Home Products International Announces Third Quarter Results Sales Drop, Raw Material Cost Increases and Tax Asset Write-Offs Lead to Loss In Quarter CHICAGO, Oct. 27 /PRNewswire-FirstCall/ -- Home Products International, Inc. , (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 Current assets 70,557 82,706 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 Total assets $183,373 $203,518 Accounts payable $ 26,690 $22,986 Accrued liabilities 25,665 28,993 Current maturities of long term debt 158 158 Current liabilities 52,513 52,137 Long term debt 126,052 129,621 Other non-current liabilities 4,400 4,293 Long term debt and other non-current liabilities 130,452 133,914 Stockholders' equity 408 17,467 Total liabilities and stockholders' equity $183,373 $203,518 Home Products International, Inc. Condensed Consolidated Statements of Operations ($ in thousands, except share and per share amounts) (Unaudited) Thirteen weeks Thirteen weeks ended ended September 27, 2003 September 28, 2002 Net sales $61,432 100.0% $67,799 100.0% Cost of goods sold 54,492 88.7% 51,198 75.6% Gross profit 6,940 11.3% 16,601 24.5% Selling, general and administrative expenses 7,176 11.7% 7,460 11.0% Amortization of intangibles 126 0.2% 127 0.2% Operating profit (loss) (362) (0.6%) 9,014 13.3% Interest (expense) (3,384) (5.5%) (3,432) (5.1%) Other income 737 1.2% 644 0.9% Earnings (loss) before income taxes (3,009) (4.9%) 6,226 9.1% Income tax expense (7,786) (12.7%) (133) (0.2%) Net earnings (loss) $ (10,795) (17.6%) $6,093 8.9% Net earnings (loss) per share: Basic $(1.35) $0.78 Diluted $(1.35) $0.74 Number of weighted average common shares outstanding: Basic 7,978,326 7,795,873 Diluted 7,978,326 8,258,516 Thirty-nine weeks Thirty-nine weeks ended ended September 27, 2003 September 28, 2003 Net sales $164,610 100.0% $178,429 100.0% Cost of goods sold 141,376 85.9% 133,524 74.9% Gross profit 23,234 14.1% 44,905 25.1% Selling, general and administrative expenses 22,790 13.8% 22,965 12.9% Amortization of intangibles 378 0.2% 380 0.2% Operating profit (loss) 66 0.1% 21,560 12.0% Interest (expense) (10,312) (6.3%) (10,370) (5.8%) Other income 806 0.5% 501 0.3% Earnings (loss) before income taxes (9,440) (5.7%) 11,691 6.5% Income tax expense (7,830) (4.8%) (433) (0.2%) Net earnings (loss) $ (17,270) (10.5%) $ 11,258 6.3% Net earnings (loss) per share: Basic $(2.17) $1.45 Diluted $(2.17) $1.37 Number of weighted average common shares outstanding: Basic 7,973,434 7,785,076 Diluted 7,973,434 8,216,783 DATASOURCE: Home Products International, Inc. CONTACT: Investor Relations, James Winslow, Executive VP & CFO of Home Products International, Inc., +1-773-890-1010 Web site: http://www.hpii.com/

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