• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

The Yankee Candle Company, Inc. Reports Fiscal 2007 Fourth Quarter and Full Year Results

Posted on: Thursday, 28 February 2008, 09:00 CST

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 December 29, 2007. 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 now the parent company of The Yankee Candle Company, Inc.

Total revenue for the fourth quarter was $284.7 million, a 2.5% increase over the prior year quarter, driven primarily by revenue generated in new stores, increased revenue in our European operations, increased revenue attributable to the Illuminations business acquired in July 2006 and increased revenue in our Fundraising business. Comparable store sales in the Company's Retail Segment, excluding its Consumer Direct business and Illuminations stores, decreased 6% over the prior year quarter. Comparable sales including its Consumer Direct business (but excluding sales from its Illuminations stores) decreased 6% over the prior year quarter.

As a result of the Merger, the Company's financial results as reported in accordance with United States generally accepted accounting principles ("GAAP") include significant costs and expenses related to the Merger, including transaction expenses and the impacts of required purchase accounting adjustments. As such, the Company generated net income for the fourth quarter of 2007 of $39.0 million compared with net income of $52.3 million in the fourth quarter of 2006. Net income prior to the impact of the Merger expenses and related purchase accounting was $40.8 million in the quarter. A reconciliation is provided at the end of this press release.

The Company also presents EBITDA (earnings/loss 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 quarter was $103.7 million compared to $96.2 million for the prior year. Adjusted EBITDA for the quarter was $103.6 million or 36.4% of sales compared to $100.4 million or 36.1% of sales for the prior year. Reconciliations of fourth quarter and full year results to EBITDA and Adjusted EBITDA, which are non-GAAP measures, are included at the end of this press release.

Craig Rydin, Chairman and Chief Executive Officer, commented, "We delivered positive profit and sales growth in a challenging macroeconomic environment during the fourth quarter. Our Wholesale Division exceeded our internal plans and delivered 8.0% net sales growth over prior year. Our Retail performance was below our internal projections, as like other mall-based specialty retailers we were adversely impacted by overall mall traffic and consumer spending during the important holiday season that was well below our expectations. Lastly, our vertically integrated Supply Chain continued to deliver strong productivity and efficiency gains during the quarter. Once again, our employees continued to focus on serving our customers, and enabling the company to deliver a strong profitable growth performance in 2007."

Fourth Quarter Highlights:

Retail sales were $189.3 million, slightly below the fiscal 2006 fourth quarter. Comparable sales in the 401 retail stores including the South Deerfield and Williamsburg flagship stores that have been open for more than one year decreased 6%.

Wholesale sales were $95.4 million in the fourth quarter, an increase of 8.0% over the prior year quarter.

During the fourth quarter ended December 29, 2007, the Company generated cash from operating activities of $109.1 million, paying down total debt by approximately $106.8 million and ending the year with total debt of $1.1 billion. At December 29, 2007, cash was $5.6 million and excess availability under the revolving credit facility was $120.0 million.

Fiscal Year Ended December 29, 2007 Highlights:

As a result of the Merger, for the fiscal year ended December 29, 2007, the financial results being reported are the combined results of (i) The Yankee Candle Company, Inc. and its subsidiaries (the "predecessor entity"), for the period from December 31, 2006 to February 5, 2007 and (ii) Yankee Holding Corp. and its subsidiaries (the "successor entity"), for the period from February 6, 2007 to December 29, 2007. A breakdown of the two periods is provided within this press release.

Retail sales were $407.7 million for the year ended December 29, 2007, a 4.9% increase compared to the year ended December 30, 2006.

Wholesale sales were $329.3 million for the year ended December 29, 2007, an increase of 10.2% compared to the year ended December 30, 2006.

For the year ended December 29, 2007 under GAAP and including the impact of the Merger expenses and related accounting, the Company generated net income of $3.0 million compared with net income of $84.5 million for the year ended December 30, 2006. Net income prior to the impact of the cumulative effect of the Merger expenses and related purchase accounting was $49.1 million for the year ended December 29, 2007.

For the year ended December 29, 2007, the Company generated EBITDA of $139.4 million compared to $175.6 million for the year ended December 30, 2006. The decrease in EBITDA was due primarily to transaction-related expenses and purchase accounting adjustments associated with the Merger. For the year ended December 29, 2007, Adjusted EBITDA was $197.0 million compared to $184.2 million for the year ended December 30, 2006. Merger-related expenses and purchase accounting adjustments for the year ended December 29, 2007 were $56.5 million. During the year ended December 29, 2007, the Company paid down total debt by approximately $45.0 million.

Craig Rydin concluded, "Given the challenging macroeconomic environment that we competed in during the fourth quarter, we were pleased with our 2007 performance. We approach 2008 with cautious optimism. Clearly, the consumer is challenged in this economic environment. Mall traffic continues to be weak early in 2008, and our Wholesale customers are cautious regarding their inventory positions as they plan 2008. We remain focused on our brand, the competitive advantage of our multi-channel business model and vertically integrated Supply Chain. Additionally, we are highly focused on cost containment and controllable expenses as we navigate in a difficult sales environment. We continue to believe that we are well-positioned to compete successfully for the consumer's share of wallet during the course of 2008."

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 fiscal 2007 fourth quarter and full year results. This call is being webcast by CCBN 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. The dial-in number is (800) 265-0241, for International Calls the dial-in number is (617) 847-8704. Participant Pass Code is 89451220.

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 has a 37-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 16,700 store locations, a growing base of Company owned and operated retail stores (459 located in 43 states as of December 29, 2007), direct mail catalogs, its Internet websites (www.yankeecandle.com, www.illuminations.com and www.aromanaturals.com), international distributors and to a European wholesale customer network of approximately 2,700 store locations (through its distribution center located in Bristol, England).

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 the fourth quarter and Fiscal 2007, 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 our recent Merger with affiliated investment funds of Madison Dearborn Partners, LLC on our financial and operating results; 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 Quarterly Report on Form 10-Q or Annual Report on Form 10-K, or the Registration Statement on Form S-4 filed on March 30, 2007 (Registration No. 333-141699-05), each 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 SubsidiariesConsolidated Statements of Operations(in thousands)(Unaudited)

Thirteen Weeks

Thirteen Weeks

Ended

Ended

December 29, 2007

December 30, 2006

Sales:

Retail

$

189,314

66.49

%

$

189,458

68.20

%

Wholesale

95,412

33.51

%

88,332

31.80

%

Total sales

284,726

100.00

%

277,790

100.00

%

Cost of sales

112,383

39.47

%

109,307

39.35

%

Gross profit

172,343

60.53

%

168,483

60.65

%

Selling expenses:

Retail

53,575

28.30

%

(A)

48,613

25.66

%

(A)

Wholesale

10,241

10.73

%

(B)

5,062

5.73

%

(B)

Total selling expenses

63,816

22.41

%

53,675

19.32

%

General & administrative expenses

16,150

5.67

%

25,204

9.07

%

Income from operations

92,377

32.44

%

89,604

32.26

%

Interest income

(9

)

0.00

%

(10

)

0.00

%

Interest expense

25,382

8.91

%

4,147

1.49

%

Other (income) expense

(430

)

-0.15

%

354

0.13

%

Income before provision

for income taxes

67,434

23.68

%

85,113

30.64

%

Provision for income taxes

28,408

9.98

%

32,796

11.81

%

Net income

$

39,026

13.71

%

$

52,317

18.83

%

Non-GAAP

Successor Period

Predecessor Period

Combined

February 6, 2007

December 31, 2006

Fifty Two Weeks

Fifty Two Weeks

To

To

Ended

Ended

December 29, 2007

February 5, 2007

December 29, 2007

December 30, 2006

Sales:

Retail

$381,169

55.76%

$26,530

49.70%

$407,699

55.32%

$388,820

56.55%

Wholesale

302,404

44.24%

26,852

50.30%

329,256

44.68%

298,737

43.45%

Total sales

683,573

100.00%

53,382

100.00%

736,955

100.00%

687,557

100.00%

Cost of sales

329,570

48.21%

24,553

45.99%

354,124

48.05%

297,338

43.25%

Gross profit

354,003

51.79%

28,829

54.01%

382,831

51.95%

390,219

56.75%

Selling expenses:

Retail

160,447

42.09%

(A)

14,423

54.36%

(A)

174,870

42.89%

(A)

149,155

38.36%

(A)

Wholesale

31,951

10.57%

(B)

1,778

6.62%

(B)

33,729

10.24%

(B)

19,039

6.37%

(B)

Total selling expenses

192,398

28.15%

16,201

30.35%

208,599

28.31%

168,194

24.46%

General & administrative expenses

62,717

9.17%

13,828

25.90%

76,545

10.39%

72,738

10.58%

Income from operations

98,888

14.47%

(1,200)

-2.25%

97,687

13.26%

149,287

21.71%

Interest income

(43)

-0.01%

(1)

0.00%

(44)

-0.01%

(30)

0.00%

Interest expense

92,443

13.52%

986

1.85%

93,429

12.68%

15,358

2.23%

Other (income) expense

(1,151)

-0.17%

(15)

-0.03%

(1,167)

-0.16%

(105)

-0.02%

Income (loss) before provision for (benefit from) income taxes

7,639

1.12%

(2,170)

-4.07%

5,469

0.74%

134,064

19.50%

Provision for (benefit from) income taxes

2,815

0.41%

(340)

-0.64%

2,475

0.34%

49,549

7.21%

Net income (loss)

$ 4,824

0.71%

$ (1,830)

-3.43%

$ 2,994

0.41%

$ 84,515

12.29%

(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)

ASSETS

December 29,

December 30,

2007

2006

(unaudited)

Current Assets:

Cash and cash equivalents

$

5,627

$

22,773

Accounts receivable, net

52,126

33,769

Inventory

69,963

61,130

Prepaid expenses and other current assets

9,344

8,651

Deferred tax assets

17,652

5,872

Total Current Assets

154,712

132,195

Property, Plant And Equipment, net

155,911

140,603

Marketable Securities

259

2,021

Deferred Financing Costs

28,654

596

Deferred Tax Assets

-

67,288

Other Assets

1,435,332

30,219

Total Assets

$

1,774,868

$

372,922

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

21,613

$

26,052

Accrued payroll

17,394

19,802

Accrued income taxes

15,551

26,600

Other accrued liabilities

56,406

25,446

Short-term debt

6,500

-

Total Current Liabilities

117,464

97,900

Deferred Compensation Obligation

410

2,213

Long-Term Debt

1,123,625

140,000

Deferred Rent

10,230

17,244

Deferred Tax Liability

104,637

-

Other Long-Term Liabilities

1,600

-

Stockholders' Equity

416,902

115,565

Total Liabilities And Stockholders' Equity

$

1,774,868

$

372,922

Yankee Holding Corp.

December 29, 2007 Earnings Release

Supplemental Data

Quarter

Year to Date

Total

YCC Retail Stores

7

27

429

Illuminations Retail Stores

3

14

30

Total Retail Stores

10

41

459

Wholesale Customer Locations - North America (1)

(25)

(661)

16,720

Wholesale Customer Locations - Europe

(149)

185

2,687

Square Footage - Gross

14,534

60,704

904,258

Square Footage - Selling

11,047

46,124

702,475

YCC Retail Comp Store Sales Change %

-6%

-2%

YCC Retail Comp Store Count

401

--

401

Total Comp Stores & Consumer Direct Sales Change %

-6%

-3%

Sales per Square Foot (2)

$573

Store Count

399

Average store square footage, gross (3)

1,650

Average store square footage, selling (3)

1,269

Gross Profit (4)

Retail $

$124,979

$245,415

Retail %

66.0%

60.2%

Wholesale $

$47,365

$137,416

Wholesale %

49.6%

41.7%

Segment Profit (4)

Retail $

$71,404

$70,545

Retail %

37.7%

17.3%

Wholesale $

$37,125

$103,687

Wholesale %

38.9%

31.5%

Depreciation & Amortization (4)

$12,032

$44,659

Inventory per Store, excluding Illuminations

$30,297

Inventory Turns

3.49

(5)

Capital Expenditures (4)

$10,281

$28,911

(1) Year to date change in Wholesale locations driven by exit of Staples and PetSmart, which sold a subset of non-candle products.

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

(3) Excludes S. Deerfield and Williamsburg, VA Flagship stores. Includes Illuminations stores.

(4) Dollars in thousands.

(5) Based on a 13 month avg. inventory divided by 12 month rolling COGS. Calculation excludes the step-up of inventory related to the merger acquisition.

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 is defined as earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA is EBITDA adjusted to exclude non-recurring or non-cash items and any other similar charges deemed appropriate by the Company. In the present period, these include Merger related charges, the impact of purchase accounting adjustments and non-cash equity compensation expense. 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. Following the Merger, 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 now evaluates our business following the Merger, 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:

Successor

Predecessor

Combined

Predecessor

Thirteen weeks ended

Thirteen weeks ended

Fifty-two weeks ended

Fifty-two weeks ended

Dec. 29, 2007

Dec. 30, 2006

Dec. 29, 2007

Dec. 30, 2006

Net income

$

39,026

$

52,317

$

2,994

$

84,515

Income taxes

28,408

32,796

2,475

49,549

Interest expense, net - excluding amortization of deferred financing fees

24,241

3,925

89,263

14,754

Amortization of deferred financing fees

1,132

212

4,122

574

Depreciation

7,521

6,549

28,185

24,725

Amortization

3,379

369

12,352

1,483

EBITDA

103,707

96,168

139,391

175,600

Equity-based compensation (a)

149

1,424

1,141

5,772

Merger costs (b)

194

3,158

14,562

3,194

Purchase accounting (c)

(456

)

-

41,925

-

Restructuring

-

(397

)

-

(397

)

Adjusted EBITDA

$

103,594

$

100,353

$

197,019

$

184,169

(a) Non-cash charges related to equity-based compensation, excluding approximately $8.2 million of stock based compensation expense associated with the acceleration of vesting of certain options, restricted shares and performance shares.

(b) Represents certain costs incurred in connection with the Merger. Includes approximately $8.2 million of stock based compensation expense associated with the acceleration of vesting of certain options, restricted shares and performance shares and certain other third-party costs (primarily legal) as a result of the Merger. It includes the quarterly installment of approximately $0.4 million associated with MDP's annual advisory fee.

(c) Includes amortization expense associated with the step up in inventory due to the Merger. The total step-up was $40.5 million and is being amortized over three months from the date of the Merger.

Reconciliation of Net Income Prior to the Impact of Merger expenses and related Purchase Accounting

Combined

Combined

Thirteen weeks endedDecember 29, 2007

Fifty Two weeks endedDecember 29, 2007

Pre-tax income

$67,434

$5,469

Purchase accounting

(456

)

41,925

Purchase accounting adjustments --Depreciation and amortization

3,239

10,687

Merger costs

194

14,562

Pro-forma pre-tax income

70,411

72,643

Provision for income taxes

29,570

23,573

Pro-forma net income

$40,841

$49,070

Source: Business Wire

More News in this Category