TCP Reports First Quarter 2015 Financial Results

May 4, 2015

AURORA, Ohio, May 4, 2015 /PRNewswire/ -- TCP International Holdings Ltd. (NYSE: TCPI), a leading global manufacturer and distributor of energy efficient lighting technologies, today announced financial results for its first quarter ended March 31, 2015.

Net sales for the first quarter of 2015 were $98.8 million, a 35% decrease compared with $153.1 million in the fourth quarter of 2014 and a 2% decrease compared with $101.1 million in the first quarter of 2014.  Net loss in the first quarter of 2015 was $1.2 million, or $0.04 per diluted share, compared to net income of $2.1 million, or $0.07 per diluted share, in the fourth quarter of 2014 and net income of $3.9 million, or $0.19 per diluted share, in the first quarter of 2014. Adjusted earnings per share were $0.00 for the first quarter of 2015, compared to $0.13 in the fourth quarter of 2014.

"While revenues were tempered by our decision to perform a safety review of all products shipped in March, we were pleased that our cost reduction roadmap resulted in strong margins for the quarter, demonstrating TCP's position as a market leader in energy-efficient lighting," said Ellis Yan, TCP's Chairman and CEO.

First Quarter 2015 Summary

Following is a summary of certain key financial measures for the first quarter of 2015:

  • Net sales were $98.8 million, a decrease of $54.3 million, or 35%, from the fourth quarter of 2014 and a decrease of $2.3 million, or 2%, from the first quarter of 2014.
    • LED sales were $40.6 million, a decrease of $14.3 million, or 26%, from the fourth quarter of 2014, largely due to reduced sales from seasonal buying practices among all sales channels, as well as lower volume in 2015 attributable to voluntary shipping delays associated with our product validation review. Our LED sales increased $4.3 million, or 12%, compared with the first quarter of 2014, driven by higher sales with Walmart and higher sales in our C&I channel.
    • CFL sales were $52.6 million, a decrease of $37.9 million, or 42% from the fourth quarter of 2014, primarily due to significantly lower sales with The Home Depot, and a decrease of $6.9 million, or 12%, from the first quarter of 2014, mainly due to lower sales in our C&I channel and with Walmart.
  • Gross margin was 24.5%, an increase from 17.7% in the fourth quarter of 2014, and level with the first quarter of 2014. The increase from the fourth quarter of 2014 mainly is due to favorable product and channel mix from a higher proportion of LED and C&I sales, as well as the non-recurrence of a write-down of Connected by TCPTM inventory, which adversely impacted gross margin in fourth quarter of 2014.
  • Selling, general and administrative expenses were $21.0 million, flat with the fourth quarter of 2014, but an increase of $4.0 million from the first quarter of 2014. The increase from the first quarter of 2014 is primarily due to share-based compensation expense associated with restricted share units granted in connection with our IPO and an increase in professional fees largely related to our previously disclosed litigation.
  • Our effective income tax rate of 229.2% primarily was due to a $1.3 million shortfall charged to income tax expense from the issuance of common shares underlying RSUs with a fair value at issuance that was less than the fair value at grant date.
  • Net loss was $1.2 million, compared with net income of $2.1 million in the fourth quarter of 2014 and net income of $3.9 million in the first quarter of 2014. Diluted net loss per share was $0.04, compared with diluted net income per share of $0.07 in the fourth quarter of 2014 and diluted net income per share of $0.19 in the first quarter of 2014.

At March 31, 2015, cash and cash equivalents were $58.0 million, up from $31.4 million at December 31, 2014, primarily resulting from the collections of account receivables from record 2014 fourth quarter sales.  Combined short-term loans and long-term debt was $90.3 million at March 31, 2015, up from $80.0 million at December 31, 2014 largely due to additional borrowings used to finance our anticipated working capital needs.

Conference Call and Webcast Information

The Company will host a conference call today, May 4, 2015, at 4:30 p.m. Eastern Time. Chief Executive Officer Ellis Yan and Chief Financial Officer Brian Catlett will present an overview of the first quarter 2015 financial results, discuss current business conditions, and respond to questions. The call will be available, live, to interested parties by dialing (888) 220-8746. For international callers, please dial (913) 312-0653. The Conference ID number is 8265677. 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 (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.

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 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
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)



March 31,
 2015


December 31,
2014

Assets




Current assets:




Cash and cash equivalents

$

57,967


$

31,354

Restricted cash

6,885


7,367

Accounts receivable, net

62,154


95,089

Inventories

126,801


122,342

Prepaids and other current assets

15,663


28,217

Deferred income taxes

14,152


17,557

Total current assets

283,622


301,926

Property, plant and equipment, net

70,925


72,037

Land rights, net

4,085


4,126

Deferred costs

16,360


16,145

Intangible assets, net

2,127


2,345

Deferred income taxes, long-term

7,360


7,094

Other long-term assets

1,629


1,737

Total assets

$

386,108


$

405,410


Liabilities and Shareholders' Equity




Current liabilities:




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

$

85,003


$

74,637

Accounts payable

117,763


129,194

Accrued expenses and other current liabilities

58,285


77,826

Total current liabilities

261,051


281,657

Long-term debt, net of current portion

5,288


5,340

Income taxes payable, long-term

8,076


7,891

Legal settlements, net of current portion

24,404


24,311

Other long-term liabilities

501


508

Total liabilities

299,320


319,707

Commitments and contingencies




Shareholders' equity:




Common stock

30,587


30,101

Additional paid-in capital

69,333


68,063

Treasury shares

(418)


Accumulated other comprehensive income

10,272


9,290

Retained deficit

(22,986)


(21,751)

Total shareholders' equity

86,788


85,703

Total liabilities and shareholders' equity

$

386,108


$

405,410

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands, except per share data)




Three Months Ended March 31,


2015


2014

Net sales

$

98,775


$

101,117

Cost of goods sold

74,617


76,330

Gross profit

24,158


24,787

Selling, general and administrative expenses

21,000


16,963

Litigation settlements

90


100

Operating income

3,068


7,724

Other expense (income):




Interest expense

1,651


2,307

Interest income

(89)


(27)

Foreign exchange losses (gains), net

550


(674)

Income before income taxes

956


6,118

Income tax expense

2,191


2,197

Net (loss) income

$

(1,235)


$

3,921

Other comprehensive (loss) income:




Foreign currency translation adjustments

982


(656)

Comprehensive (loss) income

$

(253)


$

3,265

Net (loss) income per share-basic and diluted

$

(0.04)


$

0.19

Diluted average shares outstanding

27,837


20,553

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)




Three Months Ended March 31,


2015


2014

Cash flows from operating activities:




Net (loss) income

$

(1,235)


$

3,921

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




Depreciation and amortization

2,131


2,190

Deferred income tax expense

2,969


790

Share-based compensation expense

1,756


Loss on disposal of equipment

15


18

Changes in operating assets and liabilities:




Accounts receivable

33,758


432

Inventories

(5,082)


3,002

Prepaid expenses and other assets

12,910


2,132

Accounts payable

(8,272)


(11,860)

Accrued and other liabilities

(19,059)


(10,117)

Net cash provided by (used in) operating activities

19,891


(9,492)

Cash flows from investing activities:




Purchases of property, plant and equipment

(3,824)


(4,084)

Decrease (increase) in restricted cash

455


(2,062)

Repayment of related party finance receivables


84

Other investing activities, net


2

Net cash used in investing activities

(3,369)


(6,060)

Cash flows from financing activities:




Borrowings under foreign short-term bank loans

52,877


43,627

Repayments of foreign short-term bank loans

(28,884)


(32,994)

(Repayment) borrowings on line of credit agreement, net

(13,432)


6,372

Repayments of long-term debt

(51)


(67)

Payment of related party finance liability


(74)

Payment of debt issuance costs

(245)


Net cash provided by financing activities

10,265


16,864

Effect of exchange rate changes on cash and cash equivalents

(174)


(194)

Increase in cash and cash equivalents

26,613


1,118

Cash and cash equivalents at beginning of period

31,354


21,903

Cash and cash equivalents at end of period

$

57,967


$

23,021

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Net Sales by Region and by Product Line

(Unaudited)

(Amounts in thousands)




Three Months Ended


March 31,
 2015


December 31,
 2014


March 31,
 2014

United States and Canada

$

84,864


$

135,061


$

85,271

Asia

4,684


6,258


6,659

EMEA

6,024


9,680


5,859

Latin America

3,203


2,062


3,328

Total net sales

$

98,775


$

153,061


$

101,117




Three Months Ended

March 31,
 2015


December 31,
 2014


March 31,
 2014

CFL

$

52,555


$

90,456


$

59,405

LED

40,611


54,932


36,322

Linear and fixtures

2,089


2,487


3,687

Other

3,520


5,186


1,703

Total net sales

$

98,775


$

153,061


$

101,117

 

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


March 31,
 2015


December 31,
 2014


March 31,
 2014

Net (loss) income

$

(1,235)


$

2,069


$

3,921

Adjustments:






Interest expense, net

1,562


1,826


2,280

Income tax expense

2,191


819


2,197

Depreciation and amortization

2,131


2,099


2,190

EBITDA

4,649


6,813


10,588

Adjustments:






Foreign exchange losses (gains), net

550


847


(674)

Litigation settlements

90


400


100

Share-based compensation expense

1,756


1,962


Refund of U.S. Customs import tariffs

(1,042)


(550)


Adjusted EBITDA

$

6,003


$

9,472


$

10,014

 


Three Months Ended
March 31, 2015


Three Months Ended
December 31, 2014


Three Months Ended
March 31, 2014


Net
Loss

Per
Share
(Diluted)


Net
Income

Per
Share
(Diluted)


Net
Income

Per
Share
(Diluted)

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

$

(1,235)

$

(0.04)


$

2,069

$

0.07


$

3,921

$

0.19

Adjustments, net of tax:









Foreign exchange losses (gains), net

595

0.02


447

0.01


(522)

(0.03)

Litigation settlements

57


254

0.01


63

Share-based compensation expense

1,187

0.04


1,275

0.05


Refund of U.S. Customs import tariffs

(662)

(0.02)


(351)

(0.01)


Adjusted net (loss) income and Adjusted EPS

$

(58)

$


$

3,694

$

0.13


$

3,462

$

0.16

 

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SOURCE TCP International Holdings Ltd.

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