TCP Reports 2014 Fourth Quarter and Full Year Financial Results

Apr 15, 2015

AURORA, Ohio, April 15, 2015 /PRNewswire/ -- TCP International Holdings Ltd. (NYSE: TCPI), a leading global manufacturer and distributor of energy efficient lighting technologies, today announced its 2014 fourth quarter and full year financial results.

Net sales for the fourth quarter of 2014 were $153.1 million, a 25% increase compared with $122.9 million in the third quarter of 2014 and a 34% increase compared with $114.5 million in the fourth quarter of 2013.  Net income in the fourth quarter was $2.1 million, or $0.07 per diluted share, compared to $4.5 million, or $0.16 per diluted share, in the third quarter of 2014 and a loss of $1.6 million, or $0.08 per diluted share, in the fourth quarter of 2013. Adjusted earnings per share were $0.13 for the fourth quarter of 2014, compared to $0.16 in the third quarter of 2014

Net sales for the full year 2014 were $489.5 million, a 14% increase compared with $428.9 million in 2013.  Net income for 2014 was $12.4 million, or $0.52 per diluted share, compared to $8.2 million, or $0.40 per diluted share, in 2013.

"We continued to see solid demand for TCP's lighting technology in the fourth quarter.  We finished the year with strong CFL sales as The Home Depot replenished their inventory levels following our packaging changeover, and we continued to see gains within our LED product portfolio.  While the higher CFL sales had an unfavorable impact on margins in the short-term, we remain focused on executing our cost reduction roadmaps to support our profitability and improve our margins moving forward," said Ellis Yan, TCP's Chairman and CEO.

Mr. Yan continued, "Strong demand for our products continued into the first two months of 2015, although March sales reflected our decision to delay shipment for some products.  As previously announced, we have completed testing on substantially all of our fastest moving SKUs, and with quality and safety affirmed and shipments resumed, sales trends are returning to more normalized levels.  We have been very pleased with the support we are receiving from customers and remain confident in the business and TCP's competitive position."

Fourth Quarter 2014 Summary

Following is a summary of certain key financial measures for the fourth quarter of 2014:

  • Net sales were $153.1 million, an increase of $30.2 million, or 25%, from the third quarter of 2014 and an increase of $38.6 million, or 34%, from the fourth quarter of 2013.
    • LED sales were $54.9 million, an increase of $1.6 million, or 3%, from the third quarter of 2014 and an increase of $20.1 million, or 58%, from the fourth quarter of 2013, driven by increased sales in the commercial and industrial, or C&I, channel and with Walmart in the retail channel.
    • CFL sales were $90.5 million, an increase of $30.9 million, or 52% from the third quarter of 2014 and $17.8 million, or 24%, from the fourth quarter of 2013, primarily due to the replenishment of CFL inventories by The Home Depot.
  • Gross margin was 17.7%, down from 21.7% in the third quarter of 2014 and 18.1% in the fourth quarter of 2013, due to an increase in retail CFL sales and a $4.5 million charge for the write-down of Connected by TCP inventory.
  • Selling, general and administrative expenses were $21.1 million, an increase of $1.7 million from the third quarter of 2014 and $3.8 million from the fourth quarter of 2013, primarily due to share-based compensation expenses associated with restricted share units granted in connection with our IPO and an increase in marketing costs.
  • Net income was $2.1 million, a decrease from $4.5 million in the third quarter of 2014, and an increase from a loss of $1.6 million in the fourth quarter of 2013.  Diluted net income per share was $0.07, a decrease from diluted net income per share of $0.16 in the third quarter of 2014.
  • Adjusted EPS was $0.13, compared to $0.16 in the third quarter of 2014.

At December 31, 2014, cash and cash equivalents were $31.4 million, down from $60.4 million at September 30, 2014, as a result of debt repayments of $34.0 million during the fourth quarter.  Combined short-term loans and long-term debt was $80.2 million at December 31, 2014, down from $113.9 million at September 30, 2014.

Full Year 2014 Summary

Following is a summary of certain key financial measures for the full year of 2014:

  • Net sales were $489.5 million, an increase of $60.6 million, or 14%, from $428.9 million in 2013.
    • LED sales were $190.6 million, an increase of $83.5 million, or 78%, from $107.1 million in 2013 attributable to our continued focus on this product line within our C&I channel and with Walmart in the United States and Canada, as well as retail customers in Asia and EMEA.
    • CFL sales were $268.9 million, a decrease of $20.4 million, or 7%, from $289.3 million in 2013. The decline was led by reduced sales to OEM customers and lower CFL sales to The Home Depot.
  • Gross margin was 21.2%, roughly flat from 21.5% in 2013.  The favorable shift in product mix to LED products was offset by increased provisions for excess and obsolete inventory and a stronger Chinese yuan. 
  • Selling, general and administrative expenses were $77.8 million, an increase of $13.5 million from $64.3 million in 2013.  This increase was primarily due to payroll increases and share-based compensation expense.
  • Net income was $12.4 million, an increase of $4.2 million from $8.2 million in 2013.
  • Adjusted EPS was $0.57, compared to $0.70 in 2013.

Conference Call and Webcast Information   
The Company will host a conference call on Thursday, April 16, 2015, at 8:00 a.m.  Eastern Time. The call will be available, live, to interested parties by dialing 888-211-0193. For international callers, please dial 913-312-0951. The Conference ID number is 2111529. 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 "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 income (loss) before interest expense, income taxes, depreciation and amortization, and Adjusted EBITDA as EBITDA before net foreign exchange (gains) losses, litigation settlements, share-based compensation expense and other nonrecurring items.

We define Adjusted EPS as net income (loss) per share, diluted, from continuing operations excluding net foreign exchange (gains) losses, 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 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 (gains) losses, 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
Chief Financial Officer
330-954-7689 
ir@tcpi.com

Mike Funari
Sapphire Investor Relations, LLC
415-471-2700 
ir@tcpi.com

 

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except per share data)



December 31,
 2014


December 31,
2013

Assets




Current assets:




Cash and cash equivalents

$

31,354



$

21,903


Restricted cash

7,367



3,404


Accounts receivable, net

95,089



59,574


Inventories

122,342



119,477


Prepaids and other current assets

28,393



14,415


Deferred income taxes

17,557



10,551


Total current assets

302,102



229,324


Property, plant and equipment, net

72,037



74,558


Land rights, net

4,126



4,244


Deferred costs

16,145



18,732


Finance receivable from related party



1,915


Intangible assets, net

2,345



2,993


Deferred income taxes, long-term

7,094



7,758


Other long-term assets

1,737



1,741


Total assets

$

405,586



$

341,265


Liabilities and Shareholders' Equity




Current liabilities:




Short-term loans and current portion of long-term debt

$

74,813



$

122,840


Accounts payable

129,194



105,742


Accrued expenses and other current liabilities

77,826



62,539


Total current liabilities

281,833



291,121


Long-term debt, net of current portion

5,340



7,553


Income taxes payable, long-term

7,891



7,043


Legal settlements, net of current portion

24,311



30,941


Other long-term liabilities

508



427


Total liabilities

319,883



337,085


Commitments and contingencies




Shareholders' equity:




Common stock

30,101



22,048


Additional paid-in capital

68,063



901


Accumulated other comprehensive income

9,290



13,721


Retained deficit

(21,751)



(32,490)


Total shareholders' equity

85,703



4,180


Total liabilities and shareholders' equity

$

405,586



$

341,265


 

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands, except per share data)



Three Months Ended December 31,


Year Ended December 31,


2014


2013


2014


2013

Net sales

$

153,061



$

114,452



$

489,517



$

428,925


Cost of goods sold

126,035



93,691



385,560



336,819


Gross profit

27,026



20,761



103,957



92,106


Selling, general and administrative expenses

21,065



17,312



77,780



64,252


Litigation settlements

400



3,032



100



3,032


Operating income

5,561



417



26,077



24,822


Other expense (income):








Interest expense

1,884



1,880



8,699



6,542


Interest income

(58)



(116)



(196)



(483)


Foreign exchange (gains) losses, net

847



1,293



(460)



5,929


Income before income taxes

2,888



(2,640)



18,034



12,834


Income tax expense (benefit)

819



(1,028)



5,589



4,662


Net income (loss)

$

2,069



$

(1,612)



$

12,445



$

8,172


Other comprehensive income (loss):






Foreign currency translation adjustments

(1,183)



(3,535)



(4,431)



2,155


Comprehensive income (loss)

$

886



$

(5,147)



$

8,014



$

10,327


Net income (loss) per share-basic and diluted

$

0.07



$

(0.08)



$

0.52



$

0.40


 

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)



Year ended December 31,


2014


2013

Cash flows from operating activities:




Net income

$

12,445



$

8,172


Adjustments to reconcile net income to net cash provided by (used in) operating activities:




Depreciation and amortization

8,604



8,142


Deferred income tax benefit

(6,394)



(2,831)


Share-based compensation expense

3,963




Loss on disposal of equipment

829



294


Changes in operating assets and liabilities:




Accounts receivable

(34,729)



(5,147)


Inventories

(3,712)



(40,658)


Prepaid expenses and other assets

(12,301)



(2,560)


Accounts payable

27,354



15,353


Accrued and other liabilities

12,410



2,923


Net cash provided by (used in) operating activities

8,469



(16,312)


Cash flows from investing activities:




Purchases of property, plant and equipment

(11,445)



(12,997)


(Increase) decrease in restricted cash

(3,965)



1,082


Repayment of related party finance receivables



538


Other investing activities, net

292



745


Net cash used in investing activities

(15,118)



(10,632)


Cash flows from financing activities:




Proceeds from initial public offering, net of offering costs

70,206




Borrowings under foreign short-term bank loans

120,747



153,826


Repayments of foreign short-term bank loans

(154,581)



(110,363)


(Repayment) borrowings on line of credit agreement, net

(13,704)



4,309


Borrowings of long-term debt

588




Repayments of long-term debt

(901)



(256)


Payment of related party finance liability

(124)



(282)


Payment of contingent consideration



(823)


Payment of debt issuance costs

(1,097)



(170)


Decrease in related party payable



(36,941)


Net cash provided by financing activities

21,134



9,300


Effect of exchange rate changes on cash and cash equivalents

(5,034)



867


Increase (decrease) in cash and cash equivalents

9,451



(16,777)


Cash and cash equivalents at beginning of period

21,903



38,680


Cash and cash equivalents at end of period

$

31,354



$

21,903


 

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Net Sales by Region and by Product Line

(Unaudited)

(Amounts in thousands)



Three Months Ended


Year Ended

December 31,
 2014


September 30,
 2014


December 31,
 2013


December 31,
 2014


December 31,
 2013

United States and Canada

$

135,061



$

102,369



$

92,937



$

416,764



$

353,292


Asia

6,258



7,029



6,848



29,248



21,845


EMEA

9,680



10,511



9,830



32,338



32,856


Latin America

2,062



2,966



4,837



11,167



20,932


Total net sales

$

153,061



122,875



114,452



$

489,517



$

428,925


 


Three Months Ended


Year Ended

December 31,
 2014


September 30,
 2014


December 31,
 2013


December 31,
 2014


December 31,
 2013

CFL

$

90,456



59,552



72,663



$

268,881



$

289,315


LED

54,932



53,369



34,875



190,632



107,130


Linear and fixtures

2,487



2,889



4,222



12,289



20,678


Other

5,186



7,065



2,692



17,715



11,802


Total net sales

$

153,061



122,875



114,452



$

489,517



$

428,925


 

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Reconciliation of EBITDA and Adjusted EBITDA to Net Income

and Adjusted EPS to Diluted EPS

(Unaudited)

(Amounts in thousands)



Three Months Ended


Year Ended


December 31,
 2014


September 30,
 2014


December 31,
 2013


December 31,
 2014


December 31,
 2013

Net income (loss)

$

2,069



$

4,502



$

(1,612)



$

12,445



$

8,172


Adjustments:










Interest expense, net

1,826



2,116



1,764



8,503



6,059


Income tax expense

819



1,186



(1,028)



5,589



4,662


Depreciation and amortization

2,099



2,138



2,114



8,604



8,142


EBITDA

6,813



9,942



1,238



35,141



27,035


Adjustments:










Foreign exchange losses (gains), net

847





1,293



(460)



5,929


Litigation settlements

400



(490)



3,032



100



3,032


Share-based compensation expense

1,962



1,395





3,963




Refund of U.S. Customs import tariffs

(550)



(294)





(993)




Adjusted EBITDA

$

9,472



$

10,553



$

5,563



$

37,751



$

35,996


 

 


Three Months Ended December 31, 2014


Three Months Ended September 30, 2014


Three Months Ended
December 31, 2013


Net Income

Per Share (Diluted)


Net Income

Per Share (Diluted)


Net Income (Loss)

Per Share (Diluted)

Net income (loss) and net income (loss) per share, diluted

$

2,069


$

0.07



$

4,502


$

0.16



$

(1,612)


$

(0.08)


Adjustments, net of tax:









Foreign exchange losses (gains), net

447


0.01



(280)


(0.01)



786


0.04


Litigation settlements

254


0.01



(310)


(0.01)



1,986


0.10


Share-based compensation expense

1,275


0.05



854


0.03





Refund of U.S. Customs import tariffs

(351)


(0.01)



(186)


(0.01)





Adjusted net income and Adjusted EPS

$

3,694


$

0.13



$

4,580


$

0.16



$

1,160


$

0.06


 

 


Year Ended
December 31, 2014


Year Ended
December 31, 2013


Net
Income

Per Share (Diluted)


Net
Income

Per Share (Diluted)

Net income and net income per share, diluted

$

12,445


$

0.52



$

8,172


$

0.40


Adjustments, net of tax:






Foreign exchange losses (gains), net

(769)


(0.03)



4,110


0.20


Litigation settlements

64




1,986


0.10


Share-based compensation expense

2,543


0.11





Refund of U.S. Customs import tariffs

(631)


(0.03)





Adjusted net income and Adjusted EPS

$

13,652


$

0.57



$

14,268


$

0.70


 

 

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SOURCE TCP International Holdings Ltd.

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