1.35 (m) $ 0.69 (n)
Net earnings from
continuing operations
per share - diluted $ 1.29 (m) $ 0.66 (o)
Weighted average
common shares
outstanding -
basic 5,436 6,757
diluted 5,682 7,003
The accompanying notes are an integral part of the financial statements.
HOME PRODUCTS INTERNATIONAL, INC.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(in thousands)
The accompanying Unaudited Pro Forma Condensed Combined Balance
Sheet as of December 27, 1997 is based upon and should be read in
conjunction with the historical Consolidated Financial Statements of HPI,
Seymour Housewares Corporation,("Seymour") and Prestige and the notes
thereto included elsewhere in this form 8-k/a (historical financial
statements related to Seymour are hereby incorporated by reference from
the Form S-4 filed on June 10, 1998), and have been adjusted to give pro
forma effect to the Asset Acquisition and the New Credit Facility as if
each had occurred on December 27, 1997.
The Seymour historical Condensed Balance Sheet as of December 27,
1997 has been adjusted to reflect pro forma adjustments related to, (i)
the December 30, 1997 acquisition of all of the outstanding stock of
Seymour, (the "Seymour Acquisition"), (ii) the Prior Credit Agreement and
(iii) the May 14, 1998 issuance of $125,000 9.625% Senior Subordinated
Notes due 2008, (items (ii) and (iii) are collectively referred to herein
as the "Refinancing") as if each transaction had occurred on December 27,
1997. The Seymour Acquisition and the Refinancing are described in
further detail in the Form S-4 filed on June 10, 1998.
The Unaudited Pro Forma Condensed Combined Statement of Operations
for the year ended 1997 has been prepared by combining the Consolidated
Statements of Operations of HPI for the year ended December 27, 1997 with
the Pro forma Condensed Statement of Operations of Seymour for the year
ended December 27, 1997 (pro forma to include the impact of the Seymour
Acquisition and the Refinancing on Seymour's historical Statement of
Operations, as if each transaction occurred on December 29, 1996) and the
Consolidated Statements of Operations of Prestige for the year ended
December 31, 1997 as if the Asset Acquisition and the New Credit
Agreement each occurred on December 29, 1996.
The pro forma data does not purport to represent what the Company's
actual results of operations or financial position would have been had
such transactions occurred on such dates. The pro forma statement of
operations also does not purport to project the results of operations of
the Company for the current year or for any other period.
Pro forma adjustments relating to the Asset Acquisition and the New
Credit Agreement are as follows:
(a) Reflects adjustment to inventories to record on a FIFO basis
rather than the LIFO basis used prior to the Asset Acquisition.
(b) Reflects the Asset Acquisition as if it occurred on December 27,
1997 at an all cash purchase price of $78,000. The Asset
Acquisition was accounted for as a purchase; therefore, the
purchase price will be allocated to the assets and liabilities
assumed based upon their fair values. Certain transaction fees
and expenses totaling $1,000 that were incurred in connection with
the Asset Acquisition are included in the excess of purchase price
over the fair value of the net assets acquired (i.e., goodwill).
The preliminary pro forma calculation of the excess of the
purchase price over the fair value of the net assets acquired is
$55,000 which will be amortized over a period of forty years.
(c) Deferred financing fees related to the closing of the New Credit
Agreement were $500 and will be amortized over the life of the
Term Loan which is six years.
(d) Reflects the adjustment to long-term debt to report the current
maturity of the Term Loan entered into as a part of the Asset
Acquisition.
(e) Reflects accruals established for financing fees and expenses
incurred as a part of the Asset Acquisition, but not paid as of
such date, the elimination of liabilities not assumed as a part of
the Asset Acquisition and certain immaterial items.
(f) Reflects the additional long-term debt incurred in connection with
the Asset Acquisition. A total of $750 of the Term Loan was
classified as current.
(g) Reflects the elimination of Prestige's equity accounts.
(h) Reflects elimination of intercompany sales and cost of sales
between Prestige and Newell. It is anticipated that Newell will
no longer purchase these items from Prestige.
Additionally, the pro forma adjustment to Net sales reflects a
reclassification of $3,652 of Freight expenses to operating
expenses in order to conform with HPI presentation.
(i) Reflects elimination of the change in the LIFO reserve from
December 29, 1996 to December 27, 1997.
(j) Reflects the following pro forma adjustments:
In Thousands
Reclass Freight expense from Net sales to Operating
expense to conform with HPI........................... $ 3,652
Eliminate administrative costs charged by Newell for
providing Plastics with the following services;
(i) treasury management, (ii) cash management, (iii)
receivables processing, (iv) payables processing,
(v) computer services and (vi) payroll processing..... (745)
Reflects the additional costs to be incurred by
Prestige to replace the functions that were
previously performed by Newell........................ 1,545
Reflects increased goodwill amortization as a result
of the Asset Acquisition. Goodwill is amortized
over forty years...................................... 1,375
------
Net Pro forma adjustment to Operating expenses $ 5,827
======
(k) Reflects the estimated increase in interest expense as if the
Asset Acquisition and the New Credit Agreement had occurred on
December 29, 1996, the beginning of the period. The components of
pro forma interest expense are as follows:
In Thousands
Fifty-two weeks of interest expense on $78,000 cash
purchase price....................................... $ 5,850
Fifty-two weeks of deferred financing fee
amortization on $500 of fees incurred................ 83
Adjust rate applied to revolver borrowings to the
New Credit Agreement rate............................ (241)
Reduction of Unused Commitment Fees as a result of
additional borrowings under the New Credit Agreement. (127)
-----
Net pro forma adjustment to interest expense $ 5,565
=====
(l) The pro forma income tax expense is computed by applying an
estimated combined statutory rate of 40%.
(m) Weighted average common shares outstanding used in the calculation
of earnings per share - basic were 5,436, and used in the
calculation of earnings per share - diluted were 5,682.
(n) Weighted average common shares outstanding used in the calculation
of earnings per share - basic reflect the shares issued in the
Seymour Acquisition of 1,321. As such, 6,757 shares were used in
the calculation of earnings per share - basic.
(o) Weighted average common shares outstanding used in the calculation
of earnings per share - diluted reflect the shares issued in the
Seymour Acquisition of 1,321. As such, 7,003 shares were used in
the calculation of earnings per share - diluted.
(p) Item was not acquired or assumed as a part of the Asset Acquisition.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Home Products International, Inc.
By: /s/ James .Winslow
James E. Winslow
Executive Vice President and
Chief Financial Officer
Dated: November 6, 1998