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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A-1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of report (Date of earliest event reported) February 28, 1997
HOME PRODUCTS INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S><C>
Delaware 0-17237 36-4147027
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(State or other jurisdiction of (Commission File Number) (I.R.S. Employee
incorporation or organization) Identification Number)
4501 West 47th Street, Chicago, Illinois 60632
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(Address of principal executive offices) (Zip Code)
</TABLE>
(773) 890-1010
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Unless the context otherwise requires, references herein to (i) the
"Company" are to Home Products International, Inc., a Delaware corporation, and
its wholly-owned subsidiaries, Selfix, Inc., a Delaware corporation ("SELFIX"),
Tamor Corporation, a Massachusetts corporation ("TAMOR"), and Shutters, Inc.,
an Illinois corporation ("SHUTTERS"), (ii) "Tamor" include both Tamor and
Housewares Sales, Inc., a Massachusetts corporation and Tamor's affiliated
product distribution company which was merged into Tamor as part of the Tamor
Acquisition (as defined), and (iii) the "Tamor Acquisition" are to the
acquisition by the Company of the business of Tamor and Housewares Sales, Inc.
which was acquired in February, 1997, effective as of January 1, 1997.
On February 28, 1997, pursuant to a Stock Purchase Agreement among the
Company and the stockholders of Tamor (the "Tamor Shareholders"), and an
Agreement and Plan of Merger among the Company, Housewares Sales, Inc., and the
stockholders of Housewares Sales, Inc., effective as of January 1, 1997,
Housewares was merged into a wholly-owned acquisition subsidiary of the Company
and the Company, through the same acquisition subsidiary, acquired 100% of the
outstanding capital stock of Tamor. The acquisition subsidiary then merged
into Tamor and Tamor became a wholly-owned direct subsidiary of the Company.
Tamor, a privately held company founded in 1947, designs, manufactures and
markets quality plastic housewares products, including storage totes, hooks,
and juvenile organization products.
The Company acquired Tamor for a total purchase price of $41.9
million, consisting of approximately $27.8 million in cash, $2.4 million of
Common Stock (480,000 shares) and the repayment of $11.7 million of Tamor's
long-term debt, including long-term capital lease obligations. Pursuant to an
agreement dated October 29, 1996, the Company, effective as of January 1, 1997,
took operating and financial control of Tamor, assumed substantially all of the
liabilities of Tamor and retained substantially all of the earnings from
Tamor's operations.
The Company has entered into a Credit Agreement dated as of February
27, 1997 (the "Credit Agreement"), with General Electric Capital Corporation
("GECC"), as agent ("Agent") and individually, and one other lender (such
lender and GECC, collectively, the "Lenders") which provides: (i) a 5 1/2 year
revolving credit facility (the "Revolving Credit Facility") under which up to
an aggregate principal amount of $20.0 million (subject to a borrowing base
limitation and including a letter of credit subfacility of up to $10.0 million)
are available for borrowing, (ii) a 5 1/2 year $20.0 million term loan ("Term
Loan A") and (iii) a 7 1/2 year $20.0 million term loan ("Term Loan B").
Proceeds of Term Loan A and Term Loan B (collectively, the "Term Loans") were
used, together with the combined proceeds of a $7.0 million subordinated equity
bridge note issued to GECC (the "Subordinated Note") and a Warrant (the
"Warrant") to purchase 79,204 shares of Common Stock issued to GECC to finance
the Tamor Acquisition, to repay certain indebtedness of Tamor and to pay
transaction costs related thereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
The following financial statements of Tamor are incorporated by
reference from the Registrant's Form S-2 Registration Statement No. 333-25871
filed on April 25, 1997:
TAMOR PLASTICS CORPORATION AND HOUSEWARE SALES, INC.
Report of BDO Seidman, LLP
Combined Balance Sheets as of December 31, 1996 and 1995
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Combined Statements of Income for each of the three years in the
period ended December 31, 1996
Combined Statements of Stockholders' Equity for each of the three
years in the period ended December 31, 1996
Combined Statements of Cash Flows for each of the three years in the
period ended December 31, 1996
Notes to Combined Financial Statements
(b) Pro forma financial information.
The following pro forma financial statements are filed herewith:
HOME PRODUCTS INTERNATIONAL, INC.
Unaudited Pro Forma Condensed Combined Balance Sheet as of
December 28, 1996
Unaudited Pro Forma Condensed Combined Statement of Operations for the
fifty-two weeks ended December 28, 1996
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
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HOME PRODUCTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
SELFIX TAMOR COMPANY
HISTORICAL HISTORICAL TOTAL
DECEMBER DECEMBER PRO FORMA DECEMBER
28, 1996 31, 1996 ADJUSTMENTS 28, 1996
--------- --------- --------- ---------
ASSETS (dollars in thousands)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . $ 2,879 $ 1,188 $ 3,720 (c) $ 6,867
(920) (e)
Accounts receivable, net . . . . . . . . . 6,594 8,860 --- 15,454
Inventories, net . . . . . . . . . . . . . 4,391 6,427 (300) (g) 10,518
Prepaid expenses and other current assets . 100 354 445 (o) 851
(48) (e)
--------- --------- --------- ----------
Total current assets . . . . . . . . . . 13,964 16,829 2,897 33,690
Property, plant and equipment, net . . . . . 7,934 16,905 (37) (e) 24,802
Goodwill and other intangible assets, net . . 2,527 --- 25,676 (a) 28,203
Deferred financing fees . . . . . . . . . . . --- --- 3,328 (c) 3,328
Cash surrender value of life insurance and
other . . . . . . . . . . . . . . . . . . 280 362 --- 642
--------- --------- --------- ----------
Total assets . . . . . . . . . . . . . . . . $ 24,705 $ 34,096 $ 31,864 $ 90,665
========= ========= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Checks issued against future deposits . . . $ --- $ 4,377 $ --- $ 4,377
Accounts payable - trade . . . . . . . . . 1,956 4,202 --- 6,158
Accounts payable - other . . . . . . . . . --- 3,824 --- 3,824
Accrued liabilities . . . . . . . . . . . 4,018 1,730 (60) (e) 8,175
2,487 (h)
Current maturities of long-term debt . . . 838 1,099 1,101 (d) 3,038
Current maturities of long-term capital ---
lease obligations . . . . . . . . . --- 634 (621) (d)
(13) (e)
--------- --------- --------- ----------
Total current liabilities . . . . . . . 6,812 15,866 2,894 25,572
Total long-term debt . . . . . . . . . . . . 6,184 6,032 38,368 (d) 50,584
Long-term capital lease obligations . . . . . --- 4,016 (3,992) (d) ---
(24) (e)
--------- --------- --------- ----------
12,996 25,914 37,246 76,156
Stockholders' equity:
Common Stock . . . . . . . . . . . . . . . 39 6 (6) (f) 44
5 (b)
Additional paid-in capital . . . . . . . . 10,839 294 (294) (f) 13,634
2,395 (b)
400 (c)
Retained earnings . . . . . . . . . . . . 1,296 9,364 (908) (e) 1,296
(8,456) (f)
Currency translation adjustments . . . . . (201) --- --- (201)
Common stock held in treasury - at cost . . (264) (1,482) 1,482 (f) (264)
Total stockholders' equity . . . . . . . . 11,709 8,182 (5,382) 14,509
--------- --------- --------- ----------
Total liabilities and stockholders' equity . . $ 24,705 $ 34,096 $ 31,864 $ 90,665
========= ========= ========= ==========
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HOME PRODUCTS INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SELFIX TAMOR
HISTORICAL HISTORICAL PRO
DECEMBER 28, DECEMBER 31, FORMA
1996 1996 ADJUSTMENTS TOTAL
------------ ------------ ----------- ---------
(dollars in thousands except per share amounts)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . $ 38,200 $ 75,714 $ --- $ 113,914
Cost of goods sold . . . . . . . . . . . . . 22,992 57,818 --- 80,810
---------- ---------- ------- ---------
Gross profit . . . . . . . . . . . . . . 15,208 17,896 --- 33,104
Operating expenses . . . . . . . . . . . . . 13,843 13,524 642 (i) 24,864
(3,145) (j)
---------- ---------- ------- ---------
Operating profit . . . . . . . . . . . . 1,365 4,372 2,503 8,240
Interest expense . . . . . . . . . . . . . . (707) (1,191) (4,430) (k) (6,328)
Other income - net . . . . . . . . . . . . . 148 494 205 (l) 847
---------- ---------- ------- ---------
Earnings before income taxes . . . . . . 806 3,675 (1,722) 2,759
Income tax expense . . . . . . . . . . . . . --- (160) (943) (m) (1,103)
---------- ---------- ------- ---------
Net earnings (loss) . . . . . . . . . . . . . $ 806 $ 3,515 $(2,665) $ 1,656
========== ========== ======= =========
Net earnings per common and
common equivalent share . . . . . . . . . $ 0.21 --- --- $ 0.38
========== ========== ======= =========
Number of weighted average common
and common equivalent shares
outstanding . . . . . . . . . . . . . . . 3,853,502 --- 519,602(n) 4,373,104
========== ========== ======= =========
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HOME PRODUCTS INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The accompanying Unaudited Pro Forma Condensed Combined Balance Sheet
as of December 28, 1996 gives effect to the Tamor Acquisition and the related
financing as if each had occurred on December 28, 1996. The Unaudited Pro
Forma Condensed Combined Statement of Operations for fiscal 1996 gives effect
to the Tamor Acquisition and the related financing as if each had occurred on
December 31, 1995.
The pro forma data do not purport to represent what the Company's
actual results of operations or financial position would have been had such
transactions in fact 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 Tamor Acquisition and the
related financing are as follows:
(a) Reflects the Tamor Acquisition at a purchase price of $41.9 million,
consisting of approximately $27.8 million in cash, $2.4 million of
Common Stock (480,000 shares) and the repayment of $11.7 million of
Tamor's long-term debt, including long-term capital lease obligations.
Pursuant to an agreement dated October 29, 1996, the Company, as of
January 1, 1997, took operating and financial control of Tamor,
assumed substantially all of the liabilities of Tamor and retained
substantially all of the earnings from Tamor's operations. The Tamor
Acquisition was accounted for as a purchase. The purchase price will
be allocated to the assets acquired and liabilities assumed based upon
their estimated fair values. Certain transaction fees and expenses
totaling $1.2 million that were incurred in connection with the Tamor
Acquisition are included in the excess of cost over book value of net
assets acquired (i.e., goodwill). The preliminary pro forma
calculation of the excess of the cost over the book value of net
assets acquired is $25.7 million.
(b) Reflects the issuance of 480,000 shares of the Company's Common Stock
at a value of $5.00 per share to Tamor stockholders as partial
consideration for the Tamor Acquisition.
(c) Reflects the cash flows in connection with the Tamor Acquisition and
the related financing (as shown in the table below) through the
receipt of (i) $20.0 million of proceeds from Term Loan A, (ii) $20.0
million of proceeds from Term Loan B, and (iii) $7.0 million of
proceeds from the Subordinated Note and Warrant issued to acquire
79,204 shares of the Company's Common Stock. The Company has the
option to repurchase the Warrant at a price equal to $0.8 million.
The Company also entered into a revolving credit facility but did not
utilize any of these available funds in connection with the Tamor
Acquisition.
<TABLE>
<CAPTION>
(in thousands)
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<S> <C>
Proceeds from Term Loan A . . . . . . . . . . . . . . . . $ 20,000
Proceeds from Term Loan B . . . . . . . . . . . . . . . . 20,000
Proceeds from Subordinated Note . . . . . . . . . . . . . 6,600
Proceeds from the Warrant . . . . . . . . . . . . . . . . 400
Cash portion of Tamor purchase price . . . . . . . . . . (27,792)
Payment of transaction fees and expenses . . . . . . . . (3,744)
Repayment of Tamor obligations . . . . . . . . . . . . . (11,744)
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Change in cash . . . . . . . . . . . . . . . . . . . $ 3,720
==============
</TABLE>
Deferred financing fees related to the above financing are $3.3
million. These fees will be amortized over the average life of the
obligations. Debt discount created as a result of the issuance of the
Warrant is assumed to be amortized over a period of seven months.
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(d) Reflects the adjustment to long-term debt and long-term capital lease
obligations, including current maturities, resulting from the
borrowings under the Term Loans and the Subordinated Note net of
repayment of the Tamor obligations. A total of $2.2 million of the
Term Loans are classified as current.
(e) Reflects the Tamor assets and liabilities retained by the seller.
(f) Reflects the elimination of the remaining Tamor stockholders' equity.
(g) Reflects an increase to Tamor inventory reserves as a result of the
Tamor Acquisition.
(h) Reflects $0.3 million increase to promotional reserves and accrued
transaction fees and expenses incurred in connection with the Tamor
Acquisition.
(i) Reflects the additional amortization expense resulting from the
recording of goodwill associated with the Tamor Acquisition. Goodwill
is amortized over 40 years.
(j) Reflects the net estimated cost savings as a result of the Tamor
Acquisition as follows:
<TABLE>
<CAPTION>
(in thousands)
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<S> <C>
Net reduction in discretionary distributions paid to
and on the behalf of related parties of Tamor . . . . $ (3,385)
Additional costs associated with the Company's 401(k)
and profit sharing plans and certain other fees . . . 240
--------------
Net adjustment . . . . . . . . . . . . . . . . . . $ (3,145)
==============
</TABLE>
(k) Reflects the estimated net increase in interest expense as if the
Tamor Acquisition and the related financing had occurred on December
31, 1995. The pro forma adjustment to interest expense is comprised
of the following:
<TABLE>
<CAPTION>
(in thousands)
--------------
<S> <C>
Interest expense on the estimated weighted
average amounts outstanding under the Term Loan A,
Term Loan B and the Subordinated Note in the
principal amount of $47.0 million with an effective
interest rate of 9.4% . . . . . . . . . . . . . . . . $ 4,427
Amortization of deferred financing fees . . . . . . . . . . 557
Amortization of debt discount created from issuance of
Warrant . . . . . . . . . . . . . . . . . . . . . . . 400
Facility and Letter of Credit fees . . . . . . . . . . . . 237
Less interest expense related to retired Tamor obligations (1,191)
--------------
Net adjustments . . . . . . . . . . . . . . . . . . $ 4,430
==============
</TABLE>
(l) Reflects the estimated increase in interest income as a result of an
average $3.7 million in proceeds on the Term Loans not used in
connection with the Tamor Acquisition and earning interest at an
assumed rate of 5.5%.
(m) Tamor was taxed as an S corporation prior to the Tamor Acquisition.
Selfix's fiscal 1996 historical results of operations reflected no
income tax expense as a result of net operating loss carryforwards.
The pro forma income tax expense assumes all entities are taxed as C
corporations and gives no benefit to the net operating loss
carryforwards. The pro forma income tax expense is computed by
applying an estimated combined statutory rate of 40%.
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(n) Reflects the assumed increase in the weighted average common and
common equivalent shares outstanding as a result of the Tamor
Acquisition (480,000 shares) and the Warrant.
(o) Reflects the establishment of deferred imputed interest expense
resulting from the effective date of the Tamor Acquisition prior to
the closing date. This amount is amortized to interest expense during
January and February of fiscal 1997.
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SIGNATURES
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.
Date: May 9, 1997
By: /s/ James E. Winslow
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James E. Winslow
Executive Vice President and
Chief Financial Officer
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