8-k6August15



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 6, 2015

TCP INTERNATIONAL HOLDINGS LTD.
(Exact name of registrant as specified in its charter)



Switzerland
1-36521
Not Applicable
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(I.R.S. Employer
Identification No.)
Alte Steinhauserstrasse 1
6330 Cham, Switzerland
(Address of principal executive offices)
(330) 995-6111
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))







Item 2.02 Results of Operations and Financial Condition.
On August 6, 2015, TCP International Holdings Ltd. (the “Company”) issued a press release announcing its 2015 second quarter financial results. The press release also announced that the Company would be holding a conference call on August 6, 2015 to discuss the results included in the press release. A copy of the press release is furnished as Exhibit 99.1 hereto.
The information in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, the information in this report shall not be deemed incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, except as shall be expressly set forth by separate reference in such filing.

Forward Looking Statements
     Certain statements in the foregoing press releases 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, including those related to the Company's current opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results. Forward looking statements in these press releases include, but are not limited to, the Company’s expectation regarding its future profitability. The Company expressly disclaims any obligation or undertaking to update such forward-looking statements, except as required by law.

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits

EXHIBIT INDEX
 
DESCRIPTION
 
 
 
 
99.1
 
Press Release Reporting Second Quarter 2015 Financial Results, dated August 6, 2015







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


 
 
 
TCP INTERNATIONAL HOLDINGS LTD.
 
 
By:


  /s/ Brian Catlett
 
 
 
 Brian Catlett
Chief Financial Officer and Treasurer


Date: August 6, 2015






EXHIBIT INDEX


EXHIBIT INDEX
 
DESCRIPTION
 
 
 
 
99.1
 
Press Release Reporting Second Quarter 2015 Financial Results, dated August 6, 2015



Exhibit 991.8.6.15


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

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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.

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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