Yankee Cdle (NYSE:YCC)
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Results Include Impact of $5.5 million Pre-Tax Restructuring
Charge; Excluding Charge, Fourth Quarter Adjusted EPS Exceeds Guidance
The Yankee Candle Company, Inc. ("Yankee" or the "Company")
(NYSE:YCC), the leading designer, manufacturer, wholesaler and
retailer of premium scented candles, today announced financial results
for the fourth quarter and fiscal year ended December 31, 2005
("fiscal 2005"). Total sales for the fourth quarter were $236.9
million, an 8% increase over the year ago quarter. Total sales for
fiscal 2005 were $601.2 million, an 8% increase over fiscal 2004.
Earnings per common share on a diluted basis for the fourth
quarter of 2005 increased 1% to $1.01 from $1.00 for the prior year
quarter. Earnings per common share on a diluted basis for the full
fiscal year 2005 increased 3% to $1.73 from $1.68 for the prior fiscal
year.
"In the fourth quarter, Yankee Candle grew total revenues, segment
profit and earnings per share versus the prior year period and
delivered earnings per share before the restructure that exceeded the
high end of our guidance despite a very promotional holiday
environment and wax allocations," said Craig Rydin, Chairman and Chief
Executive Officer. "We had strong revenue growth in both our Retail
and Wholesale Divisions, each of which was within or above the
guidance we provided in our October call. Key among our achievements
in the quarter was the opening of our 2nd flagship store in
Williamsburg, Virginia, which has been very well received and
significantly exceeded its sales plan in the fourth quarter. I want to
thank all of our employees for a good job this holiday season."
During the fourth quarter of fiscal 2005, the Company initiated a
previously announced restructuring plan to close 17 underperforming
stores and re-invest in talent and other strategic growth initiatives.
In connection with this restructuring plan, a pre-tax charge of
approximately $5.5 million was recorded in the fourth quarter of
fiscal 2005. Included in the restructuring charge was approximately
$2.4 million related to lease termination costs, approximately $2.5
million related to non-cash fixed assets write-offs and approximately
$0.6 million in employee related and other costs. As of the date of
this press release seven of the 17 underperforming stores have been
closed. The Company expects to close the remaining ten locations
before the end of the first quarter of fiscal 2006.
Excluding the impact of the fourth quarter restructuring charge of
$5.5 million, adjusted earnings per common share on a diluted basis
for the fourth quarter of 2005 increased 9% to $1.09 from $1.00 for
the prior year quarter; and for the full fiscal year 2005 increased 8%
to $1.81 from $1.68 for the prior fiscal year. For a reconciliation of
these results with those reported above including the impact of the
restructuring charge, please see the Statements attached to and
incorporated within this press release.
Revenue Highlights:
-- Wholesale sales were $92.4 million in the fourth quarter, a
10% increase over the year ago quarter; and Wholesale
comparable sales increased 2%. For fiscal 2005, Wholesale
sales were $297.1 million, a 10% increase over fiscal 2004;
and Wholesale comparable sales increased 2% for fiscal 2005.
-- Retail sales were $144.5 million in the fourth quarter, a 7%
increase over the fiscal 2004 fourth quarter. Consumer Direct
increased 18% over the fiscal 2004 fourth quarter. Comparable
sales in the 335 retail stores that have been open more than
one year and Consumer Direct decreased 3% and retail
comparable store sales (excluding Consumer Direct) decreased
4% in the quarter. For fiscal 2005, retail sales were $304.0
million, a 7% increase over fiscal 2004. Comparable sales in
the 335 stores that have been open more than one year and
Consumer Direct decreased 2% for fiscal 2005. Retail
comparable store sales (excluding Consumer Direct) decreased
4% for fiscal 2005.
Income Statement Highlights:
Craig Rydin continued, "Our gross profit and income from
operations were affected primarily by higher energy costs that
increased our wax and freight costs, as well as by higher production
costs incurred as we worked around wax allocations, and to a lesser
extent by the promotional environment this past holiday season. We
were able to offset some of this impact by effectively managing fourth
quarter G & A to a level favorable to our guidance."
-- Gross profit increased 5% to $140.9 million for the fourth
quarter ended December 31, 2005 as compared to the prior year
quarter; and increased 6% to $343.7 million for fiscal 2005
compared to fiscal 2004. As a percentage of sales, gross
profit decreased to 59.5% for the fourth quarter ended
December 31, 2005 compared to 61.5% for the fourth quarter
ended January 1, 2005; and decreased to 57.2% for fiscal year
2005 compared to 58.4% for fiscal year 2004.
-- Income from operations for the fiscal 2005 fourth quarter
decreased 7% to $73.3 million, from $79.0 million for the
prior year quarter. Excluding the restructuring charge,
adjusted income from operations for the fiscal 2005 fourth
quarter decreased slightly to $78.8 million.
-- Income from operations for fiscal 2005 decreased 3% to $134.8
million, from $139.3 million operating profit for fiscal 2004.
Excluding the restructuring charge, adjusted income from
operations for fiscal year 2005 increased 1% to $140.3
million.
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*T
Reconciliation of Non-GAAP Measures
(in thousands)
(Unaudited)
Thirteen Thirteen Fifty-Two Fifty-Two
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
December 31, January 1, December 31, January 1,
2005 2005 2005 2005
---------- ---------- ---------- ----------
Income from operations $ 73,287 $ 79,002 $134,759 $139,327
Restructuring charge 5,546 - 5,546 -
---------- ---------- ---------- ----------
Adjusted Income from
operations $ 78,833 $ 79,002 $ 140,305 $139,327
========== ========== ========== ==========
% change from prior
year 0% 1%
*T
Other Highlights:
-- The Company continues to return capital back to its
shareholders through its share repurchase program. In the
fourth quarter, the Company repurchased and retired 2,610,850
shares of its Common Stock at a total cost of approximately
$65.0 million. In the fiscal year of 2005, it repurchased and
retired 6,543,234 shares of its Common Stock, or 14% of its
beginning year common shares outstanding, at a total cost of
$185.0 million. Approximately $65.0 million remains available
for future purchases pursuant to its stock repurchase program
announced on July 27, 2005.
Forecast Highlights:
Mr. Rydin continued, "We made progress during the fourth quarter
on our short-term initiatives and are putting the finishing touches on
the implementation of our strategic plan, which we believe will set
the stage for profitable growth in 2006 and beyond. For 2006, our
priorities on the top line are to stimulate total sales growth through
improved sales and marketing, faster and greater innovation, and
selective channel expansion to gain market share. We also are focused
on driving long-term profitability by raising our efficiency level,
removing cost where possible, and further orienting our culture toward
performance-based objectives. While we are still in the first stage of
this transition, we believe we are making progress on all fronts."
The Company also provided its sales and EPS guidance for 2006,
excluding any impact of additional share repurchases.
-- For the full year and first quarter of 2006, the Company
expects approximately 6%-8% total sales growth. For the full
year the Company expects 11%-14% growth in adjusted net income
per diluted common share, or $2.01 - $2.07, including $0.24 -
$0.25 in the first quarter. The diluted EPS growth for the
full year would be 16% - 20%, inclusive of the restructure
charge in 2005. The diluted earnings per share guidance
incorporates the net benefit (higher interest expense on
revolver borrowings and fewer shares outstanding) of share
repurchase activity in the twelve months of fiscal 2005.
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
2005 fourth quarter and full year results and our outlook for fiscal
2006. 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, 10 minutes prior to the start of
the conference.
The Yankee Candle Company, Inc. is the leading designer,
manufacturer, wholesaler and retailer of premium scented candles in
the giftware industry. Yankee has a 36 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 16,400 store
locations, a growing base of Company owned and operated retail stores
(390 located in 42 states as of December 31, 2005), direct mail
catalogs, its Internet website (www.yankeecandle.com), international
distributors and to a European wholesale customer network of
approximately 2,200 store locations (through its distribution center
located in Bristol, England).
Non-GAAP Information
In addition to disclosing results determined in accordance with
generally accepted accounting principles, or GAAP, Yankee Candle also
discloses adjusted, or non-GAAP, results of operations that exclude
certain items. By disclosing this non-GAAP information, management
intends to provide investors with additional information to further
analyze Yankee Candle's performance, core results and underlying
trends. In order to better assess operating trends, management
utilizes a measure of adjusted net income and adjusted diluted net
income per common share on a non-GAAP basis that excludes for the
applicable periods a restructuring charge, net of tax effects related
to the closing of 17 underperforming stores and re-investment in
talent and other strategic growth initiatives.
Excluded charges are considered to be non-recurring and
non-operational in the applicable period. Management believes adjusted
net income provides useful supplemental information to management and
investors regarding the performance and underlying trends of Yankee
Candle's business operations and facilitates comparisons to its
historical operating results. Management uses this information
internally for forecasting, budgeting and evaluating the effectiveness
of Yankee Candle's operational strategies. Management believes it is
important to provide investors with the same metrics used by
management to measure core operating performance, which assists
investors in analyzing the underlying trends in Yankee Candle's
business over time.
Non-GAAP information should not be viewed as a substitute for, or
superior to, net income or other data prepared in accordance with GAAP
as measures of Yankee Candle's profitability or liquidity. Users of
this financial information should consider the types of events and
transactions for which adjustments have been made. See the tables to
this press release for a reconciliation of non-GAAP amounts to amounts
reported under GAAP.
This press release contains 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
2006, and the first quarter thereof, the growth initiatives and
specific actions discussed above and their impact on the Company's
future operating results, 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 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 our stock
price 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 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.
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*T
The Yankee Candle Company, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
Thirteen Weeks Thirteen Weeks
Ended Ended
December 31, 2005 January 1, 2005
----------------- -----------------
Sales:
Retail $144,471 60.99% $134,867 61.62%
Wholesale 92,407 39.01% 83,995 38.38%
----------------- -----------------
Total sales 236,878 100.00% 218,862 100.00%
Cost of sales 95,969 40.51% 84,346 38.54%
----------------- -----------------
Gross profit 140,909 59.49% 134,516 61.46%
Selling expenses:
Retail 40,339 27.92%(A) 37,595 27.88%(A)
Wholesale 6,334 6.85%(B) 4,310 5.13%(B)
----------------- -----------------
Total selling expenses 46,673 19.70% 41,905 19.15%
General & administrative
expenses 15,403 6.50% 13,609 6.22%
Restructuring charge 5,546 2.34% - 0.00%
----------------- -----------------
Income from operations 73,287 30.94% 79,002 36.10%
Interest income (6) 0.00% (4) 0.00%
Interest expense 2,441 1.03% 1,091 0.50%
Other income (302) -0.13% (1,380) -0.63%
----------------- -----------------
Income before provision for
income taxes 71,154 30.04% 79,295 36.23%
Provision for income taxes 27,750 11.71% 31,322 14.31%
----------------- -----------------
Net income $ 43,404 18.32% $ 47,973 21.92%
================= =================
Basic earnings per share $ 1.01 $ 1.01
========== ==========
Diluted earnings per share $ 1.01 $ 1.00
========== ==========
Dividends per share $ 0.13 N/A
==========
Weighted avg. basic shares
outstanding 42,776 47,456
Weighted avg. diluted shares
outstanding 43,083 47,867
Reconciliation of Non-GAAP
Measures:
Net Income, as reported $ 43,404 $ 47,973
Restructuring charge, net of
tax 3,383 -
---------- ----------
Adjusted net income $ 46,787 $ 47,973
========== ==========
Net income, per common share,
diluted as reported $ 1.01 $ 1.00
Restructuring charge, net of
tax 0.08 -
---------- ----------
Adjusted net income per common
share, diluted $ 1.09 $ 1.00
========== ==========
Fifty-Two Weeks Fifty-Two Weeks
Ended Ended
December 31, 2005 January 1, 2005
----------------- ------------------
Sales:
Retail $304,057 50.58% $283,482 51.15%
Wholesale 297,124 49.42% 270,720 48.85%
----------------- ------------------
Total sales 601,181 100.00% 554,202 100.00%
Cost of sales 257,455 42.82% 230,519 41.59%
----------------- ------------------
Gross profit 343,726 57.18% 323,683 58.41%
Selling expenses:
Retail 126,838 41.72%(A) 116,101 40.96%(A)
Wholesale 19,217 6.47%(B) 15,232 5.63%(B)
----------------- ------------------
Total selling expenses 146,055 24.29% 131,333 23.70%
General & administrative
expenses 57,366 9.54% 53,023 9.57%
Restructuring charge 5,546 0.92% - 0.00%
----------------- ------------------
Income from operations 134,759 22.42% 139,327 25.14%
Interest income (23) 0.00% (13) 0.00%
Interest expense 7,250 1.21% 4,152 0.75%
Other income (502) -0.08% (1,488) -0.27%
----------------- ------------------
Income before provision for
income taxes 128,034 21.30% 136,676 24.66%
Provision for income taxes 49,933 8.31% 53,987 9.74%
----------------- ------------------
Net income $ 78,101 12.99% $ 82,689 14.92%
================= ==================
Basic earnings per share $ 1.75 $ 1.70
========== ==========
Diluted earnings per share $ 1.73 $ 1.68
========== ==========
Dividends per share $ 0.25 N/A
==========
Weighted avg. basic shares
outstanding 44,622 48,749
Weighted avg. diluted shares
outstanding 45,053 49,136
Reconciliation of Non-GAAP
Measures:
Net Income, as reported $ 78,101 $ 82,689
Restructuring charge, net of
tax 3,383 -
---------- ----------
Adjusted net income $ 81,484 $ 82,689
========== ==========
Net income, per common share,
diluted as reported $ 1.73 $ 1.68
Restructuring charge, net of
tax 0.08 -
---------- ----------
Adjusted net income per common
share, diluted $ 1.81 $ 1.68
========== ==========
------------------------------
(A) Retail selling expenses as a percentage of retail sales.
(B) Wholesale selling expenses as a percentage of wholesale sales.
The Yankee Candle Company, Inc. And Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
ASSETS
December 31, January 1,
2005 2005
---------- ----------
(unaudited)
Current Assets:
Cash and cash equivalents $ 12,655 $ 36,424
Accounts receivable, net 42,546 28,231
Inventory 55,528 46,901
Prepaid expenses and other current assets 9,060 8,112
Deferred tax assets 6,734 3,876
---------- ----------
Total Current Assets 126,523 123,544
Property, Plant And Equipment, net 139,089 126,365
Marketable Securities 2,223 1,499
Deferred Financing Costs 593 451
Deferred Tax Assets 73,975 84,697
Other Assets 12,731 9,803
---------- ----------
Total Assets $ 355,134 $ 346,359
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 21,068 $ 20,246
Accrued payroll 14,319 14,492
Accrued income taxes 20,828 26,264
Other accrued liabilities 34,326 18,435
---------- ----------
Total Current Liabilities 90,541 79,437
Deferred Compensation Obligation 2,418 1,659
Long-Term Debt 178,000 75,000
Deferred Rent 16,031 10,600
Stockholders' Equity 68,144 179,663
---------- ----------
Total Liabilities And Stockholders'
Equity $ 355,134 $ 346,359
========== ==========
The Yankee Candle Company, Inc.
February 15, 2006 Earnings Release
Supplemental Data
Quarter Year to Total
Date
---------- ---------- --------
Retail Stores 23 53 390
Wholesale Customer Locations - North
America 100 784 16,384
Wholesale Customer Locations - Europe 102 12 2,212
Square Footage - Gross 93,632 140,611 794,408
Square Footage - Selling 65,225 102,605 620,979
Total Company Comp Sales Change % -1% 0%
Wholesale Comp Sales Change % 2% 2%
Retail Comp Store Sales Change % -4% -4%
Retail Comp Store Count 335 - 335
Retail Comp Store Sales Change %,
excl. S.Deerfield -4% -3%
Retail Comp Store & Consumer Direct
Sales Change % -3% -2%
Sales per Square Foot (1) - $560
Store Count - 336
Average store square footage, gross
(2) - 1,661
Average store square footage, selling
(2) - 1,285
Gross Profit (3)
Retail $ $97,439 $202,384
Retail % 67.5% 66.6%
Wholesale $ $43,470 $141,342
Wholesale % 47.0% 47.6%
Segment Profit (3)
Retail $ $57,099 $75,546
Retail % 39.5% 24.9%
Wholesale $ $37,137 $122,125
Wholesale % 40.2% 41.1%
Depreciation & Amortization (3) $6,435 $24,788
Inventory per Store $35,000 -
Inventory Turns 6.2 4.7 (4)
Capital Expenditures (3) $16,836 $39,180
Shares Outstanding 40,962,696 -
Weighted avg diluted shares in EPS
calculation 43,083,000 -
(1) Trailing 12 months, stores open for full 12 months, excluding S.
Deerfield Flagship Store and stores closed during 2005.
(2) Excludes S. Deerfield and Williamsburg, VA Flagship stores.
(3) Dollars in thousands.
(4) Rolling four quarters.
*T