The Yankee Candle Company, Inc. Reports Fiscal 2010 Fourth Quarter and Full Year Results

Mar 03, 2011, 07:30 ET from The Yankee Candle Company, Inc.

SOUTH DEERFIELD, Mass., March 3, 2011 /PRNewswire/ -- Yankee Holding Corp. and The Yankee Candle Company, Inc. ("Yankee Candle" or the "Company") today announced financial results for the fourth quarter and full year ended January 1, 2011.  Yankee Holding Corp. is a holding company formed in connection with the Company's Merger with an affiliate of Madison Dearborn Partners, LLC on February 6, 2007 (the "Merger"), and is the parent company of The Yankee Candle Company, Inc.

(Logo: http://photos.prnewswire.com/prnh/20101110/YANKEECANDLELOGO )

Sales for the fourth quarter of 2010 were $291.6 million, a $17.4 million or 6.3% increase from the prior year fourth quarter.  Sales in the Company's wholesale business were $90.3 million, an increase of $8.6 million or 10.6% versus the prior year fourth quarter.  Retail sales were $201.3 million, an increase of $8.8 million or 4.6% from the fourth quarter of fiscal 2009.  The Company generated net income of $51.8 million for the fourth quarter of 2010 compared to net income of $41.1 million, for the fourth quarter of 2009.  

For the year ended January 1, 2011 ("Fiscal 2010"), total Company sales increased by 7.7% over the prior year to $733.7 million.  Retail sales increased by 6.2% over the prior year to $426.3 million and Wholesale sales increased by 9.9% to $307.4 million.  The Company generated net income of $41.9 million for Fiscal 2010 compared to net income of $16.4 million for the prior year.  

The Company presents EBITDA (earnings/loss from continuing operations before interest, income taxes, depreciation and amortization) and Adjusted EBITDA (as defined below) to provide investors with additional information to evaluate the Company's operating performance and its ability to service its debt.  EBITDA for the fourth quarter of 2010 increased by 3.9% to $108.0 million, or 37.0% of sales, compared to $104.0 million, or 37.9% of sales for the prior year fourth quarter.  Adjusted EBITDA for the fourth quarter of 2010 increased by 4.4% to $108.4 million as compared to Adjusted EBITDA for the prior year fourth quarter of $103.9 million.  For Fiscal 2010, the Company generated EBITDA of $188.7 million compared to EBITDA of $173.6 million for the prior year, an increase of 8.7%.  Adjusted EBITDA was $193.7 million in Fiscal 2010, compared to $180.3 million for the prior year, an increase of 7.4%. Reconciliations of fourth quarter and full year results to EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, are included at the end of this press release.  

As previously announced, on February 9, 2011, YCC Holdings, LLC ("YCC Holdings"), an indirect parent of the Company, and Yankee Finance, Inc., an affiliate ("Yankee Finance" and, together with YCC Holdings, the "Issuers"), issued $315,000,000 aggregate principal amount of 10.25%/11.00% Senior Notes due 2016.

"We finished 2010 with a solid fourth quarter performance, delivering revenue growth in both of our business units and Adjusted EBITDA growth versus the prior year," said Harlan Kent, the Company's Chief Executive Officer.  "Despite a consumer environment that remained very challenging throughout the year, we were able to generate strong revenue and bottom line growth.  The results delivered by our business units, together with supply chain productivity, disciplined cost control and strong working capital management, enabled us to generate strong cash flows and pay down our debt well ahead of schedule."

Fourth Quarter Highlights:

  • Retail sales were $201.3 million, an increase of $8.8 million or 4.6% from the fourth quarter of fiscal 2009, driven primarily by increased sales in our Yankee Candle Fundraising division coupled with the addition of 26 new Yankee Candle retail stores during 2010.

  • Comparable sales in the 489 Yankee Candle retail stores, including the South Deerfield and Williamsburg flagship stores, that have been open for more than one year decreased by 2.0%, while the Consumer Direct business increased by 0.7% over the prior year fourth quarter.  Total retail comparable sales, including the Consumer Direct business, decreased by 1.8% compared to the prior year fourth quarter.  

  • Wholesale sales were $90.3 million in the fourth quarter, an increase of $8.6 million or 10.6% from the prior year fourth quarter.  The increase was driven primarily by an increase in sales in our International business (consisting of our European operations and Asian distributors).

Fiscal 2010 Highlights:

  • Retail sales were $426.3 million, an increase of $25.1 million or 6.2% versus the prior year, driven primarily by increased sales in our Yankee Candle Fundraising division coupled with the addition of 26 new Yankee Candle retail stores during 2010.
  • Comparable store sales increased by 0.1% over the prior year period, while the Consumer Direct business increased by 7.0% over prior year.  Total retail comparable sales, including the Consumer Direct business, increased by 0.7% compared to the prior year period.
  • Wholesale sales were $307.4 million for Fiscal 2010, an increase of $27.6 million or 9.9% over the prior year.  The increase was driven primarily by an increase in sales in our International business coupled with increased sales to new domestic wholesale accounts.
  • During Fiscal 2010, the Company paid down its term debt by $88.0 million.  The Company ended the year with $888.4 million of net debt (debt less cash) and no revolver borrowings as compared to net debt of $980.0 million at the end of 2009.  As of January 1, 2011, there was $123.4 million in availability under the Company's revolving credit facility.    

"While we do not necessarily believe that the consumer economy is completely out of the woods, and while the current turmoil in the Middle East and its impacts make near term visibility difficult, we are nonetheless generally optimistic about 2011 overall and believe that we are well positioned for growth in both revenue and earnings versus 2010," said Mr. Kent.  "That said, the pacing of our plans are such that we are budgeting for some unfavorable year over year comparisons in the seasonally lower volume first half of the year, due in part to unusually severe weather experienced year to date, wax and commodity inflation, and investments we are choosing to make in various growth initiatives that will begin to benefit us in the second half of the year."

Earnings Conference Call:

The Company will host a conference call to be broadcast via the Internet at 11:00 a.m. (EST) this morning to more fully discuss its fourth quarter results.  The dial-in number is (800) 860-2442, for International Calls the dial-in number is (412) 858-4600.  When greeted by the operator, request the conference by stating the Company and the host's last name (Yankee Candle/Kent) or reference the conference title (Q4 2010 Yankee Candle Earnings Conference Call).  This call is being webcast by MultiVu and can be accessed at The Yankee Candle Company's web site at www.yankeecandle.com.   Click on the "About Us" link, and then select the "Investor Information" link.  Enter your registration information ten minutes prior to the start of the conference.

About Yankee Candle

The Yankee Candle Company, Inc. is the leading designer, manufacturer, wholesaler and retailer of premium scented candles, based on sales, in the giftware industry.  Yankee Candle has a 41-year history of offering distinctive products and marketing them as affordable luxuries and consumable gifts.  The Company sells its products through a North American wholesale customer network of approximately 20,200 store locations, a growing base of Company owned and operated retail stores (515 Yankee Candle Stores located in 44 states as of January 1, 2011), direct mail catalogs, and its Internet website (www.yankeecandle.com).  Outside of North America, the Company sells its products primarily through its subsidiary, Yankee Candle Company (Europe), Ltd., which has an international wholesale customer network of approximately 5,000 store locations and distributors covering a combined 47 countries.

This press release may contain certain information constituting "forward-looking statements" for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to the statements contained herein with respect to management's current estimates of the Company's financial and operating results for Fiscal 2011, and any other statements concerning the Company's or management's plans, objectives, goals, strategies, expectations, estimates, beliefs or projections, or any other statements concerning future performance or events.  Actual results could differ materially from those indicated by these forward-looking statements as a result of various risks and uncertainties, including but not limited to the following: the impact of the ongoing economic situation and any continued deterioration in consumer confidence or spending; the risk that the substantial indebtedness incurred in connection with the Merger, and the debt agreements entered into in connection therewith, might restrict our ability to operate our business and pursue certain business strategies; the risk that we may not be able to generate sufficient cash flows to meet our debt service obligations; the current economic conditions in the United States as a whole and the continuing weakness in the retail environment; the risk that we will be unable to maintain our historical growth rate; the effects of competition from others in the highly competitive giftware industry; our ability to anticipate and react to industry trends and changes in consumer demand; our dependence upon our senior executive officers; the risk of loss of our manufacturing and distribution facilities; the impact on the price of our notes of seasonal, quarterly and other fluctuations in our business; the risk of any disruption in wax supplies; and other factors described or contained in the Company's most recent Annual Report on Form 10-K on file with the Securities and Exchange Commission.  Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.  While we may elect to update certain forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if experience or future events may cause the views contained in any forward-looking statements to change.

Yankee Holding Corp. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands)

(Unaudited)









Thirteen Weeks


Thirteen Weeks



Ended


Ended



January 1, 2011


January 2, 2010


Sales:









 Retail

$   201,352


69.05%


$      192,589


70.23%


 Wholesale

90,272


30.95%


81,656


29.77%


 Total sales

291,624


100.00%


274,245


100.00%











Cost of sales

115,001


39.43%


102,261


37.29%


Gross profit

176,623


60.57%


171,984


62.71%











Selling expenses:









 Retail

51,306


25.48%

(A)

49,056


25.47%

(A)

 Wholesale

11,606


12.86%

(B)

9,958


12.20%

(B)










  Total selling expenses

62,912


21.57%


59,014


21.52%











General & administrative expenses

16,302


5.59%


19,738


7.20%











Income from operations

97,409


33.40%


93,232


34.00%


Interest income

-


0.00%


(1)


0.00%


Interest expense

16,854


5.78%


21,779


7.94%


Other (income) expense

(995)


-0.34%


614


0.22%











Income before provision for income taxes

81,550


27.96%


70,840


25.83%


Provision for income taxes

29,738


10.20%


29,644


10.81%


Income from continuing operations

51,812


17.76%


41,196


15.02%











Loss from discontinued operations, net of
  income taxes

(37)


-0.01%


(78)


-0.03%


Net income

$     51,775


17.75%


$        41,118


14.99%











(A) Retail selling expenses as a percentage of retail sales. 

(B) Wholesale selling expenses as a percentage of wholesale sales. 




Yankee Holding Corp. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands)

(Unaudited)











Fifty-Two Weeks


Fifty-Two Weeks



Ended


Ended



January 1, 2011


January 2, 2010


Sales:









 Retail

$   426,325


58.10%


$      401,262


58.92%


 Wholesale

307,392


41.90%


279,802


41.08%


 Total sales

733,717


100.00%


681,064


100.00%











Cost of sales

307,103


41.86%


276,793


40.64%


Gross profit

426,614


58.14%


404,271


59.36%











Selling expenses:









 Retail

172,219


40.40%

(A)

163,657


40.79%

(A)

 Wholesale

40,361


13.13%

(B)

34,459


12.32%

(B)










  Total selling expenses

212,580


28.97%


198,116


29.09%











General & administrative expenses

62,609


8.53%


69,598


10.22%


Restructuring charge

829


0.11%


1,881


0.28%











Income from operations

150,596


20.53%


134,676


19.77%


Interest income

-


0.00%


(13)


0.00%


Interest expense

75,648


10.31%


86,058


12.64%


Other expense

8,972


1.23%


8,019


1.18%











Income before provision for income taxes

65,976


8.99%


40,612


5.96%


Provision for income taxes

23,688


3.23%


16,544


2.43%


Income from continuing operations

42,288


5.76%


24,068


3.53%











Loss from discontinued operations, net of
  income taxes

(379)


-0.05%


(7,696)


-1.13%


Net income

$     41,909


5.71%


$        16,372


2.40%











(A) Retail selling expenses as a percentage of retail sales.

(B) Wholesale selling expenses as a percentage of wholesale sales.



Yankee Holding Corp. And Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)






ASSETS

January 1,


January 2,



2011


2010












Current Assets:





   Cash

$           12,713


$            9,095


   Accounts receivable, net

46,937


43,928


   Inventory

67,387


59,530


   Prepaid expenses and other current assets

10,813


12,094


   Deferred tax assets

11,642


11,208


         Total Current Assets

149,492


135,855


Property and Equipment, net

118,786


124,768


Marketable Securities

1,182


1,168


Deferred Financing Costs

14,271


18,731


Other Assets

925,969


938,558


         Total Assets

$      1,209,700


$     1,219,080












LIABILITIES AND STOCKHOLDERS’ EQUITY










Current Liabilities:





   Accounts payable

$           26,291


$          21,648


   Accrued payroll

12,669


15,613


   Accrued income taxes

18,840


-


   Other accrued liabilities

65,953


63,450


         Total Current Liabilities

123,753


100,711


Deferred Compensation Obligation

1,322


1,369


Long-Term Debt

901,125


989,125


Deferred Rent

11,535


10,643


Deferred Tax Liabilities

99,432


91,706


Other Long-Term Liabilities

2,525


2,283


Stockholders’ Equity

70,008


23,243


         Total Liabilities And Stockholders’ Equity

$      1,209,700


$     1,219,080









Yankee Holding Corp.

January 1, 2011  Earnings Release

Supplemental Data


Quarter


Year to Date


Total

YCC Retail Stores

2

(5)

17

(5)

515

Wholesale Customer Locations - North America  

(488)


1,062


20,228

Wholesale Customer Locations - Europe

351


1,372


5,012

Square Footage - Gross

4,156

(5)

27,330

(5)

989,925

Square Footage - Selling

2,918

(5)

17,765

(5)

762,009

Total Comp Stores & Consumer Direct Sales Change %

-1.8%


0.7%



YCC Retail Comp Store Count

489


489


489

Sales per Square Foot (1)



$520



  Store Count



487



Average store square footage, gross (2)



1,637



Average store square footage, selling (2)



1,247



Gross Profit (3)






  Retail $

$132,293


$280,858



  Retail %

65.7%


65.9%



  Wholesale $

$44,329


$145,756



  Wholesale %

49.1%


47.4%



Segment Profit (3)






  Retail $

$80,988


$108,640



  Retail %

40.2%


25.5%



  Wholesale $

$32,723


$105,395



  Wholesale %

36.2%


34.3%



Depreciation & Amortization (3)

$11,370


$42,978



Inventory per Store



$28,045



Inventory Turns (4)



3.5



Capital Expenditures (3)

$3,806


$18,019















(1)  Trailing 12 months, stores open for full 12 months, excluding S. Deerfield/Williamsburg Flagships. 







(2)  Excludes S. Deerfield/Williamsburg Flagships.







(3)  Dollars in thousands.







(4)  Based on a 13 month average inventory divided by 12 month rolling COGS.







(5) Net of closures.



Reconciliation of EBITDA and Adjusted EBITDA

In addition to the results reported in accordance with GAAP, the Company has provided information regarding "EBITDA" and "Adjusted EBITDA", both of which are non-GAAP financial measures.  EBITDA represents earnings/loss from continuing operations before interest, taxes, depreciation and amortization.    EBITDA and Adjusted EBITDA are not intended to represent cash flow from operations as defined by GAAP and should not be used as an alternative to net income (loss) as an indicator of operating performance or to cash flow as a measure of liquidity.  We believe the presentation of EBITDA and Adjusted EBITDA provides useful information to investors regarding our results of operations because such presentation assists in analyzing and benchmarking the performance value of our business.  We believe EBITDA and Adjusted EBITDA are useful to investors because they help enable investors to evaluate our business in the same manner as our management evaluates our business, and because these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies with substantial financial leverage.  In addition, because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we also use Adjusted EBITDA for business planning purposes, to incent and compensate our management personnel and to measure our performance relative to that of our competitors.  While EBITDA and Adjusted EBITDA are frequently used as a measure of operating performance and the ability to meet debt service requirements, they are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the method of calculation.  In evaluating our operating performance these measures should be used in conjunction with GAAP measures.  

EBITDA and Adjusted EBITDA are calculated as follows: 







Thirteen Weeks Ended

Thirteen Weeks Ended

Fifty-Two Weeks Ended

Fifty-Two Weeks Ended

January 1, 2011

January 2, 2010

January 1, 2011

January 2, 2010





Net income

$             51,775

$                41,118

41,909

16,372

Loss from discontinued operations, net of income taxes

37

78

379

7,696

Provision for income taxes

29,738

29,644

23,688

16,544

Interest expense, net - excluding amortization of deferred financing fees

15,124

20,630

79,798

86,347

Amortization of deferred financing fees

1,730

2,336

4,840

5,998

Depreciation

6,579

6,840

25,811

27,042

Amortization

3,055

3,331

12,324

13,558






EBITDA from continuing operations

108,038

103,977

188,749

173,557

Equity-based compensation (a)

247

240

962

857

MDP advisory fees

375

375

1,500

1,500

Purchase accounting (b)

323

305

1,283

1,171

Restructuring (c)

-

-

829

1,881

Realized (gains) losses on foreign currency (d)

(551)

(1,026)

384

1,335






Adjusted EBITDA

$            108,432

$               103,871

$            193,707

$               180,301








(a) Non-cash charges related to equity-based compensation.

(b) Represents purchase accounting adjustments as a result of the Merger in 2007.

(c) Includes costs associated with employee severance, lease related terminations and other costs associated with the restructuring of the business.

(d) Represents transaction losses on settlements of our intercompany receivable with our foreign subsidiary and transaction  losses from foreign vendors and customers.

SOURCE The Yankee Candle Company, Inc.



RELATED LINKS

http://www.yankeecandle.com