EX-99.1 3 exh99-1.txt PRESS RELEASE FEBRUARY 24, 2003 EXHIBIT 99.1 FOR: Home Products International, Inc. APPROVED BY: James R. Tennant, Chairman & CEO Home Products International, Inc. (773) 890-1010 FOR IMMEDIATE RELEASE CONTACT: Investor Relations: --------------------- James Winslow, Executive VP & CFO Home Products International, Inc. (773) 890-1010 HOME PRODUCTS INTERNATIONAL REPORTS FOURTH QUARTER AND FULL YEAR RESULTS Fourth Quarter Earnings Per Share of $0.37 vs. $0.11 a year ago; sales up 32% Chicago, IL, February 24, 2003 - Home Products International, Inc. (Nasdaq SmallCap: HOMZ) (the "Company"), a leader in the housewares industry, today announced financial results for its fourth quarter and year ended December 28, 2002. Net sales in the 2002 fourth quarter were $70.8 million versus $53.7 million in the prior year, an increase of 32%. The Company reported fourth quarter net earnings of $3.0 million and diluted earnings per share of $0.37 as compared to net earnings of $0.9 million ($0.11 per diluted share) in 2001. The fourth quarter 2002 results include $1.3 million of income for the favorable resolution of matters relating to the Company's prior year restructuring actions. The fourth quarter 2001 results include an extraordinary charge ($0.6 million) related to the early retirement of debt, $0.5 million of goodwill amortization that is no longer required under generally accepted accounting principles, and $3.5 million of income from changes in estimate relating to the Company's restructuring initiatives. On a comparable basis that eliminates extraordinary charges, income from restructuring, income from special charges and the effect of the change in accounting for goodwill, the Company achieved diluted earnings per share in the fourth quarter of 2002 of $0.21 as compared to a loss per share of $(0.20) in 2001's fourth quarter. The improvement between years was a result of the higher sales as well as a $3.1 million reduction in bad debt expense. In 2001, the Company recorded a significant write-down of its receivable from Kmart. For the fiscal year ended December 28, 2002, net sales of $249.2 million were flat to 2001's net sales of $249.7 million. The prior year, however, included $19.2 million of sales from the servingware product line that was sold in July 2001. These sales did not repeat in 2002. An additional $7.9 million of sales was lost due to the bankruptcy of several customers, primarily Ames. Offsetting these sales declines were significant sales gains at the Company's largest customers. On a comparable basis that adjusts for the disposition of the servingware product line, 2002's sales of $249.2 million were up $18.6 million to a year ago, or 8.1%. The Company reported full year net earnings of $14.3 million and diluted earnings per share of $1.73 as compared to last year's net earnings of $17.0 million, $2.19 per diluted share. Both years contain items that make it difficult to compare operating results between years. The most significant non-recurring item in 2001 is the $14.5 million gain, $1.87 per share, on the sale of the Company's servingware product line. The 2001 results also include an extraordinary charge ($0.6 million) related to the early retirement of debt, $2.6 million of goodwill amortization that is no longer required under generally accepted accounting principles, $0.9 million of income from the favorable resolution of matters related to the Company's restructuring initiatives, and $1.1 million of earnings related to the servingware product line. The 2002 results include $1.4 million of income from the favorable resolution of matters relating to the Company's prior years' restructuring actions and an additional gain of $0.7 million related to the servingware divestiture. On a comparable basis that eliminates earnings relating to the servingware divestiture, the extraordinary charges, income from restructuring, income from special charges, and the effect of the change in accounting for goodwill, the Company achieved diluted earnings per share in 2002 of $1.48 as compared to $0.48 in 2001. The improvement between years was a result of higher sales, consistent gross profit margins, and a reduction in bad debt expense. The Company noted that total debt, net of cash, declined to $126 million from $130 million a year ago. There were no borrowings outstanding at year-end under the Company's revolving line of credit and total borrowing availability at December 28, 2002 was $43.6 million. The Company continues to be in compliance with all of its loan covenants. Commenting on the results, James R. Tennant, chairman and chief executive officer, stated, "We are very pleased with our sales and operating results. The fourth quarter sales continued to grow upon the enhanced performance that we reported in the second and third quarters. We are very pleased that we have been able to grow sales in a tough economic and competitive environment." Mr. Tennant concluded, "As we look at 2003, there are clearly opportunities and challenges ahead. We have proven in the past our ability to effectively compete while maintaining a low cost environment and providing a positive return to shareholders. We are confident that HPI's financial and operational strength coupled with our strong customer relationships have positioned the Company well." The Company's fourth quarter conference call will take place Tuesday, February 25, 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 1-888/569-5033 approximately 10 minutes prior to conference time. A replay of the Company's fourth quarter conference call will be available from 1:00 p.m. Eastern Time February 25, 2003 through midnight Eastern Time March 3, 2003. Dial 1-888/203-1112, then enter confirmation code 774107. 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 to all the largest national retailers. Some of the statements made in this press release are forward-looking and concern the Company's future growth, product development, markets and competitive position. While management makes its best efforts to be accurate in making these forward-looking statements, any such statements are subject to risks and uncertainties that could cause the Company's actual results to vary materially. These include 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. Should one or more of these risks or uncertainties materialize, actual results may vary materially from those anticipated, expected or projected. 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) December 28, December 29, 2002 2001 -------- -------- Cash $ 3,974 $ 1,091 Accounts receivable, net 48,937 36,577 Inventories 25,357 17,043 Prepaid expenses and other current assets 1,879 2,275 -------- -------- Current assets 80,147 56,986 -------- -------- Fixed assets, net 37,189 42,631 Goodwill, net 73,752 74,759 Other intangibles, net 1,111 1,616 Other non-current assets 11,319 11,351 -------- -------- Total assets $ 203,518 $ 187,343 ======== ======== Accounts payable $ 22,986 $ 16,834 Accrued liabilities 28,993 33,916 Current maturities of long term debt 158 158 -------- -------- Current liabilities 52,137 50,908 -------- -------- Long term debt 129,621 130,447 Other non-current liabilities 4,293 3,168 -------- -------- Long term debt and other non-current liabilities 133,914 133,615 -------- -------- Stockholders' equity 17,467 2,820 -------- -------- Total liabilities and stockholders' equity $ 203,518 $ 187,343 ======== ======== Home Products International, Inc. Consolidated Statements of Operations ($ in thousands, except share and per share amounts) Thirteen weeks Thirteen weeks Fifty-two weeks Fifty-two weeks ended ended ended ended December 28, December 29, December 28, December 29, 2002 2001 2002 2001 ----------------- ----------------- ----------------- ----------------- Net sales $ 70,763 100.0% $ 53,673 100.0% $249,192 100.0% $249,721 100.0% Cost of goods sold 57,108 80.7% 40,425 75.3% 190,705 76.5% 188,299 75.4% Special (income) charges, net (33) (0.0%) (524) (1.0%) (106) (0.0%) (414) (0.2%) ----------------- ----------------- ----------------- ----------------- Gross profit 13,688 19.3% 13,772 25.7% 58,593 23.5% 61,836 24.8% ----------------- ----------------- ----------------- ----------------- Operating expenses 7,762 11.0% 10,305 19.2% 30,727 12.3% 36,910 14.8% Amortization of intangibles 127 0.2% 666 1.2% 507 0.2% 3,190 1.3% Restructuring and other (income) charges (1,303) (1.8%) (2,963) (5.5%) (1,303) (0.5%) (480) (0.2%) Asset impairment charges 567 0.8% - - 567 0.2% - - ----------------- ----------------- ----------------- ----------------- Operating profit 6,535 9.1% 5,764 10.8% 28,095 11.3% 22,216 8.9% Interest (expense) (3,453) (4.9%) (3,586) (6.7%) (13,823) (5.5%) (18,284) (7.3%) Other income 58 0.1% 59 0.1% 559 0.2% 14,621 5.9% ----------------- ----------------- ----------------- ----------------- Earnings before income taxes 3,140 4.3% 2,237 4.2% 14,831 6.0% 18,553 7.5% ----------------- ----------------- ----------------- ----------------- Income tax (expense) (94) (0.1%) (784) (1.5%) (527) (0.2%) (975) (0.4%) ----------------- ----------------- ----------------- ----------------- Net earnings before extraordinary charges 3,046 4.2% 1,453 2.7% 14,304 5.8% 17,578 7.1% Extraordinary charge for early retirement of debt - - 598 1.1% - - 598 0.2% ----------------- ----------------- ----------------- ----------------- Net earnings $ 3,046 4.2% $ 855 1.6% $ 14,304 5.8% $ 16,980 6.9% ================= ================= ================= ================= Net earnings per share: Basic $0.39 $0.11 $1.83 $2.24 Diluted $0.37 $0.11 $1.73 $2.19 Number of weighted average common shares outstanding: Basic 7,817,218 7,591,900 7,804,309 7,563,740 Diluted 8,294,652 7,936,337 8,286,790 7,754,762
Home Products International, Inc. Pro Forma Consolidated Statements of Operations ($ in thousands, except share and per share amounts), (Unaudited) The following table sets forth for the periods indicated the 2002 and 2001 pro forma results of operations as well as the percentage, which the pro forma items in the Statements of Operations bear to net sales. The pro forma results of operations are presented as if the PI divestiture and the change in accounting for goodwill had occurred at the beginning of fiscal 2001. Exclusions to 2002 include special and restructuring (income) charges of $(1,336) and $(1,409), which were recorded during the fourth quarter and full year, respectively. Exclusions to 2001 include special (income) charges, restructuring (income) charges and an extraordinary charge for the early retirement of debt of $(2,889) and $(296), which were recorded during the fourth quarter and full year, respectively. This pro forma financial information is not necessarily indicative of the results the Company would have realized had such events occurred at the beginning of fiscal 2001 or of the Company's future results of operations. Pro Forma Pro Forma Pro Forma Pro Forma --------- --------- --------- --------- 13 weeks ended 13 weeks ended 52 weeks ended 52 weeks ended December 28, December 29, December 28, December 29, 2002 2001 2002 2001 ----------------- ----------------- ----------------- ----------------- Net sales $ 70,763 100.0% $ 53,673 100.0% $249,192 100.0% $230,553 100.0% Cost of goods sold 57,108 80.7% 40,425 75.3% 190,705 76.5% 176,324 76.5% ----------------- ----------------- ----------------- ----------------- Gross profit 13,655 19.3% 13,248 24.7% 58,487 23.5% 54,229 23.5% ----------------- ----------------- ----------------- ----------------- Operating expenses 7,762 11.0% 10,305 19.2% 30,727 12.3% 33,875 14.7% Amortization of intangibles 127 0.2% 130 0.2% 507 0.2% 594 0.3% Asset impairment charges 567 0.8% - - 567 0.2% - - ----------------- ----------------- ----------------- ----------------- Operating profit 5,199 7.3% 2,813 5.3% 26,686 10.8% 19,760 8.5% Interest (expense) (3,453) (4.9%) (3,586) (6.7%) (13,823) (5.5%) (15,203) (6.6%) Other income (expense) 58 0.1% 59 0.1% (104) (0.0%) 132 0.1% ----------------- ----------------- ----------------- ----------------- Earnings (loss) before income taxes 1,804 2.5% (714) (1.3%) 12,759 5.3% 4,689 2.0% ----------------- ----------------- ----------------- ----------------- Income tax (expense) (94) (0.1%) (784) (1.5%) (527) (0.2%) (975) (0.4%) ----------------- ----------------- ----------------- ----------------- Net earnings (loss) $ 1,710 2.4% $ (1,498) 2.8% $ 12,232 5.1% $ 3,714 1.6% ================= ================= ================= ================= Net earnings (loss) per share: Basic $0.22 $(0.20) $1.57 $0.49 Diluted $0.21 $(0.20) $1.48 $0.48 Number of weighted avg common shares o/s: Basic 7,817,218 7,591,900 7,804,309 7,563,740 Diluted 8,294,652 7,936,337 8,286,790 7,754,762 Adjusted EBITDA(1) $ 7,766 11.0% $ 5,058 9.4% $ 36,898 14.8% $ 29,793 12.9% (1) Adjusted EBITDA represents, for any period, net income before interest expense, income taxes, depreciation and amortization and non-recurring items. Adjusted EBITDA is presented to provide additional information about the Company's ability to meet future debt service, capital expenditures and working capital requirements and is one of the measures which determines the Company's ability to borrow money. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, cash flows from operating activities and other income or cash flow statement data prepared in accordance with generally accepted accounting principles or as a measure of the Company's profitability or liquidity. Adjusted EBITDA as calculated herein may not be comparable to similarly titled measures reported by other companies.
Home Products International, Inc. Adjusted Earnings Per Share The Company has incurred various items of income and expense that are considered internally separate from day-to-day operations. These include extraordinary charges, restructuring costs, income related to changes in estimates of restructuring costs and earnings related to our former servingware product line. In addition, the Company ceased to amortize goodwill as of the beginning of fiscal 2002 in accordance with new accounting standards. This required change in accounting had a significantly favorable impact on reported results in 2002 as compared to prior years. To provide a better picture of comparable earnings results, the table below reconciles reported earnings per share to what is a more useful measurement of our operating performance. Thirteen- Thirteen- Fifty-two Fifty-two weeks weeks weeks weeks ended ended ended ended December 28, December 29, December 28, December 29, 2002 2001 2002 2001 ---- ---- ---- ---- Diluted earnings per share as reported $0.37 $0.11 $1.73 $2.19 Extraordinary charge for early retirement of debt --- 0.08 --- 0.08 Reversal of special charge accruals --- (0.07) (0.01) (0.05) Income from resolution of restructuring items (0.16) (0.39) (0.16) (0.06) Earnings from servingware product line --- --- --- (0.14) Gain from sale of servingware product line --- --- (0.08) (1.87) Goodwill amortization --- 0.07 --- 0.33 ---- ---- ---- ---- Diluted earnings (loss) per share as adjusted $0.21 $(0.20) $1.48 $0.48 ==== ===== ==== ====