The Yankee Candle Company, Inc. Reports Fiscal 2011 Second Quarter Results

SOUTH DEERFIELD, Mass., Aug. 11, 2011 /PRNewswire/ -- Yankee Holding Corp. and The Yankee Candle Company, Inc. (collectively, "Yankee Candle" or the "Company") today announced financial results for the second quarter ended July 2, 2011.  Yankee Holding Corp., a direct subsidiary of YCC Holdings LLC, 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 second quarter of 2011 were $129.9 million, a $4.5 million or 3.6% increase from the prior year second quarter.  Retail sales were $73.1 million, an increase of $1.4 million or 1.9% from the prior year quarter. Sales in the Company's Wholesale segment were $38.1 million, a decrease of $2.7 million or 6.7% versus the prior year second quarter.  Sales in the Company's International segment, which is being reported as a separate business segment beginning in 2011 after previously having been included in the Wholesale segment, were $18.7 million, an increase of $5.9 million or 46.0% from the second quarter of fiscal 2010.  The Company incurred a net loss of $7.4 million for the second quarter of 2011 compared to a net loss of $10.2 million for the second quarter of 2010.  

The Company presents 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.  Adjusted EBITDA for the second quarter of 2011 decreased by 13.8% to $15.4 million, or 11.8% of sales, as compared to Adjusted EBITDA for the prior year second quarter of $17.8 million, or 14.2% of sales. A reconciliation of the second quarter results to Adjusted EBITDA, which is a non-GAAP financial measure, is included at the end of this press release.  

"Our second quarter results were consistent with the expectations we have communicated since the beginning of the year," said Harlan Kent, the Company's Chief Executive Officer.  "Despite a consumer spending environment that remains very uncertain, we were able to continue to grow our sales and again saw strong performance by several of our growth platforms, including our International, Consumer Direct, Fundraising and Wholesale premium mass and department store businesses.  That said, as previously indicated, our 2011 plan contemplated year over year unfavorability in Adjusted EBITDA for the seasonally lower volume first half of the year, due in large part to wax and freight inflation and targeted investments we are making this year in specific growth initiatives.  Therefore, as expected, our second quarter earnings were down versus the prior year quarter though consistent with our internal plans.  Our first half historically represents a disproportionately small percentage of our annual Adjusted EBITDA."

Second Quarter Highlights:

• Retail sales were $73.1 million, an increase of $1.4 million or 1.9% from the second quarter of fiscal 2010, driven primarily by sales from the 32 new Yankee Candle retail stores opened after the second quarter of 2010 and increased sales in our Yankee Fundraising and Consumer Direct divisions, and partially offset by a decrease in our comparable store sales.

• Total Retail comparable sales, including the Consumer Direct business, decreased by 2.9% compared to the prior year second quarter.  Comparable store sales in the 495 Yankee Candle retail stores, including the South Deerfield and Williamsburg flagship stores, that have been open for more than one year decreased by 4.0%, while comparable sales in the Consumer Direct business increased by 9.8% over the prior year second quarter.  The decrease in comparable store sales was driven primarily by the Company's decision to run its semi-annual clearance sale in a condensed period of time, resulting in 12 fewer clearance days as compared to the prior year quarter.

• Wholesale sales were $38.1 million in the second quarter, a decrease of $2.7 million or 6.7% from the prior year second quarter.  The decrease was driven primarily by decreased sales to gift channel accounts and decreased sales from co-packing and licensing activities, partially offset by increased sales in our premium mass and department store channels.

• International sales were $18.7 million in the second quarter, an increase of $5.9 million or 46.0% over the prior year second quarter.  The increase was driven primarily by increased sales in our UK business.

• During the second quarter, the Company entered into a Joinder Agreement under its revolving credit facility (the "Revolving Facility") which provided a total of $15.0 million in new loan commitments, thereby increasing the Company's total capacity under the Revolving Facility from $125.0 million to $140.0 million.  As of July 2, 2011, the Company had outstanding letters of credit of $2.1 million and $66.0 million outstanding under the Revolving Facility, leaving $71.9 million in availability under the Revolving Facility.  

Six Months Ended July 2, 2011 Highlights:

• Retail sales were $147.8 million, an increase of $2.5 million or 1.7% over the prior year period, driven primarily by sales in new stores opened after the second quarter of 2010 and increased sales in our Consumer Direct division, partially offset by a decrease in our comparable store sales.

• Wholesale sales were $85.6 million for the first six months of fiscal 2011, a decrease of $6.0 million or 6.5% from the prior year period.  The decrease was driven primarily by decreased sales to gift channel accounts and decreased sales from co-packing and licensing activities, partially offset by increased sales in our premium mass and department store channels.

• International sales were $40.6 million for the first six months of fiscal 2011, an increase of $11.2 million or 38.1% over the prior year period.  The increase was driven primarily by increased sales in our UK business.

"As we head into the second half of the year we remain focused first and foremost on executing our plans and generating free cash flow," said Mr. Kent.  "There certainly continues to be a lack of visibility on the macro-economic front and the consumer still faces significant headwinds.  While these challenges may continue, we remain committed to our investment and growth plans, which we believe are on track and will position us well for profitable growth this year and allow us to capitalize on any upturn in consumer spending and sentiment.  That said, given the increased uncertainty and volatility in the economy, financial markets and consumer sentiment, we will remain diligently focused on our productivity, cost containment and cash flow generation efforts."

In February 2011, YCC Holdings LLC (the parent of Yankee Holding Corp.) and Yankee Finance were the co-issuers of $315.0 million of 10.25%/11.00% Senior Notes due in 2016 (the "Senior PIK Notes").  For the thirteen weeks ending July 2, 2011, YCC Holdings LLC incurred a net loss of $12.7 million, compared to the above-referenced net loss by the Company of $7.4 million.  The difference in net loss between the two entities is driven primarily by additional interest expense at YCC Holdings LLC of $8.5 million related to the Senior PIK Notes, offset by a tax benefit related to such interest expense of $3.2 million.  Neither Yankee Holding Corp. nor The Yankee Candle Company, Inc. have any obligations with respect to the Senior PIK Notes.

Earnings Conference Call:

The Company will host a conference call to be broadcast via the Internet at 11:00 a.m. (EDT) this morning to more fully discuss its second 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 (Q2 2011 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, select the "Investor Information" link, and then select the "Events Calendar" 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 20,500 store locations, a growing base of Company owned and operated retail stores (528 Yankee Candle Stores located in 45 states as of July 2, 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 5,300 store locations and distributors covering a combined 48 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 quarter thereof, 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, together with any other indebtedness incurred, 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 or continued inflation in wax and transportation costs; 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.

Reconciliation of Adjusted EBITDA

In addition to the results reported in accordance with GAAP, the Company has provided information regarding "Adjusted EBITDA" which is a non-GAAP financial measure.  Adjusted EBITDA represents earnings/loss from continuing operations before interest, taxes, depreciation and amortization ("EBITDA") adjusted to remove the affects of equity-based compensation, MDP advisory fees, purchase accounting, restructuring and realized (gains) losses on foreign currency transactions.  Under the Company's Credit Facility, Consolidated Adjusted EBITDA is defined as net income plus, interest, taxes, depreciation and amortization, further adjusted to add back extraordinary, unusual or non-recurring losses, non-cash stock option expense, fees and expenses related to the Merger, fees and expenses under the Management Agreement with our equity sponsor, restructuring charges or reserves, as well as other non-cash charges, expenses or losses, and further adjusted to subtract extraordinary, unusual or non-recurring gains, other non-cash income or gains, and certain cash contributions to our common equity.  Adjusted EBITDA is 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 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 Adjusted EBITDA is useful to investors because it helps enable investors to evaluate our business in the same manner as our management evaluates our business, and because this measure is 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 Adjusted EBITDA is frequently used as a measure of operating performance and the ability to meet debt service requirements, it is 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.  

SOURCE The Yankee Candle Company, Inc.