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The Yankee Candle Company, Inc. Reports Fiscal 2010 Third Quarter Results

SOUTH DEERFIELD, Mass., Nov. 12, 2010 /PRNewswire via COMTEX/ -- Yankee Holding Corp. and The Yankee Candle Company, Inc. ("Yankee Candle" or the "Company") today announced financial results for the third quarter ended October 2, 2010.

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/20081106/NETH043LOGO ) (Logo: http://www.newscom.com/cgi-bin/prnh/20081106/NETH043LOGO ) Sales for the third quarter of 2010 were $175.8 million, a $7.0 million or 4.1% increase from the prior year third quarter. Sales in the Company's wholesale business were $96.2 million, an increase of $3.4 million or 3.7% versus the prior year third quarter. Retail sales were $79.6 million, an increase of $3.6 million or 4.7% from the third quarter of fiscal 2009.

The Company generated net income of $8.8 million for the third quarter of 2010 compared to a net loss of $0.7 million, for the third quarter of 2009.

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 third quarter of 2010 increased by 10.8% to $43.0 million, or 24.5% of sales, compared to $38.9 million, or 23.0% of sales for the prior year third quarter. Adjusted EBITDA for the third quarter of 2010 increased by 9.1% to $44.4 million as compared to Adjusted EBITDA for the prior year third quarter of $40.7 million. Reconciliations of third quarter results to EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, are included at the end of this press release.

"Given the ongoing economic and consumer challenges, we were pleased that both our Retail and Wholesale businesses produced solid year over year sales growth in the third quarter," said Harlan Kent, the Company's Chief Executive Officer.

"Just as importantly, we have remained diligent in our focus on supply chain productivity and company-wide cost control initiatives, which has helped us to deliver strong Adjusted EBITDA growth versus the prior year quarter." Third Quarter Highlights: Retail sales were $79.6 million, an increase of $3.6 million or 4.7% from the third quarter of fiscal 2009, driven primarily by increased sales at retail stores opened after the third quarter of 2009 and an increase in sales in our Consumer Direct business.

Comparable sales in the 486 Yankee Candle retail stores, including the South Deerfield and Williamsburg flagship stores, that have been open for more than one year increased by 0.4%, while the Consumer Direct business increased by 17.6% over the prior year third quarter. Total retail comparable sales, including the Consumer Direct business, increased by 1.7% compared to the prior year third quarter.

Wholesale sales were $96.2 million in the third quarter, an increase of $3.4 million or 3.7% from the prior year third quarter. The increase was driven primarily by an increase in sales in our International business (consisting of our European operations and Asian distributors).

Nine Months Ended October 2, 2010 Highlights: Retail sales were $225.0 million, an increase of $16.3 million or 7.8% from the first nine months of fiscal 2009, driven primarily by an increase in new stores opened after the third quarter of 2009 and an increase in comparable store sales. Comparable store sales increased by 1.9% over the prior year period.

Total retail comparable sales, including the Consumer Direct business, increased by 2.8% compared to the prior year.

Wholesale sales were $217.1 million for the first nine months of fiscal 2010, an increase of $19.0 million or 9.6% from the first nine months of fiscal 2009. The increase was driven primarily by an increase in sales in our International business coupled with increased sales to new domestic wholesale accounts.

"We are encouraged by the third quarter and year to date operating results of our business, particularly given the still challenging consumer environment," said Mr. Kent. "While we have seen some encouraging macro-level forecasts for the holiday shopping season, buying behavior remains inconsistent from month to month. As a result, we remain cautious with respect to our outlook for the fourth quarter and are planning our business accordingly. That said, we have an energized Yankee Candle team, strong new Holiday fragrances and exciting merchandising plans that we believe position us well to capitalize on any positive Holiday trends." 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 third 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 (Q3 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 40-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 20,700 store locations, a growing base of Company owned and operated retail stores (513 Yankee Candle Stores located in 43 states as of October 2, 2010), 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 4,700 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 2010, 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 October 2, 2010 October 3, 2009 --------------- --------------- Sales: Retail $79,585 45.28% $75,989 45.03% Wholesale 96,165 54.72% 92,759 54.97% ------ ----- ------ ----- Total sales 175,750 100.00% 168,748 100.00% Cost of sales 74,103 42.16% 71,232 42.21% ------ ----- ------ ----- Gross profit 101,647 57.84% 97,516 57.79% Selling expenses: Retail 41,741 52.45% (A) 39,635 52.16% (A) Wholesale 10,101 10.50% (B) 8,844 9.53% (B) ------ ----- ----- ---- Total selling expenses 51,842 29.50% 48,479 28.73% General & administrative expenses 15,676 8.92% 19,158 11.35% Restructuring charge - 0.00% 906 0.54% --- ---- --- ---- Income from operations 34,129 19.42% 28,973 17.17% Interest income - 0.00% (1) 0.00% Interest expense 20,525 11.68% 20,740 12.29% Other expense 484 0.28% 5,929 3.51% --- ---- ----- ---- Income before provision for income taxes 13,120 7.47% 2,305 1.37% Provision for income taxes 4,247 2.42% 1,045 0.62% ----- ---- ----- ---- Income from continuing operations 8,873 5.05% 1,260 0.75% Loss from discontinued operations, net of (49) -0.03% (1,995) -1.18% income taxes ----- ----- Net income (loss) $8,824 5.02% $(735) -0.44% ====== ==== ===== ===== (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) Thirty-Nine Weeks Thirty-Nine Weeks Ended Ended October 2, 2010 October 3, 2009 --------------- --------------- Sales: Retail $224,974 50.89% $208,673 51.29% Wholesale 217,119 49.11% 198,146 48.71% ------- ----- ------- ----- Total sales 442,093 100.00% 406,819 100.00% Cost of sales 192,102 43.45% 174,531 42.90% ------- ----- ------- ----- Gross profit 249,991 56.55% 232,288 57.10% Selling expenses: Retail 120,913 53.75% (A) 114,601 54.92% (A) Wholesale 28,755 13.24% (B) 24,501 12.37% (B) ------ ----- ------ ----- Total selling expenses 149,668 33.85% 139,102 34.19% General & administrative expenses 46,307 10.47% 49,861 12.26% Restructuring charge 829 0.19% 1,881 0.46% --- ---- ----- ---- Income from operations 53,187 12.03% 41,444 10.19% Interest income - 0.00% (12) 0.00% Interest expense 58,794 13.30% 64,279 15.80% Other expense 9,968 2.25% 7,408 1.82% ----- ---- ----- ---- Loss before benefit from income taxes (15,575) -3.52% (30,231) -7.43% Benefit from income taxes (6,051) -1.37% (13,100) -3.22% ------ ----- ------- ----- Loss from continuing operations (9,524) -2.15% (17,131) -4.21% Loss from discontinued operations, net of (342) -0.08% (7,614) -1.87% income taxes ----- ----- Net loss $(9,866) -2.23% $(24,745) -6.08% ======= ===== ======== ===== (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 October 2, January 2, 2010 2010 ---- ---- Current Assets: Cash $2,003 $9,095 Accounts receivable, net 75,504 43,928 Inventory 99,814 59,530 Prepaid expenses and other current assets 21,214 12,094 Deferred tax assets 13,682 11,208 ------ ------ Total Current Assets 212,217 135,855 Property and Equipment, net 121,119 124,768 Marketable Securities 1,254 1,168 Deferred Financing Costs 15,901 18,731 Other Assets 929,001 938,558 ------- ------- Total Assets $1,279,492 $1,219,080 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $40,524 $21,648 Accrued payroll 9,570 15,613 Other accrued liabilities 53,545 63,450 ------ ------ Total Current Liabilities 103,639 100,711 Deferred Compensation Obligation 1,376 1,369 Long-Term Debt 1,044,951 989,125 Deferred Rent 11,561 10,643 Deferred Tax Liabilities 98,019 91,706 Other Long-Term Liabilities 1,815 2,283 Stockholders' Equity 18,131 23,243 Total Liabilities And Stockholders' Equity $1,279,492 $1,219,080 ========== ========== Yankee Holding Corp.

October 2, 2010 Earnings Release Supplemental Data Year to Quarter Date Total ------- ------- ----- YCC Retail Stores 10 (5) 15 (5) 513 Wholesale Customer Locations - North America 22 1,550 20,716 Wholesale Customer Locations - Europe 591 1,021 4,661 Square Footage - Gross 15,636 (5) 23,174 (5) 985,769 Square Footage - Selling 9,805 (5) 14,847 (5) 759,091 Total Comp Stores & Consumer Direct Sales Change % 1.7% 2.8% YCC Retail Comp Store Count 486 486 486 Sales per Square Foot (1) $524 Store Count 486 Average store square footage, gross (2) 1,636 Average store square footage, selling (2) 1,246 Gross Profit (3) Retail $$55,053 $148,565 Retail % 69.2% 66.0% Wholesale $$46,593 $101,427 Wholesale % 48.5% 46.7% Segment Profit (3) Retail $$13,313 $27,652 Retail % 16.7% 12.3% Wholesale $$36,492 $72,672 Wholesale % 37.9% 33.5% Depreciation & Amortization (3) $10,433 $31,608 Inventory per Store $28,341 Inventory Turns (4) 3.4 Capital Expenditures (3) $4,629 $14,213 (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 Thirteen Weeks Ended Ended October 2, 2010 October 3, 2009 --------------- --------------- Net income (loss) $8,824 $(735) Loss from discontinued operations, net of income taxes 49 1,995 Provision for (benefit from) income taxes 4,247 1,045 Interest expense, net -excluding amortization of deferred financing fees 19,488 25,406 Amortization of deferred financing fees 1,037 1,007 Depreciation 6,345 6,723 Amortization 3,054 3,410 ----- ----- EBITDA from continuing operations 43,044 38,851 Equity-based compensation (a) 199 206 MDP advisory fees 375 375 Purchase accounting (b) 289 77 Restructuring (c) - 906 Realized losses on foreign currency (d) 504 302 --- --- Adjusted EBITDA $44,411 $40,717 ======= ======= Thirty-nine Thirty-nine Weeks Ended Weeks Ended October 2, 2010 October 3, 2009 --------------- --------------- Net income (loss) (9,866) (24,745) Loss from discontinued operations, net of income taxes 342 7,614 Provision for (benefit from) income taxes (6,051) (13,100) Interest expense, net -excluding amortization of deferred financing fees 64,673 65,717 Amortization of deferred financing fees 3,111 3,662 Depreciation 19,232 20,202 Amortization 9,269 10,229 ----- ------ EBITDA from continuing operations 80,710 69,579 Equity-based compensation (a) 716 617 MDP advisory fees 1,125 1,125 Purchase accounting (b) 961 866 Restructuring (c) 829 1,881 Realized losses on foreign currency (d) 934 2,361 --- ----- Adjusted EBITDA 85,275 76,429 ====== ====== (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.

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