TCP International Holdings Ltd.
Aug 6, 2015

TCP Reports Second Quarter 2015 Financial Results

AURORA, Ohio, Aug. 6, 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 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.

 

TCP Logo

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 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.

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

 

 

 

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


 

 

 

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


 

 

 

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


 

 

 

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


 

 

 

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
December 31, 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


 

 

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