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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended June 26, 2004

or

Commission file number 0-17237

HOME PRODUCTS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

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  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Common shares, par value $0.01, outstanding as of August 2, 2004 – 7,878,902

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HOME PRODUCTS INTERNATIONAL, INC.

INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HOME PRODUCTS INTERNATIONAL, INC.

Condensed Consolidated Balance Sheets

(Amounts in thousands, except share and per share amounts)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HOME PRODUCTS INTERNATIONAL, INC.

Condensed Consolidated Statements of Operations

(Amounts in thousands, except share and per share amounts)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HOME PRODUCTS INTERNATIONAL, INC.

Condensed Consolidated Statements of Cash Flows

(Amounts in thousands)

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated financial statements.

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HOME PRODUCTS INTERNATIONAL, INC.

Notes to Condensed Consolidated Financial Statements

(Dollar amounts in thousands, except per share amounts)

(Unaudited)

Note 1. General Information

Home Products International, Inc. (the “Company”), based in Chicago, is a leading designer, manufacturer and marketer of a broad range of value-priced, quality consumer houseware products. The Company’s products are marketed principally through mass-market trade channels in the United States and internationally.

The condensed consolidated financial statements for the thirteen and twenty-six weeks ended June 26, 2004 and June 28, 2003, include, in the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows as of June 26, 2004 and for all periods presented.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto incorporated by reference in the Company’s Form 10-K for the year ended December 27, 2003. The results of operations for the thirteen and twenty-six weeks ended June 26, 2004 are not necessarily indicative of the operating results to be expected for the full year.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 2. Stock-Based Compensation Plans

Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation” encourages companies to adopt a fair value approach to valuing stock-based compensation that would require compensation cost to be recognized based upon the fair value of the stock-based instrument issued. As permitted by SFAS No. 123, the Company follows the provisions of Accounting Principles Board (“APB”) Opinion No. 25 “Accounting for Stock Based Compensation” and the related interpretations in accounting for stock option awards under the stock option plans. Under APB Opinion No. 25, compensation expense is recognized if the market price on the date of grant exceeds the exercise price. All options granted by the Company have been granted at the market price of stock on the date of grant and therefore the Company recognizes no compensation expense.

To provide more prominent and frequent disclosures about the effects of stock-based compensation as required under SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”, the following table summarizes the pro forma effect of stock-based compensation on net loss and loss per share if the optional expense recognition provisions of SFAS No. 123 had been adopted. No tax benefits were attributed to the stock based employee compensation expense during the thirteen and twenty-six weeks ended June 26, 2004 due to the Company’s loss carryforward position.

The fair value of these stock options was estimated at the date of grant using a Black-Scholes option pricing model. Changes in assumptions can materially affect the fair value estimate, and therefore the existing valuation model may not provide a reliable single measure of the fair value of the Company’s stock options.

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No stock options were granted during the thirteen and twenty-six weeks ended June 26, 2004 and June 28, 2003.

Note 3. Net Loss Per Share

The following information presents net loss per share basic and diluted:

Net loss per share - basic is computed based on the weighted average number of outstanding common shares. Net loss per share - diluted normally includes the weighted average effect of dilutive options, warrants and restricted stock on the weighted average shares outstanding. Because the inclusion of these common stock equivalents would have been antidilutive, the weighted average shares outstanding – diluted for the thirteen and twenty-six weeks ended June 26, 2004 exclude the effect of approximately 943,420 and 963,420, respectively, options and warrants. Because the inclusion of these common stock equivalents would have been antidilutive the weighted average shares outstanding – diluted for the thirteen and twenty-six weeks ended June 28, 2003 exclude the effect of approximately 1,454,720 options, warrants and restricted stock.

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Note 4. Other Comprehensive Loss

The following table summarizes other comprehensive loss for the periods presented:

The following is a summary of accumulated other comprehensive loss balances:

Note 5. Goodwill and Patents and Non-Compete Agreements

Goodwill relates to the excess of purchase price over the fair value of tangible assets acquired. Goodwill is tested at least annually for impairment or more often if an event or circumstance indicates that an impairment loss has been incurred.

The change in the carrying amount of goodwill for the twenty-six weeks ended June 26, 2004 is as follows:

During the second quarter of 2004, the carrying amount of goodwill was decreased by $574 as a result of the resolution of tax contingencies arising in connection with prior year acquisitions. The resolution was a result of the closing of certain tax years.

Patents and non-compete agreements are amortized over their useful lives, and are evaluated annually to determine whether events and circumstances warrant a revision to the remaining period of amortization.

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Patents and non-compete agreements consist of the following:

Aggregate amortization expense for the thirteen weeks ended June 26, 2004 and June 28, 2003 was $124 and $126, respectively. Aggregate amortization expense for the twenty-six weeks ended June 26, 2004 and June 28, 2003 was $248 and $252, respectively.

Estimated patents and non-compete agreements amortization expense for the remaining two quarters of fiscal 2004 and fiscal 2005 based on patents and non-compete agreements at June 26, 2004 is as follows:

Note 6. Inventories

The components of the Company’s inventory consist of direct labor, direct materials and the applicable portion of overhead required to manufacture the goods.

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Note 7. Eagan Shutdown

On July 29, 2003, the Company announced its intention to close its Eagan, Minnesota manufacturing and warehouse facility in January 2004 (“Eagan Shutdown”). This facility was exited on January 31, 2004. The Eagan, Minnesota facility was closed as part of an effort to reduce operating costs and utilize capacity in the Company’s other injection molding plants. The Company terminated approximately 130 hourly and salaried employees as part of the Eagan Shutdown. During the thirteen and twenty-six weeks ended June 26, 2004, the Company incurred $76 and $682, respectively, of Eagan Shutdown charges. These charges relate to costs associated with the Eagan, Minnesota plant closure, costs associated with the relocation of equipment and inventory and employee related fringe benefits. The second quarter of 2004 includes a change in management estimates of $98 related to employee separation costs. Eagan Shutdown charges for the thirteen and twenty-six weeks ended June 26, 2004 are included in cost of goods sold.

The following tables reflect the changes in the accrual during the thirteen and twenty-six weeks ended June 26, 2004 associated with the Eagan Shutdown. This accrual is included in accrued liabilities on the Company’s condensed consolidated balance sheets.

Note 8. Special, Restructuring and Other Charges Update

During 2000 and 2001, the Company implemented a restructuring plan to reduce fixed costs and better position the Company for sustained profitability. The restructuring plan entailed the closure of the Leominster, Massachusetts manufacturing and warehouse facilities, reconfiguration of remaining manufacturing facilities, a reduction in headcount and a realignment of the selling process. The restructuring charges were accounted for under Emerging Issues Task Force (“EITF”) Issue No. 94-3. The Company identified a total of 124 hourly and salaried Leominster employees to be terminated in accordance with the 2001 restructuring initiatives. All planned restructuring initiatives were completed in 2001.

On a quarterly basis, the Company reviews remaining accrual balances related to these actions and adjusts them to its best estimate of remaining cost.

Restructuring accruals were determined based on estimates prepared at the time the restructuring actions were approved by management and also reflect any subsequent changes in management estimates. Restructuring accruals of $239, as of June 26, 2004, are considered adequate. The following table reflects changes in the accruals during the twenty-six weeks ended June 26, 2004.

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As of June 26, 2004, obsolete and duplicate leased assets accruals of $179 are related to future minimum lease payments on machinery and equipment no longer used in the Company’s manufacturing process and employee related accruals of $50 are primarily related to employee severance and benefits.

Note 9. Income Taxes

The Company uses the asset and liability method of SFAS No. 109 in accounting for income taxes. Under this method deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, tax credits and operating loss carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

As discussed in Note 12 to the consolidated financial statements in the Company’s 2003 Form 10-K, the Company has a valuation allowance against the full amount of its net deferred tax assets. The Company expects to provide a full valuation allowance on future tax benefits until an appropriate level of profitability is sustained.

Note 10. Recent Development

On June 2, 2004, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with JRT Acquisition, Inc. (“JRT”), a privately held company whose sole stockholder is James R. Tennant, the Chief Executive Officer of the Company, and which was created solely for the purpose of effectuating the Merger Agreement and the transactions contemplated thereby (the “Merger”). Pursuant to the provisions of the Merger Agreement, JRT will merge with and into the Company, with the Company continuing as the surviving corporation. The Merger Agreement provides that, at the closing of the Merger, each holder of the Company’s common stock will be entitled to receive $1.50 in cash, without interest and less any applicable withholding taxes, for each outstanding share of the Company’s common stock that he or she owns. A special meeting of stockholders will be held for the purpose of obtaining the requisite stockholder approval. The Merger is subject to customary conditions and requires the approval of holders of a majority of the shares of the Company’s common stock outstanding as of the record date and the approval of holders of a majority of the shares of the Company’s common stock present or represented by proxy at the special meeting and voting either “for” or “against” the Merger Agreement and the Merger, excluding shares held by JRT, equityholders of JRT, James R. Tennant and any of their affiliates. Upon completion of the Merger, the Company will be a privately held company, wholly owned by the stockholders of JRT, and its common stock will cease to be quoted on NASDAQ and registered under the Securities Exchange Act of 1934. On July 6, 2004, the Company filed a Preliminary Proxy Statement on Schedule 14A, and the Company, JRT and Mr. Tennant filed a Schedule 13E-3 in connection with the proposed Merger.

Note 11. Contingencies

The Company is party to various claims, legal actions and complaints including product liability litigation, arising in the ordinary course of business. In the opinion of management, all such matters are adequately covered by insurance or will not have a material adverse effect on the Company’s consolidated financial position, results of operations or liquidity.

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On June 3, 2004, a complaint was filed in the Court of Chancery for the State of Delaware against the Company, our board of directors and JRT. The complaint purports to be filed by a stockholder and alleges that in entering into the Merger Agreement, our board of directors breached their fiduciary duties of loyalty, due care and good faith. The complaint, which includes a request for a declaration that the action be maintained as a class action, seeks, among other relief, injunctive relief enjoining the Merger from being consummated. The Company and our board of directors believe the complaint is without merit and intend to vigorously contest this lawsuit.

On June 4, 2004, a complaint was filed in the Chancery Division of the Circuit Court of Cook County, Illinois against the Company and our directors. The complaint purports to be filed by a stockholder and alleges that in entering into the Merger Agreement, our board of directors breached their fiduciary duties of loyalty, due care, independence, good faith and fair dealing. The complaint, which includes a request for a declaration that the action be maintained as a class action, seeks, among other relief, injunctive relief enjoining the Merger from being consummated. The Company and our board of directors believe the complaint is without merit and intend to vigorously contest this lawsuit.

If class certification is granted in either of the aforementioned legal actions, it is possible that the outcome could have a material adverse effect on the operating results, financial position and cash flows of the Company. There is not sufficient information to estimate the Company’s exposure at this time.

Note 12. Segment of an Enterprise

The Company consists of a single operating segment that designs, manufactures and markets quality consumer housewares products. This segmentation is based on the financial information presented to the chief operating decision maker. The following table sets forth the net sales by product category within the Company’s single operating segment.

Product Category Information – Net Sales

Major Customers

The Company is dependent upon a few customers for a large portion of its consolidated net sales. The table below sets forth the customers that each account for more than 10% of consolidated net sales. The loss of one of these customers could have a material adverse effect on the Company. No other customer accounted for more than 10% of consolidated net sales during the thirteen and twenty-six weeks ended June 26, 2004 and June 28, 2003.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This commentary should be read in conjunction with the Company’s consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations contained in the Company’s Form 10-K for the year ended December 27, 2003.

Overview

The Company designs, manufactures and markets a broad range of quality houseware products. The following are key factors in understanding the Company’s performance:

The Company’s business is highly concentrated among mass merchandisers, including discount stores, home centers and other category specific retailers. Sales to our top three customers, Kmart, Wal-Mart and Target, were 74% of net sales in the twenty-six weeks ended June 26, 2004, 73% of net sales in fiscal year 2003 and 74% of net sales in fiscal year 2002. Our products generally have few unique or patented features and are sold at entry level price points. As such, the Company’s financial success is highly dependent on profitably meeting certain price points as demanded by customers. The competitive atmosphere generally results in the erosion of selling prices for commodity products. Further, the Company has historically had little success at recovering raw material cost increases through higher selling prices.

The size of the mass merchandisers gives them strong bargaining power with suppliers. They encourage high levels of competition among suppliers, demand that manufacturers supply innovative new products, require suppliers to match or beat quoted prices received from other potential suppliers, demand reduced lead times and that product be warehoused until the customer desires delivery. These customers also actively engage in the direct import of generic products from multiple sources.

The high concentration of sales to mass merchandisers also makes the Company’s results dependent upon the operating results and financial viability of its key customers. The Company’s operating results in recent years have been impacted by developments at Kmart, the Company’s largest customer in fiscal year 2003. Since emerging from bankruptcy in May 2003, Kmart has improved its financial performance and has operated within its financial covenants. However, Kmart continues to experience declines in same store sales and has announced further reductions in store count. Kmart has paid all of its current obligations to the Company on time and we do not believe that Kmart’s current situation will negatively impact the Company in the near term.

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The Company’s primary raw materials are plastic resin and steel. Changing prices for such raw materials can cause the Company’s results of operations to fluctuate significantly. The cost of raw materials is impacted by several factors outside the control of the Company including supply and demand characteristics, oil and natural gas prices and the overall state of the economy. Generally, as the cost of raw materials rises it results in immediate declines in profitability since we usually are unable to recover the cost increase by passing it through to customers. Conversely, when raw material costs decline, our margins generally are favorably impacted in the short-term though competitive factors may force a decrease in selling prices that erodes some of the improved profitability. During the first twenty-six weeks of 2004, the cost of plastic resin increased approximately 10% and steel prices increased approximately 37% as compared to the first twenty-six weeks of 2003. The increase in raw material costs added approximately $4.9 million to cost of goods sold that was not recovered from customers. Current resin costs are such that several of our products cannot be sold at a profit. Management expects the cost of both plastic resin and steel to increase further during the remainder of 2004.

The Company sells a variety of household items. For various reasons, some items provide a better return than others. As the mix of items sold changes, profitability and cash flow are affected. During the first twenty-six weeks of 2004, sales of closet and general storage items increased as compared to the first twenty-six weeks of 2003. Since these product categories are among the lowest profit items, overall profitability was negatively impacted by product mix in the first twenty-six weeks of 2004. During the remainder of 2004, we expect that mix will continue to have an unfavorable impact on the Company’s earnings. However, certain unprofitable products will be discontinued if selling price increases are not accepted in the marketplace. The costs related to discontinuing a product are relatively minor and relate primarily to the non-cash write-off of related tooling.

The Company has four injection molding facilities with a variety of injection molding machine sizes. Customer ordering patterns and mix of product manufactured impacts utilization of these machines. When demand exceeds our capacity, we must place production at third party facilities that are more costly than internal manufacturing. In addition, the mix of product sold impacts profitability since low margin items take the same amount of production time as higher margin items. In January 2004, we closed our most expensive molding facility and relocated the machines to lower cost operations. The Company’s future profitability is dependent on selling to our optimum capacity and product mix so that constrained capacity is devoted to products with higher margins. We have no plans for expansion or reduction of our molding capacity until we can profitably operate the facilities we currently own.

Seasonal working capital needs are provided by the Company’s $50 million asset based line of credit. Ability to borrow is a function of our eligible asset based availability and our outstanding borrowings. During the first twenty-six weeks of 2004, our cash flow was negative and by the end of the second quarter there were $11.5 million of borrowings outstanding under the line of credit. At June 26, 2004, our unused available line of credit was $36.9 million. A significant decline in eligible asset base or cash flow could result in constrained funds for operations. The Company has historically experienced negative cash flow in the second half of its fiscal years. This is due to seasonal cash needs as well as the semi annual payments of interest on subordinated debt. However, management believes it has sufficient borrowing capability for at least the next 12 months.

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See “Capital Resources and Liquidity” below for additional discussion of the Company’s cash flows and financing situation.

Recent Development

On June 2, 2004, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with JRT Acquisition, Inc. (“JRT”), a privately held company whose sole stockholder is James R. Tennant, the Chief Executive Officer of the Company, and which was created solely for the purpose of effectuating the Merger Agreement and the transactions contemplated thereby (the “Merger”). Pursuant to the provisions of the Merger Agreement, JRT will merge with and into the Company, with the Company continuing as the surviving corporation. The Merger Agreement provides that, at the closing of the Merger, each holder of the Company’s common stock will be entitled to receive $1.50 in cash, without interest and less any applicable withholding taxes, for each outstanding share of the Company’s common stock that he or she owns. A special meeting of stockholders will be held for the purpose of obtaining the requisite stockholder approval. The Merger is subject to customary conditions and requires the approval of holders of a majority of the shares of the Company’s common stock outstanding as of the record date and the approval of holders of a majority of the shares of the Company’s common stock present or represented by proxy at the special meeting and voting either “for” or “against” the Merger Agreement and the Merger, excluding shares held by JRT, equityholders of JRT, James R. Tennant and any of their affiliates. Upon completion of the Merger, the Company will be a privately held company, wholly owned by the stockholders of JRT, and its common stock will cease to be quoted on NASDAQ and registered under the Securities Exchange Act of 1934. On July 6, 2004, the Company filed a Preliminary Proxy Statement on Schedule 14A, and the Company, JRT and Mr. Tennant filed a Schedule 13E-3 in connection with the proposed Merger.

Critical Accounting Estimates

The estimates and assumptions involved in the application of generally accepted accounting principles (“GAAP”) have an impact on the Company’s reported financial condition and operating performance. The Company identified the critical accounting estimates as those that involve high levels of subjectivity and judgment to account for uncertain or difficult to predict matters that could have a material impact on financial condition or operating performance.

A summary of the critical accounting estimates is as follows:

Allowances for retailer deductions and customer programs are recognized when sales are recorded. Allowances are based on various market data, historical trends and information from customers. Although the best information reasonably available to the Company is used to establish the allowances, such information is often based on estimates of retailer recovery rates and future sales to retailers. Retailer programs are often based on annual sales levels in total and by product category. Different recovery rates apply depending on the annual sales levels achieved. As such, judgments are required on an interim basis of the expected full year sales level by customer and product category. Because of the judgment involved, interim estimates can vary significantly from the full year actual determination of program costs. Only at year-end can an accurate assessment of the current year’s costs be made. Retailers recover the program costs through deductions against future amounts owed to the Company. It is not unusual for retailers to have a different judgment of the amounts earned than does the Company. Accordingly, the Company maintains allowances for any differences that may arise. Resolution of such differences can sometimes take up to several years depending on the particular program. Allowances are reviewed quarterly and are adjusted based on current estimates of retailer recovery and future sales. Due to changes in estimates, changes in retailer activity and the length of time required for many programs to run their course, it is possible for allowance activity to materially impact operating performance and financial condition in any given period. In the first twenty-six weeks of 2004, the allowances for retailer deductions and trade programs as a percentage of gross sales were 5.1% compared to 7.2% in the first twenty-six weeks of 2003. The change in percentage is a function of the assortment of trade programs, the level of retailer deductions and the sales levels achieved by customers. Due to changes in estimates during the year, interim results can vary from the full year result.

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The Company evaluates the collectibility of its accounts receivable based upon an analysis of historical trends, aging of accounts receivable, write-off experience and credit evaluations of selected high risk customers. In the event of a specific customer bankruptcy or reorganization, specific allowances are established to write down accounts receivable to the level of anticipated recovery. The Company may consult with third-party purchasers of bankruptcy receivables when establishing specific allowances. The determination of specific allowances involves management judgments about the expected financial viability of its customers. Changes in specific allowances for doubtful accounts would only be material to financial condition and operating performance to the extent any change involved one of the Company’s 10 largest customers. The 10 largest customers accounted for approximately 84% of net sales in the first twenty-six weeks of 2004 and 79% of accounts receivable at June 26, 2004. No material changes in allowances for doubtful accounts involving any of our 10 largest customers was recorded in the thirteen weeks ended June 26, 2004.

The Company values inventory at cost (not in excess of market) determined by the first-in, first-out (FIFO) method. Inventory costs are based on standard costs, adjusted for actual manufacturing and raw material purchase price variances. The Company includes material, labor and manufacturing overhead in the cost of inventories. Management regularly reviews inventory for salability and has established allowances to record inventory at the lower of cost or market. The allowances are based on management judgments regarding future selling prices and costs of disposal. Such judgments are impacted by economic conditions, condition of the inventory and age of the inventory. Such judgments involve high degrees of uncertainty and subjectivity. Accordingly, changes in the estimates can have a material impact on reported results or financial condition. In the first twenty-six weeks of 2004, problem inventories were lower than in the first twenty-six weeks of 2003. Accordingly, charges to reduce inventory carrying values were $0.4 million lower in the first twenty-six weeks of 2004 than in the first twenty-six weeks of 2003.

The Company regularly evaluates its ability to recover the reported amount of its deferred tax assets. The evaluation considers several factors, including our estimate of the likelihood that we will generate sufficient taxable income in future years in which temporary differences reverse. This evaluation is based primarily on our historical earnings, projected operating results, applicable net operating loss carryforward expiration dates and identified actions under the control of the Company in realizing the associated carryforward benefits.

The Company has $32.1 million of deferred tax assets, as of December 27, 2003, resulting from net operating loss carryforwards, and other deductible temporary differences, which may reduce taxable income in future periods to the extent the Company generates profits. Because the value of the deferred tax assets are fully reserved, changes in estimates of future operating performance could result in a reduction of the valuation allowances and a corresponding decrease in income tax expense. The changes in the valuation allowances in any future interim period or fiscal year could be material.

In 2000 and 2001, the Company recorded restructuring charges for certain costs associated with plant closures and business reorganization activities upon approval by management with the appropriate level of authority in accordance with Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)”. Such costs were recorded as a liability and included lease termination costs,

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employee severance and certain employee termination benefits. These costs were neither associated with nor do they benefit continuing business activities. Inherent in the determination of these costs were assessments related to the most likely expected outcome of the significant actions to accomplish the restructuring. The Company reviews the status of restructuring activities on an ongoing basis and, if appropriate, records changes based on such activities. At June 26, 2004, remaining accruals related to the 2000 and 2001 restructuring charges are less than $0.3 million.

The Company assesses the recoverability of long-lived assets whenever it determines that events or changes in circumstances indicate that their carrying amount may not be recoverable. In accordance with GAAP, indefinite lived intangible assets are subject to annual impairment tests. The Company’s assessments and impairment testing are primarily based upon management estimates of future cash flows associated with these assets. Should the Company’s operating results, or estimated future results, deteriorate, we may determine that some portion of our long-lived tangible or intangible assets are impaired. Such determination could result in non-cash charges that could materially affect the Company’s consolidated financial position or results of operations for that period. At June 26, 2004, intangible assets were $73.5 million and long-lived assets (property, plant and equipment) were $32.5 million.

Thirteen weeks ended June 26, 2004 compared to the thirteen weeks ended June 28, 2003

In the discussion and analysis that follows, all references to 2004 are for the thirteen week period ended June 26, 2004 and all references to 2003 are for the thirteen week period ended June 28, 2003.

The following discussion and analysis compares the actual results for the second quarter of 2004 to the actual results for the second quarter of 2003 with reference to the following (in thousands, except net loss per share; unaudited):