TCP Reports Third Quarter 2014 Financial Results

Nov 6, 2014

AURORA, Ohio, Nov. 6, 2014 /PRNewswire/ -- TCP International Holdings Ltd. (NYSE: TCPI), a leading global manufacturer and distributor of energy efficient lighting technologies, today announced financial results for its third quarter ended September 30, 2014.

Net sales for the third quarter were $122.9 million, a 9% increase compared with $112.5 million in the second quarter of 2014 and $113.0 million in the third quarter of 2013.  Net income in the third quarter was $4.5 million, or $0.16 per diluted share, compared to $2.0 million, or $0.10 per diluted share, in the second quarter of 2014 and compared to $4.3 million, or $0.21 per diluted share, in the third quarter of 2013.

"Our LED business continued to perform well in the quarter as a result of increased demand from both the retail and C&I channels for our products," said Ellis Yan, TCP's Chairman and CEO.  "We have a solid position in the market and are focused on leveraging our cost structure to take advantage of the LED market opportunity ahead of us."

Third Quarter 2014 Summary

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

  • Net sales were $122.9 million, an increase of $10.4 million, or 9%, from the second quarter of 2014 and an increase of $9.9 million, or 9%, from the third quarter of 2013.
    • LED sales were $53.4 million, an increase of $7.4 million, or 16%, from the second quarter of 2014 and an increase of $27.6 million, or 107%, from the third 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 $59.6 million, roughly flat with the second quarter of 2014 and down $21.7 million, or 27%, from the third quarter of 2013, primarily due to the transition to LEDs in the C&I channel and lower volume with The Home Depot.
  • Gross margin was 21.7%, down from 22.7% in the second quarter of 2014 due to a reduction in LED pricing on certain C&I projects to meet market demands along with an increase in retail sales, but up from 20.8% in the third quarter of 2013 due to favorable product and customer mix from higher LED sales in the C&I channel.  
  • Selling, general and administrative expenses were $19.3 million, a decrease of $1.1 million from the second quarter of 2014 due to lower marketing and severance costs, but an increase of $3.6 million from the third quarter of 2013 due to higher payroll largely attributable to the expansion of our sales force and marketing team to serve the C&I channel, increased marketing costs, and share-based compensation expenses.
  • Net income was $4.5 million, an increase from $2.0 million in the second quarter of 2014 and an increase from $4.3 million in the third quarter of 2013.  Diluted earnings per share were $0.16, an increase from diluted earnings per share of $0.10 in the second quarter of 2014 but a decrease from diluted earnings per share of $0.21 in the third quarter of 2013 due to the increase in shares outstanding following the IPO.
  • Adjusted EPS was $0.16, compared to $0.10 in the second quarter of 2014 and $0.20 in the third quarter of 2013.

At September 30, 2014, cash and cash equivalents were $60.4 million, up from $16.1 million at June 30, 2014, as a result of the net proceeds of $70.2 million following the IPO, less debt repayments of $20.0 million during the quarter.  Combined short-term loans and long-term debt was $113.9 million at September 30, 2014, down from $144.2 million at June 30, 2014.

Conference Call and Webcast Information   
The Company will host a conference call today, November 6, 2014, at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time). Chief Executive Officer Ellis Yan and Chief Financial Officer Brian Catlett will present an overview of the third quarter 2014 financial results, discuss current business conditions, and respond to questions. The call will be available, live, to interested parties by dialing (866) 598-9340. For international callers, please dial (480) 293-0669. The Conference ID number is 1676168. 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
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 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 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 was named a 2014 ENERGY STAR® Partner of the Year by the U.S. Environmental Protection Agency.  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 the growth of its LED product line.  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

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except per share data)





September 30,
 2014


December 31,
2013

Assets




Current assets:




Cash and cash equivalents

$

60,395


$

21,903

Restricted cash

6,466


3,404

Accounts receivable, less allowance for doubtful accounts of $1,366 and $1,479 at
September 30, 2014 and December 31, 2013, respectively

91,441


59,574

Inventories

137,270


119,477

Prepaids and other current assets

17,829


14,415

Deferred income taxes

11,261


10,551

Total current assets

324,662


229,324

Property, plant and equipment, net of accumulated depreciation of $41,835 and $39,007 at
September 30, 2014 and December 31, 2013 respectively

70,689


74,558

Land rights, net

4,129


4,244

Deferred costs

16,990


18,732

Finance receivable from related party


1,915

Intangible assets, net of accumulated amortization of $937 and $837 at September 30, 2014
and December 31, 2013, respectively

2,572


2,993

Deferred income taxes, long-term

6,862


7,758

Other long-term assets

1,680


1,741

Total assets

$

427,584


$

341,265

Liabilities and Shareholders' Equity




Current liabilities:




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

$

108,515


$

122,840

Accounts payable

127,052


105,742

Accrued expenses and other current liabilities

66,776


62,539

Total current liabilities

302,343


291,121

Long-term debt, net of current portion

5,392


7,553

Income taxes payable, long-term

7,629


7,043

Legal settlements, net of current portion

28,942


30,941

Other long-term liabilities

423


427

Total liabilities

344,729


337,085

Shareholders' equity:




Common stock, CHF 1.00 par value; 41,107 shares authorized; 27,696 issued and
outstanding at September 30, 2014 and 20,553 issued and outstanding at December 31, 2013

30,064


22,048

Additional paid-in capital

66,138


901

Accumulated other comprehensive income

10,473


13,721

Retained deficit

(23,820)


(32,490)

Total shareholders' equity

82,855


4,180

Total liabilities and shareholders' equity

$

427,584


$

341,265

 

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands, except per share data)















Three Months Ended September 30,


Nine Months Ended September 30,


2014


2013


2014


2013

Net sales

$

122,875


$

113,022


$

336,456


$

314,473

Cost of goods sold

96,242


89,519


259,525


243,128

Gross profit

26,633


23,503


76,931


71,345

Selling, general and administrative expenses

19,319


15,761


56,715


46,940

Litigation settlements

(490)



(300)


Operating income

7,804


7,742


20,516


24,405

Other expense (income):








Interest expense

2,189


1,671


6,815


4,662

Interest income

(73)


(103)


(138)


(367)

Foreign exchange (gains) losses, net


(1)


(1,307)


4,636

Income before income taxes

5,688


6,175


15,146


15,474

Income tax expense

1,186


1,883


4,770


5,690

Net income

$

4,502


$

4,292


$

10,376


$

9,784

Other comprehensive income:







Foreign currency translation adjustments

(2,764)


10


(3,248)


1,839

Comprehensive income

$

1,738


$

4,302


$

7,128


$

11,623

Net income per share-basic and diluted

$

0.16


$

0.21


$

0.46


$

0.48

 

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)








Nine Months Ended September 30,


2014


2013

Cash flows from operating activities:





Net income

$

10,376


$

9,784

Adjustments to reconcile net income to net cash used in operating activities:





Depreciation and amortization

6,505


6,028

Deferred income tax expense

135


1,456

Share-based compensation expense

2,001


Loss on disposal of equipment

130


162

Changes in operating assets and liabilities:





Accounts receivable

(31,949)


(10,534)

Inventories

(18,511)


(47,849)

Prepaid expenses and other assets

(2,108)


(5,175)

Accounts payable

26,470


23,552

Accrued and other liabilities

5,267


(4,175)

Net cash used in operating activities

(1,684)


(26,751)

Cash flows from investing activities:





Purchases of property, plant and equipment

(8,630)


(7,298)

(Increase) decrease in restricted cash

(3,106)


1,228

Repayment of related party finance receivables

209


521

Other investing activities, net

67


2

Net cash used in investing activities

(11,460)


(5,547)

Cash flows from financing activities:






Proceeds from initial public offering, net of offering costs

70,498


Borrowings under foreign short-term bank loans

101,797


91,051

Repayments of foreign short-term bank loans

(96,859)


(75,367)

(Repayment) borrowings on line of credit agreement, net

(18,748)


6,336

Borrowings of long-term debt

588


Repayments of long-term debt

(618)


(185)

Payment of related party finance liability

(124)


(211)

Payment of contingent consideration


(831)

Payment of debt issuance costs

(869)


(127)

Increase in related party payable


5,490

Net cash provided by financing activities

55,665


26,156

Effect of exchange rate changes on cash and cash equivalents

(4,029)


676

Increase (decrease) in cash and cash equivalents

38,492


(5,466)

Cash and cash equivalents at beginning of period

21,903


38,680

Cash and cash equivalents at end of period

$

60,395


$

33,214

 

 

TCP INTERNATIONAL HOLDINGS LTD. AND SUBSIDIARIES

Net Sales by Region and by Product Line

(Unaudited)

(Amounts in thousands)






Three Months Ended


Nine Months Ended

September 30,
2014


June 30,
2014


September 30,
2013


September 30,
2014


September 30,
2013

United States and Canada

$

102,369


$

94,063


$

93,328


$

281,703


$

260,355

Asia

7,029


9,302


2,860


22,990


14,997

EMEA

10,511


6,288


8,549


22,658


23,026

Latin America

2,966


2,811


8,285


9,105


16,095

Total net sales

$

122,875


112,464


113,022


$

336,456


$

314,473












































Three Months Ended



Nine Months Ended

September 30,
2014


June 30,
2014


September 30,
2013


September 30,
2014


September 30,
2013

CFL

$

59,552


59,468


81,238


$

178,425


$

216,652

LED

53,369


46,009


25,738


135,700


72,255

Linear and fixtures

2,889


3,226


4,093


9,802


16,456

Other

7,065


3,761


1,953


12,529


9,110

Total net sales

$

122,875


112,464


113,022


$

336,456


$

314,473

 

 

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


Nine Months Ended


September 30,
 2014


June 30,
 2014


September 30,
 2013


September 30,
 2014


September 30,
 2013

Net income

$

4,502


$

1,953


$

4,292


$

10,376


$

9,784

Adjustments:














Interest expense, net

2,116


2,281


1,568


6,677


4,295

Income tax expense

1,186


1,387


1,883


4,770


5,690

Depreciation and amortization

2,138


2,177


2,073


6,505


6,028

EBITDA

9,942


7,798


9,816


28,328


25,797

Adjustments:














Foreign exchange gains, net


(633)


(1)


(1,307)


4,636

Litigation settlements

(490)


90



(300)


Share-based compensation expense

1,395


606



2,001


Refund of U.S. Customs import tariffs

(294)


(149)



(442)


Adjusted EBITDA

$

10,553


$

7,712


$

9,815


$

28,280


$

30,433

 

 


Three Months Ended
September 30, 2014


Three Months Ended
June 30, 2014


Three Months Ended
September 30, 2013


Net
Income


Per Share
(Diluted)


Net
Income


Per Share
(Diluted)


Net
Income


Per Share
(Diluted)

Net income and net income per share, diluted

$

4,502


$

0.16


$

1,953


$

0.10


$

4,292


$

0.21

Adjustments, net of tax:














Foreign exchange gains, net

(280)


(0.01)


(414)


(0.02)


(283)


(0.01)

Litigation settlements

(310)


(0.01)


57




Share-based compensation expense

854


0.03


414


0.02



Refund of U.S. Customs import tariffs

(186)


(0.01)


(94)




Adjusted net income and Adjusted EPS

$

4,580


$

0.16


$

1,916


$

0.10


$

4,009


$

0.20

 

 


Nine Months Ended
September 30, 2014


Nine Months Ended
September 30, 2013


Net
Income


Per Share
(Diluted)


Net
Income


Per Share
(Diluted)

Net income and net income per share, diluted

$

10,376


$

0.46


$

9,784


$

0.48

Adjustments, net of tax:








Foreign exchange gains, net

(1,216)


(0.05)


3,324


0.16

Litigation settlements

(190)


(0.01)



Share-based compensation expense

1,268


0.06



Refund of U.S. Customs import tariffs

(280)


(0.01)



Adjusted net income and Adjusted EPS

$

9,958


$

0.45


$

13,108


$

0.64

 

SOURCE TCP International Holdings Ltd.

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