Attached files
| file | filename |
|---|---|
| 8-K - 8-K - TCP International Holdings Ltd. | a8-k6august15.htm |
Exhibit 99.1
TCP Reports Second Quarter 2015 Financial Results
Aurora, Ohio (August 6, 2015) – TCP International Holdings Ltd. (NYSE: TCPI), a leading global manufacturer and distributor of energy efficient lighting technologies, today announced financial results for its second quarter ended June 30, 2015. Highlights for the second quarter include:
• | LED sales increasing 49% from the first quarter of 2015 and 32% compared with the second quarter of 2014. |
• | Gross margins remaining strong at 23.1%, an increase from 22.7% in the second quarter of 2014. |
• | Charges of $3.9 million for legal settlement ($0.09 per share) and $2.2 million ($0.05 per share) for severance benefits to our former CEO that negatively impacted operating results. |
• | Adjusted earnings per share of $0.03, compared to $0.00 in the first quarter of 2015 and $0.10 in the second quarter of 2014. |
Second Quarter 2015 Summary
Following is a summary of key financial measures for the second quarter of 2015:
• | Net sales were $111.2 million, an increase of $12.5 million, or 13%, from the first quarter of 2015 but a decrease of $1.2 million, or 1%, from second quarter of 2014. |
• | LED sales were $60.6 million, an increase of $20.0 million, or 49%, from the first quarter of 2015, largely from higher sales with Walmart and The Home Depot and the resumption of sales activity following the voluntary shipping delays associated with our product validation review in the first quarter of 2015. Our LED sales increased $14.6 million, or 32%, compared with the second quarter of 2014, driven by higher sales with Walmart and The Home Depot and higher sales in our C&I channel. |
• | CFL sales were $43.9 million, a decrease of $8.6 million, or 16% from the first quarter of 2015, and a decrease of $15.5 million, or 26%, from the second quarter of 2014, primarily due to lower market demand in North America and with Asian customers largely due to the termination of the Chinese government subsidy program in 2014. |
• | Gross margin was 23.1%, a decrease from 24.5% from the first quarter of 2015, but an increase from 22.7% in the second quarter of 2014. The decrease from the first quarter of 2015 mainly is due to the write-down of inventory, including certain Connected by TCPTM products, which adversely impacted gross margin. The improvement in gross margin from the second quarter of 2014 primarily is due to improved product mix from a higher proportion of LED sales. |
• | Selling, general and administrative expenses were $22.5 million, an increase of $1.5 million from the first quarter of 2015 primarily due to severance expenses as a result of our former CEO not renewing his employment agreement. SG&A expenses increased $2.1 million from the |
1
second quarter of 2014 primarily due to an increase in professional fees largely related to our previously disclosed litigation, share-based compensation expense associated with restricted share units granted in connection with our IPO, and severance expenses as a result of our former CEO not renewing his employment agreement.
• | Litigation settlements of $3.9 million resulted from the settlement of legal claims with Laura Hauser, our former General Counsel and Secretary. |
• | Our effective income tax rate of 1.2% was lower than the U.S. federal income tax rate primarily due to current period losses in certain operating companies, for which no tax benefit was recorded, and interest on uncertain tax positions. |
• | Net loss was $1.7 million, compared with a net loss of $1.2 million in the first quarter of 2015 and net income of $2.0 million in the second quarter of 2014. Diluted net loss per share was $0.06, compared with diluted net loss per share of $0.04 in the first quarter of 2015 and diluted net income per share of $0.10 in the second quarter of 2014. |
• | Cash and cash equivalents were $33.9 million, up from $31.4 million at December 31, 2014. Combined short-term loans and long-term debt was $98.7 million at June 30, 2015, up from $80.0 million at December 31, 2014 largely due to additional borrowings used to finance our working capital needs. |
“I am excited to be part of the TCP team and look forward to harnessing our growth potential,” said Kaj den Daas, Chief Executive Officer of TCP. “Our gross margins in the quarter demonstrate the strength of our core operations. While our current results were negatively impacted by charges for a litigation settlement and severance benefits, we believe that the underlying fundamentals of our business remain strong and will allow us to take advantage of the opportunities in the lighting market.”
Conference Call and Webcast Information
The Company will host a conference call today, August 6, 2015, at 4:30 p.m. Eastern Time. Chief Executive Officer Kaj den Daas and Chief Financial Officer Brian Catlett will present an overview of the second quarter 2015 financial results, discuss current business conditions, and respond to questions. The call will be available, live, to interested parties by dialing (888) 264-8931. For international callers, please dial (913) 905-3226. The Conference ID number is 5726506. A live webcast will also be available in the Investors Relations section of the TCP website at: http://investors.tcpi.com. A replay of the webcast will be available through the Investor Relations section of the Company’s web site approximately two hours after the conclusion of the call and remain available for approximately 30 calendar days.
Non-GAAP Adjusted EBITDA and Adjusted EPS
We present the non-GAAP financial measures "EBITDA," "Adjusted EBITDA" and "Adjusted EPS" as supplemental measures of our performance. These non-GAAP financial measures are not measures of financial performance or liquidity calculated in accordance with accounting principles generally accepted in the United States, referred to herein as U.S. GAAP, and should be viewed as a supplement to, not a substitute for, our results of operations and balance sheet information presented on the basis of U.S. GAAP.
We define EBITDA as net (loss) income before interest expense, income taxes, depreciation and amortization, and Adjusted EBITDA as EBITDA before net foreign exchange losses (gains), litigation settlements, share-based compensation expense and other nonrecurring items.
2
We define Adjusted EPS as net (loss) income per share, diluted, from continuing operations excluding net foreign exchange losses (gains), litigation settlements, share-based compensation expense and other nonrecurring items.
Adjusted EBITDA and Adjusted EPS are not necessarily comparable to similarly titled measures reported by other companies. Adjusted EBITDA may exclude certain financial information that some may consider important in evaluating our financial performance. Adjusted EBITDA and Adjusted EPS may not be indicative of historical operating results, and we do not intend for either of them to be predictive of future results of operations. We believe that our use of EBITDA, Adjusted EBITDA and Adjusted EPS as metrics assists our board, management and investors in comparing our operating performance on a consistent basis. Factors in this determination include removing the impact of our capital structure (specifically interest expense, net), asset base (specifically depreciation and amortization) and tax structure, as well as certain items that affect inter-period comparability, such as variability due to unrealized foreign exchange losses (gains), litigation settlements, non-cash share-based compensation expense and other nonrecurring items, which affect results in a given period or periods.
About TCP
TCP is a leading global manufacturer and distributor of energy efficient lighting technologies. TCP’s extensive product offerings include LED and CFL lamps and fixtures, internet-based lighting control solutions and other energy efficient lighting products. TCP has the largest combined number of LED and CFL ENERGY STAR® compliant lighting products. TCP’s products are currently offered through thousands of retail and C&I distributors. Since TCP’s inception, it has sold more than one billion energy efficient lighting products. For more information, visit http://www.tcpi.com.
Forward Looking Statements
Certain statements in this release may constitute “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 based on management’s current opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. Forward looking statements in this press release include, but are not limited to, the Company’s expectation regarding its future profitability. These forward-looking statements are only predictions, not historical fact, and involve certain risks and uncertainties, as well as assumptions. Actual results, levels of activity, performance, achievements and events could differ materially from those stated, anticipated or implied by such forward-looking statements. While TCP believes that its assumptions are reasonable, it is very difficult to predict the impact of known factors, and, of course, it is impossible to anticipate all factors that could affect actual results. There are a number of risks and uncertainties that could cause actual results to differ materially from forward-looking statements made herein. Such forward-looking statements are made only as of the date of this release. TCP expressly disclaims any obligation or undertaking to release any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or changes in events, conditions or circumstances on which any statement is based.
Contact
Brian Catlett Mike Funari
Chief Financial Officer Sapphire Investor Relations, LLC
330-954-7689 415-471-2700
ir@tcpi.com ir@tcpi.com
3
TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands, except per share data)
June 30, 2015 | December 31, 2014 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 33,852 | $ | 31,354 | |||
Restricted cash | 5,445 | 7,367 | |||||
Accounts receivable, net | 85,853 | 95,089 | |||||
Inventories | 112,316 | 122,342 | |||||
Prepaids and other current assets | 15,638 | 28,217 | |||||
Deferred income taxes | 17,671 | 17,557 | |||||
Total current assets | 270,775 | 301,926 | |||||
Property, plant and equipment, net | 70,979 | 72,037 | |||||
Land rights, net | 4,079 | 4,126 | |||||
Deferred costs | 16,695 | 16,145 | |||||
Intangible assets, net | 2,139 | 2,345 | |||||
Deferred income taxes, long-term | 7,452 | 7,094 | |||||
Other long-term assets | 1,597 | 1,737 | |||||
Total assets | $ | 373,716 | $ | 405,410 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Short-term loans and current portion of long-term debt | $ | 93,439 | $ | 74,637 | |||
Accounts payable | 87,944 | 129,194 | |||||
Accrued expenses and other current liabilities | 65,038 | 77,826 | |||||
Total current liabilities | 246,421 | 281,657 | |||||
Long-term debt, net of current portion | 5,235 | 5,340 | |||||
Income taxes payable, long-term | 8,332 | 7,891 | |||||
Legal settlements, net of current portion | 24,498 | 24,311 | |||||
Other long-term liabilities | 489 | 508 | |||||
Total liabilities | 284,975 | 319,707 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Common stock | 30,587 | 30,101 | |||||
Additional paid-in capital | 70,995 | 68,063 | |||||
Accumulated other comprehensive income | 11,836 | 9,290 | |||||
Retained deficit | (24,677 | ) | (21,751 | ) | |||
Total shareholders’ equity | 88,741 | 85,703 | |||||
Total liabilities and shareholders’ equity | $ | 373,716 | $ | 405,410 | |||
4
TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES
Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
(Amounts in thousands, except per share data)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||
Net sales | $ | 111,249 | $ | 112,464 | $ | 210,024 | $ | 213,581 | |||||||
Cost of goods sold | 85,532 | 86,953 | 160,149 | 163,283 | |||||||||||
Gross profit | 25,717 | 25,511 | 49,875 | 50,298 | |||||||||||
Selling, general and administrative expenses | 22,500 | 20,433 | 43,500 | 37,396 | |||||||||||
Litigation settlements | 3,900 | 90 | 3,990 | 190 | |||||||||||
Operating (loss) income | (683 | ) | 4,988 | 2,385 | 12,712 | ||||||||||
Other expense (income): | |||||||||||||||
Interest expense | 1,787 | 2,319 | 3,438 | 4,626 | |||||||||||
Interest income | (73 | ) | (38 | ) | (162 | ) | (65 | ) | |||||||
Foreign exchange gains, net | (685 | ) | (633 | ) | (135 | ) | (1,307 | ) | |||||||
(Loss) income before income taxes | (1,712 | ) | 3,340 | (756 | ) | 9,458 | |||||||||
Income tax (benefit) expense | (21 | ) | 1,387 | 2,170 | 3,584 | ||||||||||
Net (loss) income | $ | (1,691 | ) | $ | 1,953 | $ | (2,926 | ) | $ | 5,874 | |||||
Other comprehensive (loss) income: | |||||||||||||||
Foreign currency translation adjustments | 1,564 | 172 | 2,546 | (484 | ) | ||||||||||
Comprehensive (loss) income | $ | (127 | ) | $ | 2,125 | $ | (380 | ) | $ | 5,390 | |||||
Net (loss) income per share-basic and diluted | $ | (0.06 | ) | $ | 0.10 | $ | (0.10 | ) | $ | 0.29 | |||||
Diluted average shares outstanding | 28,149 | 20,554 | 27,993 | 20,554 | |||||||||||
5
TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Six Months Ended June 30, | |||||||
2015 | 2014 | ||||||
Cash flows from operating activities: | |||||||
Net (loss) income | $ | (2,926 | ) | $ | 5,874 | ||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | |||||||
Depreciation and amortization | 4,287 | 4,367 | |||||
Deferred income tax (benefit) expense | (593 | ) | 1,460 | ||||
Share-based compensation expense | 3,312 | 606 | |||||
Loss on disposal of equipment | 138 | 114 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 10,635 | (24,713 | ) | ||||
Inventories | 9,992 | 2,382 | |||||
Prepaid expenses and other assets | 13,354 | (1,054 | ) | ||||
Accounts payable | (39,601 | ) | 2,773 | ||||
Accrued and other liabilities | (12,742 | ) | (4,095 | ) | |||
Net cash used in operating activities | (14,144 | ) | (12,286 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property, plant and equipment | (4,681 | ) | (6,025 | ) | |||
Decrease (increase) in restricted cash | 1,921 | (3,306 | ) | ||||
Repayment of related party finance receivables | — | 209 | |||||
Other investing activities, net | — | 59 | |||||
Net cash used in investing activities | (2,760 | ) | (9,063 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings under foreign short-term bank loans | 98,603 | 88,420 | |||||
Repayments of foreign short-term bank loans | (76,399 | ) | (80,222 | ) | |||
Borrowings on line of credit agreement, net | (3,610 | ) | 7,971 | ||||
Borrowings of long-term debt | 477 | 588 | |||||
Repayments of long-term debt | (219 | ) | (341 | ) | |||
Payment of debt issuance costs | (479 | ) | (701 | ) | |||
Proceeds from sale of treasury shares | 524 | — | |||||
Payment of deferred offering costs | — | (40 | ) | ||||
Payment of related party finance liability | — | (124 | ) | ||||
Net cash provided by financing activities | 18,897 | 15,551 | |||||
Effect of exchange rate changes on cash and cash equivalents | 505 | (14 | ) | ||||
Increase (decrease) in cash and cash equivalents | 2,498 | (5,812 | ) | ||||
Cash and cash equivalents at beginning of period | 31,354 | 21,903 | |||||
Cash and cash equivalents at end of period | $ | 33,852 | $ | 16,091 | |||
6
TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES
Net Sales by Region and by Product Line
(Unaudited)
(Amounts in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, 2015 | March 31, 2015 | June 30, 2014 | June 30, 2015 | June 30, 2014 | |||||||||||||||
United States and Canada | $ | 95,428 | $ | 84,864 | $ | 94,063 | $ | 180,293 | $ | 179,334 | |||||||||
Asia | 5,280 | 4,684 | 9,302 | 9,963 | 15,961 | ||||||||||||||
EMEA | 5,466 | 6,024 | 6,288 | 11,492 | 12,147 | ||||||||||||||
Latin America | 5,075 | 3,203 | 2,811 | 8,276 | 6,139 | ||||||||||||||
Total net sales | $ | 111,249 | $ | 98,775 | $ | 112,464 | $ | 210,024 | $ | 213,581 | |||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, 2015 | March 31, 2015 | June 30, 2014 | June 30, 2015 | June 30, 2014 | |||||||||||||||
CFL | $ | 43,943 | $ | 52,555 | $ | 59,468 | $ | 96,498 | $ | 118,873 | |||||||||
LED | 60,592 | 40,611 | 46,009 | 101,203 | 82,331 | ||||||||||||||
Linear and fixtures | 1,613 | 2,089 | 3,226 | 3,702 | 6,913 | ||||||||||||||
Other | 5,101 | 3,520 | 3,761 | 8,621 | 5,464 | ||||||||||||||
Total net sales | $ | 111,249 | $ | 98,775 | $ | 112,464 | $ | 210,024 | $ | 213,581 | |||||||||
7
TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES
Reconciliation of EBITDA and Adjusted EBITDA to Net (Loss) Income
and Adjusted EPS to Diluted EPS
(Unaudited)
(Amounts in thousands)
Three Months Ended | Six Months Ended | ||||||||||||||||||
June 30, 2015 | March 31, 2015 | June 30, 2014 | June 30, 2015 | June 30, 2014 | |||||||||||||||
Net (loss) income | $ | (1,691 | ) | $ | (1,235 | ) | $ | 1,953 | $ | (2,926 | ) | $ | 5,874 | ||||||
Adjustments: | |||||||||||||||||||
Interest expense, net | 1,715 | 1,562 | 2,281 | 3,277 | 4,561 | ||||||||||||||
Income tax (benefit) expense | (21 | ) | 2,191 | 1,387 | 2,170 | 3,584 | |||||||||||||
Depreciation and amortization | 2,156 | 2,131 | 2,177 | 4,287 | 4,367 | ||||||||||||||
EBITDA | 2,159 | 4,649 | 7,798 | 6,808 | 18,386 | ||||||||||||||
Adjustments: | |||||||||||||||||||
Foreign exchange losses (gains), net | (685 | ) | 550 | (633 | ) | (135 | ) | (1,307 | ) | ||||||||||
Litigation settlements | 3,900 | 90 | 90 | 3,990 | 190 | ||||||||||||||
Share-based compensation expense | 1,556 | 1,756 | 606 | 3,312 | 606 | ||||||||||||||
Refund of U.S. Customs import tariffs | (1,221 | ) | (1,042 | ) | (149 | ) | (2,263 | ) | (149 | ) | |||||||||
Adjusted EBITDA | $ | 5,709 | $ | 6,003 | $ | 7,712 | $ | 11,712 | $ | 17,726 | |||||||||
Three Months Ended June 30, 2015 | Three Months Ended March 31, 2015 | Three Months Ended June 30, 2014 | ||||||||||||||||||
Net (Loss) Income | Per Share (Diluted) | Net Loss | Per Share (Diluted) | Net Income | Per Share (Diluted) | |||||||||||||||
Net (loss) income and net (loss) income per share, diluted | $ | (1,691 | ) | $ | (0.06 | ) | $ | (1,235 | ) | $ | (0.04 | ) | $ | 1,953 | $ | 0.10 | ||||
Adjustments, net of tax: | ||||||||||||||||||||
Foreign exchange losses (gains), net | (401 | ) | (0.01 | ) | 595 | 0.02 | (414 | ) | (0.02 | ) | ||||||||||
Litigation settlements | 2,477 | 0.09 | 57 | — | 57 | — | ||||||||||||||
Share-based compensation expense | 1,010 | 0.04 | 1,187 | 0.04 | 414 | 0.02 | ||||||||||||||
Refund of U.S. Customs import tariffs | (775 | ) | (0.03 | ) | (662 | ) | (0.02 | ) | (94 | ) | — | |||||||||
Adjusted net (loss) income and Adjusted EPS | $ | 620 | $ | 0.03 | $ | (58 | ) | $ | — | $ | 1,916 | $ | 0.10 | |||||||
Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 | |||||||||||||||
Net (Loss) Income | Per Share (Diluted) | Net Income | Per Share (Diluted) | |||||||||||||
Net (loss) income and net (loss) income per share, diluted | $ | (2,926 | ) | $ | (0.10 | ) | $ | 5,874 | $ | 0.29 | ||||||
Adjustments, net of tax: | ||||||||||||||||
Foreign exchange losses (gains), net | 194 | 0.01 | (936 | ) | (0.05 | ) | ||||||||||
Litigation settlements | 2,534 | 0.09 | 120 | 0.01 | ||||||||||||
Share-based compensation expense | 2,197 | 0.08 | 414 | 0.02 | ||||||||||||
Refund of U.S. Customs import tariffs | (1,437 | ) | (0.05 | ) | (94 | ) | — | |||||||||
Adjusted net income and Adjusted EPS | $ | 562 | $ | 0.03 | $ | 5,378 | $ | 0.27 | ||||||||
8