UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Period Ended March 28, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-17237
HOME PRODUCTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its Charter)
Delaware 36-4147027
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
4501 West 47th Street
Chicago, Illinois 60632
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number including area code (773) 890-1010.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Common shares, par value $0.01, outstanding as of April 30, 1998 - 7,944,965
<PAGE>
HOME PRODUCTS INTERNATIONAL, INC
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
and Retained Earnings
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Part II. Other Information
Items 1 through 5 are not applicable
Item 6. Exhibits and Reports on Form 8-K. 13
Signature 14
<PAGE>
<TABLE>
PART I Financial Information
ITEM 1. Financial Statements
HOME PRODUCTS INTERNATIONAL, INC.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share amounts)
March 28,
1998 December 27,
(unaudited) 1997
<S> Assets <C> <C>
Current assets:
Cash and cash equivalents ...................... $ 4,163 $ 583
Accounts receivable, net ....................... 30,460 20,802
Inventories, net ............................... 24,756 12,797
Prepaid expenses and other current assets ...... 1,974 508
Total current assets ......................... 61,353 34,690
Property, plant and equipment - at cost........... 62,840 47,634
Less accumulated depreciation and amortization.... (21,121) (19,254)
Property, plant and equipment, net................ 41,719 28,380
Intangible and other assets....................... 121,947 36,273
Total assets......................................$225,019 $99,343
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term obligations.....$ 6,591 3,850
Accounts payable ............................... 16,293 9,664
Accrued liabilities ............................ 19,784 12,913
Total current liabilities .................... 42,668 26,427
Long-term obligations - net of current maturities. 120,075 30,700
Other liabilities................................. 6,212 -
Stockholders' equity:
Preferred Stock - authorized, 500,000 shares,
$.01 par value; none issued .................. - -
Common Stock - authorized 15,000,000 shares,
$.01 par value;
8,003,727 shares issued at March 28, 1998 an
6,674,271 shares issued at December 27, 1997.. 80 67
Additional paid-in capital ................... 48,282 33,956
Retained earnings .............................. 8,125 8,616
Common stock held in treasury - at cost
(58,762 shares)................................... (264) (264)
Currency translation adjustments ............... (159) (159)
Total stockholders' equity ................... 56,064 42,216
Total liabilities and stockholders' equity........$225,019 $99,343
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
HOME PRODUCTS INTERNATIONAL, INC.
Condensed Consolidated Statements of Operations and Retained Earnings
(unaudited)
(dollars in thousands, except per share amounts)
Thirteen Weeks Ended
March 28, March 29,
1998 1997
<S> <C> <C>
Net sales........................................ $52,408 $31,738
Cost of goods sold............................... 36,455 22,610
Gross profit ................................. 15,953 9,128
Operating expenses
Selling ...................................... 6,429 4,588
Administrative ............................... 3,504 1,809
Amortization of intangible assets ............ 928 205
10,861 6,602
Operating profit ............................. 5,092 2,526
Other income (expense)
Interest income .............................. 45 31
Interest (expense) ........................... (3,006) (1,532)
Other, net ................................... 13 124
(2,948) (1,377)
Earnings before income taxes and extraordinary
charge........................................ 2,144 1,149
Income tax (expense)............................. (898) (117)
Earnings before extraordinary charge............ 1,246 1,032
Extraordinary charge for early retirement of
debt, net of tax benefit of $1,258............ (1,737) -
Net earnings (loss).............................. (491) 1,032
Retained earnings at beginning of period......... 8,616 1,296
Retaining earnings at end of period..............$ 8,125 $ 2,328
Earnings before extraordinary charge, per
common share -basic...........................$ 0.16 $ 0.24
Extraordinary charge for early
retirement of debt, net of tax................ (0.22) -
Net earnings (loss) per common share - basic.....$ (0.06) $ 0.24
Earnings before extraordinary charge, per
common share - diluted........................$ 0.15 $ .23
Extraordinary charge for early retirement of
debt, net of tax.............................. (0.21) -
Net earnings (loss) per common share - diluted...$ (0.06) $ 0.23
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
HOME PRODUCTS INTERNATIONAL, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(dollars in thousands)
Thirteen Weeks Ended
March 28, March 29,
<S> 1998 1997
<C> <C>
Cash flows from operating activities:
Net earnings (loss) ............................. $ (491) $ 1,032
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization .................. 2,929 1,721
Changes in assets and liabilities:
Decrease (increase) in accounts receivable.... 2,807 (1,960)
(Increase) in inventories .................... (361) (1,086)
Increase (decrease) in accounts payable....... 1,449 (310)
(Decrease) increase in accrued liabilities.... (4,290) 697
Other operating activities, net ................ 2,116 160
Net cash provided by operating activities......... 4,159 254
Cash flows from investing activities:
Seymour acquisition, net of cash acquired........ (14,882) -
Tamor acquisition, net of cash acquired.......... - (27,792)
Capital expenditures, net ....................... (4,034) (597)
Net cash used for investing activities............ (18,916) (28,389)
Cash flows from financing activities:
Payments on borrowings .......................... (99,218) (11,744)
Net proceeds from borrowings and warrants........ 117,538 43,671
Payment of capital lease obligation ............. (42) (9)
Exercise of common stock options and issuance of
common stock under stock purchase plan ......... 59 47
Net cash provided by financing activities......... 18,337 31,965
Net increase in cash and cash equivalents........ 3,580 3,830
Cash and cash equivalents at beginning of period. 583 2,879
Cash and cash equivalents at end ofperiod........$ 4,163 $ 6,709
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ........................................$ 2,686 $ 300
Income taxes, net ...............................$ 905 $ -
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
HOME PRODUCTS INTERNATIONAL, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(dollars in thousands, except share and per share amounts)
Note 1. Home Products International, Inc. (the "Company") and its
subsidiary companies design, manufacture and market products in two
industry segments: houseware products and home improvement products.
Houseware products are marketed principally through mass market trade
channels throughout the United States and internationally. Home
improvement products are sold principally through wholesalers that
service the residential construction, repair and remodeling industry
throughout the United States.
The condensed consolidated financial statements include the
accounts of the Company and its subsidiary companies. All significant
intercompany transactions and balances have been eliminated.
The unaudited condensed financial statements included herein as of
and for the thirteen weeks ended March 28, 1998 and for the thirteen
weeks ended March 29, 1997 reflect, in the opinion of the Company, all
adjustments (which include only normal recurring adjustments) necessary
for the fair presentation of the financial position, the results of
operations and cash flows. These unaudited financial statements should
be read in conjunction with the audited financial statements and related
notes thereto included in the Company's 1997 Annual Report on Form 10-K.
The results for the interim periods presented are not necessarily
indicative of results to be expected for the full year.
Note 2. Effective December 30, 1997 (within fiscal 1998) the Company
completed the acquisition of Seymour Sales Corporation and its wholly
owned subsidiary Seymour Housewares Corporation, (collectively
"Seymour"). Seymour, headquartered in Seymour, Indiana is an industry
leading manufacturer and marketer of consumer laundry care products,
including a full line of ironing boards, ironing board covers and pads
and numerous laundry related accessories.
Total consideration for the acquisition was $100,700 consisting of
approximately $16,400 in cash, $14,300 in common stock (1,320,700
shares) and the assumption of $70,000 of debt.
On December 30, 1997 in connection with the Company's acquisition
of Seymour, the Company refinanced its primary credit facility. As a
result, the Company was required to record an extraordinary charge
related to the write-off of certain deferred financing fees previously
capitalized.
The pro forma impact of the acquisition of Seymour and the related
financing on the Company's historical results together with a detailed
description of the related financing is more fully described in Note 16
to the Consolidated Financial Statements of the Company as included in
the Company's 1997 Annual Report on Form 10-K.
<PAGE>
<TABLE>
Note 3. Inventories are summarized as follows:
March 28, December 27,
1997 1998
Finished goods ........................ $13,059 $ 7,335
Work-in-process ....................... 4,516 2,225
Raw materials ......................... 7,181 3,237
$24,756 $12,797
Note 4. During fiscal 1997 the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share," which established
standards for the computation and presentation of earnings per share
information. Prior period net earnings (loss) per share have been
restated. Net earnings (loss) per common share - basic, was calculated
by dividing net earnings (loss) applicable to common shares by the
weighted average number of common shares outstanding during each period.
Net earnings (loss) per common share - diluted, reflects the potential
dilution that could occur assuming exercise of all outstanding "in-the-
money" stock options. A reconciliation of the net earnings (loss) and
the number of shares used in computing basic and diluted earnings per
share was as follows:
For the Thirteen Weeks Ended
March 28, March 29,
1998 1997
<S> <C> <C>
Net earnings(loss) per common share - basic:
Net earnings(loss) applicable to common shares.. $ (491) $ 1,032
Weighted average common shares
outstanding for the period..................... 7,929 4,299
Net earnings(loss) per common share - basic..... $ (0.06) $ 0.24
Net earnings(loss) per common share- diluted:
Net earning(loss) applicable to common shares... $ (491) $ 1,032
Weighted average common shares
outstanding for the period..................... 7,929 4,299
Increase in shares which would result
from exercise of "in-the-money"
stock options ........... 387 215
Weighted average common shares outstanding
assuming conversion of the above securities.... 8,316 4,514
Net earnings(loss) per common share - diluted... $ (0.06) $ 0.23
</TABLE>
Note 5. The provision for income taxes is determined by applying an
estimated annual effective tax rate (federal, state and foreign
combined) to income before taxes. The estimated annual effective income
tax rate is based upon the most recent annualized forecast of pretax
income and permanent book/tax differences.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
This quarterly report on Form 10-Q, including "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" contains forward-looking statements within the meaning of
the "safe-harbor" provisions of the Private Securities Litigation Reform
Act of 1995. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties
which could cause actual results to differ materially from those
described in the forward-looking statements. Such factors and
uncertainties include, but are not limited to: (i) the anticipated
effects of the acquisition of Seymour on the Company's sales and
earnings; (ii) the impact of the level of the Company's indebtedness;
(iii) restrictive covenants contained in the Company's various debt
agreements; (iv) general economic conditions and conditions in the
retail environment; (v) the Company's dependence on a few large
customers; (vi) price fluctuations in raw materials used by the Company,
particularly plastic resin; (vii) competitive conditions in the
Company's markets; (viii) the seasonal nature of the Company's business;
(ix) the Company's ability to execute its acquisition strategy; (x)
fluctuations in the stock market; (xi) the extent to which the Company
is able to retain and attract key personnel; (xii) relationships with
retailers and (xiii) the impact of federal, state and local
environmental requirements (including the impact of current or future
environmental claims against the Company). As a result, the Company's
operating results may fluctuate, especially when measured on a quarterly
basis. The Company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
Readers are also urged to carefully review and consider the various
disclosures made by the Company which attempt to advise interested
parties of the factors which affect the Company's business, in this
report, as well as the Company's periodic reports on Forms 10-K, 10-Q
and 8-K filed with the Securities and Exchange Commission.
Seymour Acquisition. Effective December 30, 1997, (within the
Company's 1998 fiscal year) the Company acquired Seymour, (the "Seymour
Acquisition") and Seymour's actual results have been combined with the
Company's since the date of the acquisition. Seymour is a leading
designer, manufacturer and marketer of consumer laundry care products.
Seymour manufactures and markets a full line of ironing boards, ironing
board covers and pads and numerous laundry related accessories.
Seymour was acquired for a total purchase price of $100.7 million,
consisting of $16.4 million in cash, $14.3 million in common stock
(1,320,700 shares) and the assumption of $70.0 million of debt. The
necessary funds to complete the acquisition were obtained from a credit
agreement entered into on December 30, 1997 with the lenders which are
parties thereto and General Electric Capital Corporation, ("GECC").
In the discussion and analysis that follows, all references to the
first quarter of 1998 are to the thirteen week period ended March 28,
1998 and all references to the first quarter of 1997 are to the thirteen
week period ended March 29, 1997. The following discussion and analysis
compares the actual results for the first quarter of 1998 to the actual
results for the first quarter of 1997 with reference to the following
(dollars in thousands, except share and per share amounts):
<PAGE>
<TABLE>
Thirteen weeks ended
March 28, 1998 March 29, 1997
<S> <C> <C> <C> <C>
Net sales............................. $52,408 100.0% $31,738 100.0%
Cost of goods sold.................... 36,455 69. 22,610 71.
Gross profit........................ 15,953 30.4 9,128 28.8
Operating expenses.................... 10,861 20.7 6,602 20.8
Operating profit.................... 5,092 9.7 2,526 8.0
Interest expense...................... (3,006) (5.7) (1,532) (4.8)
Other income.......................... 57 0.1 155 0.5
Earnings before income taxes........ 2,144 4.1 1,149 3.7
Income tax expense.................... (898) (1.7) (117) (0.4)
Earnings before extraordinary charge.. 1,246 2.4 1,032 3.3
Extraordinary charge for early
retirement of debt, net of tax...... (1,737) (3.3) - -
Net earnings (loss).................. $ (491) (0.9)% $ 1,032 3.3%
Earnings before extraordinary charge
per common share - basic............ $ 0.16 $ 0.24
Earnings before extraordinary charge
per common share - diluted.......... $ 0.15 $ 0.23
Net earnings(loss) per share - basic. $ (0.06) $ 0.24
Net earnings(loss) per share - diluted $ (0.06) $ 0.23
Weighted average common shares
outstanding - basic................. 7,928,668 4,298,779
Weighted average common shares
outstanding - diluted............... 8,316,182 4,513,683
</TABLE>
Net sales. Net sales of $52.4 million in the first quarter of 1998
increased $20.7 million, or 65.3%, from net sales of $31.7 million in
the first quarter of 1997. The Seymour Acquisition contributed $23.0
million to net sales in the quarter. The Company's remaining subsidiaries
experienced a net sales decrease in the first quarter of 1998 totaling
$2.3 million. This slight decrease was a result of the Company's continuing
effort to cutback or eliminate the sales of certain under performing
products. Further contributing to the slight decrease, sales as compared to
the prior period were negatively impacted by the bankruptcy of several
retailers during the fourth quarter of 1997 and the first quarter of 1998.
Sales to such customers for the first quarter of 1997 totaled $1.0 million
as compared to $0.2 million in the first quarter of 1998.
<PAGE>
Gross profit. Gross profit increased from $9.1 million in the
first quarter of 1997 to $16.0 million in the first quarter of 1998
while gross profit margins increased from 28.8% in the first quarter of
1997 to 30.4% in the first quarter of 1998. The Seymour Acquisition
contributed $6.6 million to gross profit in the quarter. Gross profit
margins for the other subsidiaries increased from 28.8% in the first
quarter of 1997 to 31.6% in the first quarter of 1998 due to a decrease
in the cost of plastic resin. The Company experienced a price decrease
resulting in margin savings of about 3.0% as compared to a year ago.
Declines in resin costs were a reflection of plastic resin market
factors and not as a result of any change in the Company's buying
practices. Partially offsetting the resin savings were charges for
additional assembly and start-up costs relating to new products.
Margins were also impacted by unfavorable overhead absorption on
decreased production in response to the sales decline.
Operating expenses. Operating expenses of $10.9 million in the
first quarter of 1998 were up $4.3 million as compared to the first
quarter of 1997. The Seymour Acquisition accounted for operating
expenses of $3.9 million in the first quarter of 1998 including $0.7
million of amortization expense. Excluding the impact of the Seymour
Acquisition, operating expenses increased $0.4 million to $7.0 million
for the first quarter of 1998, up from $6.6 million for the first
quarter of 1997. Selling expenses decreased $0.2 million in the first
quarter of 1998 as expenses such as freight and commissions were lower
in response to the decrease in net sales. Administrative expenses
increased $0.6 million due to an increase in employee wages, benefits
and the implementation of a new incentive compensation plan. Excluding
the impact of the Seymour Acquisition, amortization of intangibles
remained constant at $0.2 million.
Interest expense. Interest expense of $3.0 million in the first
quarter of 1998 increased $1.5 million from $1.5 million in the first
quarter of 1997. The Seymour Acquisition accounted for $2.1 million of
interest expense in the first quarter of 1998. Excluding the impact of
the Seymour Acquisition, interest expense decreased from $1.5 million in
the first quarter of 1997 to $0.9 million in the first quarter of 1998.
This decrease of $0.6 million is primarily due to a reduction in the
outstanding principal balance of the Company's debt. Proceeds from the
Company's public stock offering of 2,280,000 new shares in the third
quarter of 1997 were used to repay outstanding debt. Proceeds from the
stock offering, $20.9 million, were used to repay a subordinated note of
$7.0 million, term notes of $13.6 million and accrued interest of $0.3
million. In addition, interest expense in the first quarter of 1997
also reflected an additional $0.2 million related to warrants issued in
connection with the Company's acquisition of Tamor Corporation.
Income taxes. Income taxes increased by $0.8 million to $0.9
million for the first quarter of 1998 from $0.1 million in the first
quarter of 1997. The Seymour Acquisition contributed $0.3 million to
income tax expense in the first quarter of 1998. Excluding the impact
of the Seymour Acquisition, the provision for income taxes increased
from $0.1 million in the first quarter of 1997 to $0.6 million in the
first quarter of 1998. The primary contributor to this increase was due
to the fact net operating loss carryforwards in 1997 are no longer
available in 1998. The first quarter of 1998 provision includeda provision
for federal and state income taxes.
<PAGE>
Earnings before extraordinary charge. Earnings before
extraordinary charge increased to $1.2 million in the first quarter of
1998 from first quarter 1997 earnings of $1.0 million. Diluted earnings
before extraordinary charge, per share in the first quarter of 1998 were
$0.15 per common share based on 8,316,182 weighted average common shares
outstanding as compared to diluted earnings before extraordinary charge,
per share in the first quarter of 1997 of $0.23 per common share based
on 4,513,683 weighted average common shares outstanding. The increase
in weighted average common shares outstanding was the result of a public
stock offering in July, 1997 (2,280,000 new shares issued) and shares
issued in connection with the Seymour Acquisition (1,320,700 shares
issued).
Extraordinary charge. An extraordinary charge, net of tax, for the
early retirement of debt of $1.7 million, or $0.21 per common share -
diluted, was recorded to write off deferred financing charges. To fund
the Seymour Acquisition, increased financing facilities were obtained to
replace and augment existing facilities as of December 27, 1997,
requiring the write-off of the capitalized costs incurred to obtain the
replaced credit facilities.
Net earnings. A net loss of $0.5 million, or $0.06 per common
share - diluted, was incurred in the first quarter of 1998 based on
8,316,182 weighted average common shares outstanding . This compares to
net earnings of $1.0 million, or $0.23 per common share - diluted, in
the first quarter of 1997 based on 4,513,683 weighted average common
shares outstanding.
Operating Results by Industry Segment
The Company operates in two industry segments: (i) housewares
products and (ii) home improvement products.
Housewares
The housewares segment significantly improved its profitability in
the first quarter of 1998. Operating profit increased $2.6 million to
$5.1 million in the first quarter of 1998. The improvement was the
result of the Seymour Acquisition which contributed $2.7 million to
operating profit in the quarter. Aside from the Seymour Acquisition the
housewares segment experienced a slight decrease in operating profit
attributable to a decline in net sales. The primary cause of the
decline in net sales of $2.6 million is due to a continuing effort to
cutback or eliminate certain under performing products and the
bankruptcy of several retailers during the fourth quarter of 1997 and
the first quarter of 1998.
Home Improvement Products
Operating losses of the home improvement segment remained flat at
$0.1 for the first quarter of 1997 and 1998. The home improvement
segment had a slight increase in sales but due to a change in mix
operating losses were flat.
<PAGE>
Capital Resources and Liquidity
Cash and cash equivalents at March 28, 1998 were $4.2 million as
compared to $0.6 million at December 27, 1997. Total assets increased
$125.7 million to $225.0 million while stockholders' equity increased
$13.8 million, or 32%, to $56.1 million. Working capital increased
$10.4 million, or 125%, to $18.7 million at March 28, 1998. The
increase in assets, stockholders' equity and working capital are
primarily the result of the Seymour Acquisition. Cash provided by
operating activities was $4.2 million for the first quarter of 1998.
Increases in cash and cash equivalents also resulted from borrowings
from GECC in excess of funds required to close the Seymour Acquisition.
The required borrowings for the Seymour Acquisition have
significantly changed the Company's financial structure. To fund the
Seymour Acquisition, financing facilities were provided by commercial
lenders to replace and augment the financing facilities in place at
December 27, 1997. The financing facilities provided consist of $110.0
million of term notes, a $10.0 million senior subordinated note and a
$20.0 million revolving credit facility. At March 28, 1998, the Company
had total short and long term debt outstanding of $126.7 million and
unused availability under the revolving line of credit of $11.5 million.
There were no borrowings outstanding under the revolving line of credit
at March 28, 1998. During the remainder of 1998, $5.1 million of debt
will come due.
The Company's capital spending needs in 1998 are expected to be
between $10.0 million and $12.0 million. About 30% of the spending relates
to new injection molding presses to expand existing capacity and to replace
old, inefficient machines. The remaining spending relates to routine
maintenance and required investments to support new products. The
replacement machines are expected to reduce manufacturing cycle times
and ongoing maintenance costs. In addition, the Company exercised an
option in the first quarter of 1998 to purchase the leased manufacturing
and warehouse facility in Missouri at an approximate cost of $1.4
million. Where possible, management will pursue alternative means of
financing such as capital leases and other purchase money transactions.
In addition, operating leases will be pursued to the extent they
represent attractive economic alternatives.
The Company believes its financing facilities together with its
cash flow from operations will provide sufficient capital to fund
operations, make the required debt repayments and meet the anticipated
capital spending needs.
To provide the Company with the financial flexibility and resources
necessary to pursue strategic acquisitions the Company announced on
March 31, 1998 that is preparing to offer a $125.0 million 10 year
fixed-rate senior subordinated debt issue. The bonds to be offered
initially will not be registered under the Securities Act of 1933 and may
not be offered or sold absent registration or applicable exemption from
registration requirements. The bonds will be sold in a Rule 144A private
placement to institutional investors. The proceeds from the bonds will be
used to pay off the Company's existing debt with GECC. In addition to the
bond issue the Company is also seeking to enter into a $100.0 million
senior revolving credit facility to be used to finance future acquisitions
and working capital needs.
<PAGE>
The replacement of the Company's existing debt agreement will
result in prepayment penalties and the write-off of previously incurred
fees and expenses totaling $3.3 million, net of tax, or $0.39 per share
on a diluted basis. Such charge is expected to be reflected as an
extraordinary charge in the Company's second quarter results. The new
financial structure will provide fixed rate debt and defer existing
principal amortization. Management believes that the incurrence of the
prepayment penalties and the write-off of previously incurred fees and
expenses is justified by the improved financial structure achieved.
Outlook
The outlook section contains a number of forward-looking statements
which are based upon current expectations. Actual results may differ
materially. These statements do not take into account the potential
effects of future mergers or acquisitions.
The Company expects increased sales and earnings in the second quarter of
1998. The Seymour product line is more seasonal than the Company's other
products with sales of their products more heavily concentrated in the
second and third quarters. This corresponds to the spring/summer wedding
season and the back-to-school season. Resin prices have remained lower
than expected in the first quarter of 1998 and management expects prices
to remain flat over the remainder of the year. The Company estimates that
gross margins will improve in the second and third quarters as fixed costs
will be absorbed over an expanded manufacturing volume in response to the
increase in sales.
Management continues to believe that significant growth
opportunities exist in the plastic storage container category. The
Company, however, is currently using all of its production capacity and
is also using outside custom molders to meet the sales demand. During
the rest of 1998 the Company will evaluate its production capacity needs
and identify ways by which to add capacity. It is management's
intention to have the capacity in place by 1999 to allow for the
aggressive pursuit of profitable sales growth in this category.
In addition to the Company's goal of 10% annual growth from new
products and product line improvements, the Company will continue to
aggressively pursue acquisitions that are accretive to earnings.
Management anticipates that the fragmented nature of the housewares
industry will continue to provide significant opportunities for growth
through strategic acquisitions of complementary businesses. Management
intends to acquire businesses at attractive multiples of cash flow and
achieve operational and distribution efficiencies through integration of
complementary businesses.
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 27 - Financial Data Schedule
b) On January 13, 1998 the Registrant filed a Form 8-K to report
the December 30, 1997 acquisition of Seymour Sales Corporation,
and its wholly owned subsidiary, Seymour Housewares
Corporation. No financial statements were included with this
filing as it was impracticable to do so at such time.
<PAGE>
On March 16, 1998 the Registrant filed a Form 8-K/A which
amended the Form 8-K filed on January 13, 1998. The amendment
was filed to include the required financial statements. The
statements included were as follows:
SEYMOUR SALES CORPORATION and SUBSIDIARIES - As of and For the
Years Ended June 30, 1997 and 1996:
Report of Ernst & Young LLP
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in
Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
SEYMOUR SALES CORPORATION and SUBSIDIARIES - As of and For
the Years Ended June 30, 1996 and 1995:
Report of Ernst & Young LLP
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in
Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
SEYMOUR SALES CORPORATION and SUBSIDIARIES - Interim Financial
Statements
Condensed Consolidated Balance Sheet as of December 27,
1997
Condensed Consolidated Statements of Operations for the Six
Months Ended December 27, 1997 and December 28, 1996
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended December 27, 1997 and December 28, 1996
Notes to the Condensed Consolidated Financial Statements
HOME PRODUCTS INTERNATIONAL, INC :
Unaudited Pro Forma Condensed Combined Balance Sheet as of
December 27, 1997
Unaudited Pro Forma Condensed Combined Statement of
Operations for the fifty-two weeks ended December 27, 1997
Notes to the Unaudited Pro Forma Condensed
Combined Financial Statements
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 E.Winslow
James E. Winslow
Executive Vice President and
Chief Financial Officer
Dated: May 12, 1998
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