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Stanley Black & Decker Reports 3Q 2013 Results
Business WirePress Release: Stanley Black & Decker – Wed, Oct 16, 2013 6:00 AM EDT..
Stanley Black & Decker (SWK) today announced third quarter 2013 financial results.
• 3Q’13 Revenues Increased 10% To $2.8 Billion; Organic Growth 4%
• Organic Growth Initiatives Continue To Gain Traction Driving One-Half Of The Organic Growth (2 Points)
• 3Q’13 Diluted GAAP EPS Was $1.07; Excluding Charges, 3Q’13 Diluted EPS Was $1.39
• 2013 FY EPS Guidance Range, Excluding Charges, Revised To $4.90 - $5.00 ($3.75 - $3.95 On A GAAP Basis) From $5.40 - $5.65 as a result of slower margin rate recovery within the Security segment, weakening emerging markets and the impact of the U.S. government shutdown on organic growth
• Free Cash Flow Excluding Charges And Payments Revised To Approximately $800 Million Vs. Prior Estimate Of Approximately $1 Billion
3Q’13 Key Points:
• Net sales for the period were $2.8 billion, up 10% versus the prior year, attributable to volume (+5%) and acquisitions (+7%), partially offset by price (-1%) and currency (-1%).
• The gross margin rate for the quarter was 35.8%. Excluding charges, the gross margin rate was 36.0%, down from the prior year rate of 36.7%, as the favorable impact of volume and cost synergies was more than offset by Security margins.
• SG&A expenses were 24.3% of sales. Excluding charges, SG&A expenses were 23.1% of sales, compared to a 3Q’12 level of 22.7%, primarily reflecting investments in organic growth initiatives.
• Operating margin was 11.5% of sales. Excluding charges, operating margin was 12.9% of sales, down 110 basis points from the 3Q’12 operating margin of 14.0%.
• The tax rate was 9.2%. Excluding charges, the tax rate was 13.1%, reflecting the realization of certain tax credits and the higher level of earnings in lower-taxed foreign jurisdictions.
• Diluted GAAP EPS was $1.07. Excluding charges, 3Q’13 diluted EPS was $1.39.
Stanley Black & Decker’s Chairman and CEO, John F. Lundgren, commented, “We continue to make significant progress driving organic growth throughout the organization. Our focused organic growth initiatives have resulted in a strong third quarter performance and maintained the momentum we achieved in the second quarter.
“Growth was robust across the portfolio with our CDIY and Industrial segments posting another strong organic growth quarter, and with the exception of Europe, Security also achieved solid, mid-single digit organic growth. Within Security, we are gaining further traction with our verticals initiative based on recent order activity and are encouraged by the sequential growth and margin improvements in this segment during the quarter. However, the achievement of high teen margins, which we believe represent the appropriate level given the characteristics of this business, is taking longer than anticipated.
“Progress from our organic growth initiatives combined with the overall strength and diversity of our portfolio and underlying strategic framework position us well to deliver on our previously stated long-term financial objectives.”
3Q’13 Segment Results
($ in M) 3Q' 13 Segment Results
Sales Profit Charges1 Profit
Ex-Charges1
Profit Rate Profit Rate
Ex-Charges1
CDIY $1,388 $203.9 $3.1 $207.0 14.7% 14.9%
Industrial $771 $109.2 $2.3 $111.5 14.2% 14.5%
Security $600 $61.4 $11.9 $73.3 10.2% 12.2%
1 M&A charges primarily pertaining to synergy attainment & facility closures
• In the CDIY segment, net sales increased 5% vs. 3Q’12 as a result of volume (+6%) and acquisitions (+1%), partially offset by price (-1%) and currency (-1%). Similar to the prior quarter, strong organic volumes were achieved in North America, primarily driven by new product introductions, retail promotions and continued strength in the residential construction market, as well as within the emerging markets which grew 10%. While the emerging markets continue to be a source of strength, current macroeconomic conditions have caused growth rates to decelerate somewhat. European volumes were solid; up 3% organically, with growth in all regions. In particular, the UK performed well reflecting share gains in the face of continued soft economic conditions. Excluding charges, overall segment profit was 14.9%, relatively consistent with the 2Q’13 rate but down from the 3Q’12 rate of 15.5% as investments in organic growth initiatives and currency pressures offset volume and productivity.
• Net sales in the Industrial segment rose 25%. Unit volumes increased approximately 4%, currency was down 1% and acquisitions added 22%. Pricing was flat for the quarter. Oil & Gas posted another strong quarter of impressive organic growth (+32%) driven primarily by continued strength within its North American onshore operations. Organic sales for Industrial and Automotive Repair (IAR) increased 2% primarily as a result of volume increases in North America and the emerging markets. Similar to CDIY, although strong, IAR’s emerging markets growth fell short of expectations due to the weakening of these markets. Consistent with the prior quarter, volume growth in North America was driven by the MRO vending growth initiative as well as strength within Mac Tools mobile distribution, which more than offset the impact of spending cuts on IAR’s US Government business and the results of IAR’s European operations. Engineered Fastening organic growth was relatively flat in the face of a difficult equipment sales comparison, even as organic fastener volume was up 6%. The integration of Infastech continues to progress as planned and is on track to deliver its planned synergies.
Overall Industrial segment profit excluding charges was 14.5% down from the 3Q’12 rate of 15.4% due primarily to investments in organic growth initiatives and the mix impact of Infastech’s modestly below line average margins.
• Net sales in Security increased 3% versus 3Q’12 due to pricing (+1%) acquisitions (+1%) and currency (+1%). Volume was relatively flat. Organic growth within the CSS North America business was up an encouraging 6% driven by higher installation and service volumes supported by early successes with the vertical markets organic growth initiative. CSS Europe declined 4% organically due primarily to continued softness in various regions, most notably France and the Nordics.
Mechanical Access organic sales were up 4% driven by strong growth within the automatic door business due to successful door conversion wins and new product introductions. The commercial mechanical lock business also experienced growth during the quarter driven by gains in emerging markets.
Security segment profit rate excluding charges was 12.2%, up 170 basis points from the 2Q’13 rate and 380 basis points lower than the 3Q’12 rate. The sequential improvement in the rate is primarily attributable to North America volume improvements due in part to organic growth investments, the elimination of costs associated with the commercial lock business model shift, and progress relating to field technician productivity. As previously communicated, the year over year decline in the rate resulted from field technician costs required to install and service the growing second half North American backlog, investments in organic growth initiatives, European volume declines and temporary negative rate pressure in the commercial lock business due to the business model shift.
President and Chief Operating Officer, James M. Loree, commented, “While the slower macro backdrop has created some challenges as global economic growth rates have notched downward, we are encouraged by the fact that most of our businesses continue to post solid organic performances aided by our substantial growth investments. As we move into 2014 we are entering the period in which these investments will become accretive to operating margin.
“As for Security, notable progress was made during the quarter outside of Europe on both organic growth (+4%) and operating margin rate (~15%) and we expect to see continued progress in 2014. European Security made less tangible progress on organic growth (down 4%) and rate (~7%); however, its management team made significant underlying headway on talent upgrades and basic business model fixes that will bear fruit as we enter 2014. Substantial improvements have been made in both North America and Europe with the latter being manifested about six months behind our expectations. Therefore, we fully expect Security to regain its appropriate position as a revenue and earnings growth driver in 2014 and beyond.”
Revision Of 2013 Outlook
As a result of a slower than expected margin rate recovery within our Security operations as well as overall lower than previously anticipated organic growth related to macro issues affecting emerging markets and the U.S. government budget impasse, the Company is revising its outlook for full year 2013 EPS and free cash flow to approximately $4.90 - $5.00 per share and $800 million, respectively, excluding charges and payments, based on the following:
• Approximately half of the full year EPS outlook reduction relates to the aforementioned slower than expected pace of the Security margin improvement.
• The balance of the reduction relates to lower organic growth expectations within our CDIY and Industrial segments. This is primarily attributable to growth pressure within the emerging markets due to the current volatile macroeconomic environment, and the uncertainty created by the U.S. government’s sequestration and shut-down, and its impact on business, consumer confidence and spending levels.
• Partially offsetting these items will be a lower tax rate of ~20% versus our prior estimated tax rate of ~23%.
• These factors combined with lower than expected working capital performance create a reduction to our free cash flow estimate for the year.
• FY’13 organic growth is now expected to approximate 3% versus the prior expectation range of 4%-5%.
• All other assumptions remain unchanged from our prior guidance
Including all charges, the Company expects GAAP EPS to be in the range of $3.75 - $3.95 in 2013. For the full year of 2013 the Company estimates one-time pre-tax charges to be approximately $225 - $250 million.
Donald Allan Jr., Senior Vice President and CFO commented, “As the year progresses, our strong organic growth performance within many of our businesses continues to be a bright spot for Stanley Black & Decker. However, the year-to-date performance of our Security business has created pressure on our results which has, along with lower organic growth expectations within certain businesses and geographies, caused us to revise our full year 2013 earnings and free cash flow outlook. The actions we have taken and are executing to address the Security segment’s margin performance will enable us to increase Security margins to levels that are more closely aligned to historical results. We remain focused and committed to attaining our long-term financial goals and 2016/2017 vision enabled by our disciplined focus on organic growth initiatives, our commitment to allocating capital in ways that provide excellent returns for our shareholders, and our proven capabilities of driving efficiencies and streamlining our operations via the Stanley Fulfillment System.
“Assuming that the level of volatility and current uncertainty in the markets we serve does not worsen in 2014 and based on our path to recovery in Security, we see conditions in 2014 that support our long-term 4%-6% organic growth expectations and 2014 EPS growth, excluding charges, ranging from 7% - 9%.”
Merger And Acquisition (M&A) One-Time Charges
Total one-time charges in 3Q’13 related to M&A were $67.2 million. Gross margin includes $5.3 million of these one-time charges, primarily for integration-related matters, and SG&A includes $31.9 million in one-time charges, primarily for integration-related administration costs and consulting fees, as well as employee-related matters. $17.3 million of these costs that impact the Company’s operating margin are included in segment results, with the remainder in corporate overhead. One-time charges of $1.5 million are included in Other, net, primarily related to deal costs, and $28.5 million are included in restructuring charges, the majority of which represent Niscayah-related restructuring charges and cost containment actions associated with the severance of employees.
The company will host a conference call with investors today, Wednesday, October 16, at 8:00am ET. A slide presentation which will accompany the call will be available at www.stanleyblackanddecker.com and will remain available after the call.
You can also access the slides via the Stanley Black & Decker Investor Relations iPad & iPhone app from the Apple App Store by searching for “SWK Investor Relations”.
The call will be accessible by telephone at (800) 447-0521, from outside the U.S. at +1 (847) 413-3238, and via the Internet at www.stanleyblackanddecker.com. To participate, please register on the web site at least fifteen minutes prior to the call and download and install any necessary audio software. Please use the conference identification number 3574-6661. A replay will also be available two hours after the call and can be accessed at (888) 843-7419 or +1 (630) 652-3042 using the passcode 3574-6661#. The replay will also be available as a podcast within 24 hours and can be accessed on our website and via iTunes.
Stanley Black & Decker, an S&P 500 company, is a diversified global provider of hand tools, power tools and related accessories, mechanical access solutions and electronic security solutions, healthcare solutions, engineered fastening systems, and more. Learn more at www.stanleyblackanddecker.com.
These results reflect the Company’s continuing operations. The Company sold its Hardware & Home Improvement business (HHI), including the residential portion of Tong Lung in December of 2012. The sale of this business occurred in a First and Second Closing. The First closing, which excluded the residential portion of Tong Lung, occurred on December 17, 2012. The Second closing in which the residential portion of Tong Lung was sold occurred on April 8, 2013. The operating results of the residential portion of Tong Lung and HHI have been reported as discontinued operations for 3Q’12. In addition, in 3Q’13 the Company has reported two small businesses as discontinued operations. Total sales reported as discontinued operations were $7.8 million and $268.8 million for 3Q’13 and 3Q’12, respectively.
Organic sales growth is defined as total sales growth less the sales of companies acquired in the past twelve months and any foreign currency impacts. Operating margin is defined as sales less cost of sales and selling, general and administrative expenses. Management uses operating margin and its percentage of net sales as key measures to assess the performance of the Company as a whole, as well as the related measures at the segment level. Free cash flow is defined as cash flow from operations less capital and software expenditures. Management considers free cash flow an important indicator of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and business acquisitions, among other items. The normalized statement of operations, cash flows and business segment information, as reconciled to GAAP on pages 13-18 for 2013 and 2012, are considered relevant to aid analysis of the Company’s operating performance, earnings results and cash flows aside from the material impact of the one-time charges and payments associated with the Black & Decker merger, the Niscayah and Infastech acquisitions and other smaller acquisitions of the Company. Normalized cash flow and free cash flow, as reconciled from the associated GAAP measures on pages 15-16 for 2013 and 2012 are considered meaningful pro forma metrics to aid the understanding of the Company’s cash flow performance aside from the material impact of the M&A-related payments and charges.
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
Statements in this press release that are not historical, including but not limited to those regarding the Company’s ability to: (i) achieve full year 2013 diluted EPS of $4.90 - $5.00 ($3.75 - $3.95 on a GAAP basis); (ii) generate approximately $800 million in free cash flow for 2013, excluding charges and payments; (iii) achieve its 2016/2017 vision; and (iv) achieve long term organic growth of 4% - 6% and 2014 EPS growth ranging from 7% - 9% (collectively, the “Results”); are “forward looking statements” and subject to risk and uncertainty.
The Company’s ability to deliver the Results as described above is based on current expectations and involves inherent risks and uncertainties, including factors listed below and other factors that could delay, divert, or change any of them, and could cause actual outcomes and results to differ materially from current expectations. In addition to the risks, uncertainties and other factors discussed in this press release, the risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or implied in the forward looking statements include, without limitation, those set forth under Item 1A Risk Factors of the Company’s Annual Report on Form 10-K and any material changes thereto set forth in any subsequent Quarterly Reports on Form 10-Q, or those contained in the Company’s other filings with the Securities and Exchange Commission, and those set forth below.
The Company’s ability to deliver the Results is dependent, or based, upon: (i) the Company’s ability to achieve $50 million of synergies in 2013 from Black & Decker merger and another $50 million from the acquisition of Niscayah; (ii) the Company’s ability to execute its integration plans and achieve synergies from the Infastech acquisition sufficient to generate $.20 of EPS accretion in 2013; (iii) the Company’s ability to generate organic net sales increases of approximately 3% in 2013; (iv) the Company’s ability to generate a modest increase in operating margin vs. the prior year in the CDIY segment and to minimize any decrease in operating margin vs. the prior year in the Security and Industrial segments; (v) the Company’s ability to continue to identify and execute upon acquisitions and sales opportunities to increase its CDIY, IAR and Security businesses in the emerging markets while minimizing associated costs; (vi) the Company’s ability to achieve a tax rate of approximately 20% in 2013; (vii) the Company’s ability to limit interest expense to approximately $145 million and other-net to approximately $250 million in 2013; (viii) the Company’s ability to minimize tax liabilities associated with the HHI divestiture; (ix) successful integration of acquisitions completed in 2012 and 2013, and any additional acquisitions completed during the year, as well as integration of existing businesses; (x) the continued acceptance of technologies used in the Company’s products and services; (xi) the Company’s ability to manage existing Sonitrol franchisee and Mac Tools relationships; (xii) the Company’s ability to minimize costs associated with any sale or discontinuance of a business or product line, including any severance, restructuring, legal or other costs; (xiii) the proceeds realized with respect to any business or product line disposals; (xiv) the extent of any asset impairments with respect to any businesses or product lines that are sold or discontinued; (xv) the success of the Company’s efforts to manage freight costs, steel and other commodity costs as well as capital expenditures; (xvi) the Company’s ability to sustain or increase prices in order to, among other things, offset or mitigate the impact of steel, freight, energy, non-ferrous commodity and other commodity costs and any inflation increases; (xvii) the Company’s ability to generate free cash flow and maintain a strong debt to capital ratio; (xviii) the Company’s ability to identify and effectively execute productivity improvements and cost reductions, while minimizing any associated restructuring charges; (xix) the Company’s ability to obtain favorable settlement of routine tax audits; (xx) the ability of the Company to generate earnings sufficient to realize future income tax benefits during periods when temporary differences become deductible; (xxi) the continued ability of the Company to access credit markets under satisfactory terms; (xxii) the Company’s ability to negotiate satisfactory payment terms under which the Company buys and sells goods, services, materials and products; and (xxiii) the Company’s ability to successfully develop, market and achieve sales from new products and services.
The Company’s ability to deliver the Results is also dependent upon: (i) the success of the Company’s marketing and sales efforts, including the ability to develop and market new and innovative products in both existing and new markets; (ii) the ability of the Company to maintain or improve production rates in the Company’s manufacturing facilities, respond to significant changes in product demand and fulfill demand for new and existing products; (iii) the Company’s ability to continue improvements in working capital through effective management of accounts receivable and inventory levels; (iv) the ability to continue successfully managing and defending claims and litigation; (v) the success of the Company’s efforts to mitigate any cost increases generated by, for example, increases in the cost of energy or significant Chinese Renminbi or other currency appreciation; (vi) the geographic distribution of the Company’s earnings; (vii) the commitment to and success of the Stanley Fulfillment System; and (viii) successful implementation with expected results of cost reduction programs.
The Company’s ability to achieve the Results will also be affected by external factors. These external factors include: challenging global macroeconomic environment; the continued economic growth of emerging markets, particularly Latin America; pricing pressure and other changes within competitive markets; the continued consolidation of customers particularly in consumer channels; inventory management pressures on the Company’s customers; the impact the tightened credit markets may have on the Company or its customers or suppliers; the extent to which the Company has to write off accounts receivable or assets or experiences supply chain disruptions in connection with bankruptcy filings by customers or suppliers; increasing competition; changes in laws, regulations and policies that affect the Company, including, but not limited to trade, monetary, tax and fiscal policies and laws; the timing and extent of any inflation or deflation; currency exchange fluctuations; the impact of dollar/foreign currency exchange and interest rates on the competitiveness of products and the Company’s debt program; the strength of the U.S. and European economies; the extent to which world-wide markets associated with homebuilding and remodeling stabilize and rebound; the impact of events that cause or may cause disruption in the Company’s supply, manufacturing, distribution and sales networks such as war, terrorist activities, and political unrest; and recessionary or expansive trends in the economies of the world in which the Company operates. The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date hereof.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
THIRD QUARTER YEAR TO DATE
2013 2012 2013 2012
NET SALES $ 2,759.3 $ 2,517.2 $ 8,095.2 $ 7,488.4
COSTS AND EXPENSES
Cost of sales 1,771.6 1,605.3 5,193.0 4,739.0
Gross margin 987.7 911.9 2,902.2 2,749.4
% of Net Sales 35.8 % 36.2 % 35.9 % 36.7 %
Selling, general and administrative 669.6 609.2 2,011.5 1,863.3
% of Net sales 24.3 % 24.2 % 24.8 % 24.9 %
Operating margin 318.1 302.7 890.7 886.1
% of Net sales
11.5 % 12.0 % 11.0 % 11.8 %
Other - net 66.6 112.7 208.8 262.3
Restructuring charges 28.5 52.9 40.6 116.6
Income from operations 223.0 137.1 641.3 507.2
Interest - net 36.1 34.2 109.1 98.0
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 186.9 102.9 532.2 409.2
Income taxes on continuing operations 17.3 12.9 80.5 82.9
NET EARNINGS FROM CONTINUING OPERATIONS 169.6 90.0 451.7 326.3
Less: net loss attributable to non-controlling interests (0.3 ) (0.2 ) (0.9 ) (1.2 )
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE
TO COMMON SHAREOWNERS 169.9 90.2 452.6 327.5
(Loss) earnings from discontinued operations before income taxes (23.4 ) 40.8 (33.0 ) 98.1
Income tax (benefit) expense on discontinued operations (19.5 ) 15.8 (14.6 ) 33.8
NET (LOSS) EARNINGS FROM DISCONTINUED OPERATIONS (3.9 ) 25.0 (18.4 ) 64.3
NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS $ 166.0 $ 115.2 $ 434.2 $ 391.8
BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing operations $ 1.10 $ 0.55 $ 2.92 $ 2.00
Discontinued operations (0.02 ) 0.15 (0.12 ) 0.39
Total basic earnings per share of common stock $ 1.07 $ 0.71 $ 2.80 $ 2.39
DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing operations $ 1.07 $ 0.54 $ 2.85 $ 1.95
Discontinued operations (0.02 ) 0.15 (0.12 ) 0.38
Total diluted earnings per share of common stock $ 1.04 $ 0.69 $ 2.74 $ 2.34
DIVIDENDS PER SHARE $ 0.50 $ 0.49 $ 1.48 $ 1.31
AVERAGE SHARES OUTSTANDING (in thousands)
Basic 155,043 162,990 155,140 163,835
Diluted 158,925 166,043 158,717 167,568
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
September 28, December 29,
2013 2012
ASSETS
Cash and cash equivalents $ 469.1 $ 716.0
Accounts and notes receivable, net 1,936.4 1,525.8
Inventories, net 1,629.5 1,304.6
Assets held for sale 15.0 171.7
Other current assets 381.2 393.2
Total current assets 4,431.2 4,111.3
Property, plant and equipment, net 1,455.4 1,329.9
Goodwill and other intangibles, net 10,688.8 9,947.0
Other assets 448.3 455.8
Total assets $ 17,023.7 $ 15,844.0
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings $ 1,220.1 $ 11.5
Accounts payable 1,625.9 1,345.9
Accrued expenses 1,097.8 1,680.0
Liabilities held for sale 5.0 37.3
Total current liabilities 3,948.8 3,074.7
Long-term debt 3,396.9 3,526.5
Other long-term liabilities 2,659.7 2,515.7
Stanley Black & Decker, Inc. shareowners' equity 6,936.9 6,667.1
Non-controlling interests' equity 81.4 60.0
Total liabilities and equity $ 17,023.7 $ 15,844.0
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
THIRD QUARTER YEAR TO DATE
2013 2012 2013 2012
OPERATING ACTIVITIES
Net earnings from continuing operations $ 169.6 $ 90.0 $ 451.7 $ 326.3
Net (loss) earnings from discontinued operations (3.9 ) 25.0 (18.4 ) 64.3
Depreciation and amortization 108.8 105.8 322.7 330.6
Changes in working capital1 (244.2 ) (174.8 ) (371.6 ) (286.0 )
Other 69.3 105.2 (248.1 ) (17.1 )
Net cash provided by operating activities 99.6 151.2 136.3 418.1
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures (94.2 ) (89.0 ) (262.1 ) (259.5 )
Proceeds from sale of business / assets 1.0 2.3 96.5 8.6
Acquisitions, net of cash acquired (16.7 ) (106.4 ) (926.6 ) (695.1 )
Proceeds from long-term borrowings - 729.4 - 729.4
Premium paid on debt extinguishment - (91.0 ) - (91.0 )
Proceeds from issuances of common stock 32.3 27.4 138.7 102.9
Net short-term (repayments) borrowings (70.9 ) 527.4 1,199.5 1,316.3
Cash dividends on common stock (77.5 ) (82.5 ) (235.0 ) (221.3 )
Payments on long-term debt (0.6 ) (900.9 ) (1.7 ) (1,222.0 )
Purchases of common stock for treasury (7.8 ) - (32.6 ) (217.8 )
Payment on forward stock purchase contract - - (350.0 ) -
Other 42.2 23.8 (9.9 ) (6.0 )
Net cash (used in) provided by investing and financing activities (192.2 ) 40.5 (383.2 ) (555.5 )
(Decrease) Increase in Cash and Cash Equivalents (92.6 ) 191.7 (246.9 ) (137.4 )
Cash and Cash Equivalents, Beginning of Period 561.7 577.8 716.0 906.9
Cash and Cash Equivalents, End of Period $ 469.1 $ 769.5 $ 469.1 $ 769.5
1
The change in working capital is comprised of accounts receivable, inventory, accounts payable and deferred revenue.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
THIRD QUARTER YEAR TO DATE
2013 2012 2013 2012
NET SALES
Construction & DIY $ 1,387.5 $ 1,315.7 $ 4,025.7 $ 3,819.1
Industrial 771.4 618.0 2,273.1 1,909.1
Security 600.4 583.5 1,796.4 1,760.2
Total $ 2,759.3 $ 2,517.2 $ 8,095.2 $ 7,488.4
SEGMENT PROFIT
Construction & DIY $ 203.9 $ 186.9 $ 588.8 $ 532.2
Industrial 109.2 94.6 307.5 314.2
Security 61.4 83.1 173.5 224.4
Segment Profit 374.5 364.6 1,069.8 1,070.8
Corporate Overhead (56.4 ) (61.9 ) (179.1 ) (184.7 )
Total $ 318.1 $ 302.7 $ 890.7 $ 886.1
Segment Profit as a Percentage of Net Sales
Construction & DIY 14.7 % 14.2 % 14.6 % 13.9 %
Industrial 14.2 % 15.3 % 13.5 % 16.5 %
Security 10.2 % 14.2 % 9.7 % 12.7 %
Segment Profit 13.6 % 14.5 % 13.2 % 14.3 %
Corporate Overhead (2.0 %) (2.5 %) (2.2 %) (2.5 %)
Total 11.5 % 12.0 % 11.0 % 11.8 %
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars Except Per Share Amounts)
THIRD QUARTER 2013
Reported
Merger &
Acquisition-
Related and
Other
Charges1
Normalized3
Gross margin $ 987.7 $ 5.3 $ 993.0
% of Net Sales 35.8 % 36.0 %
Selling, general and administrative 669.6 (31.9 ) 637.7
% of Net Sales 24.3 % 23.1 %
Operating margin 318.1 37.2 355.3
% of Net Sales 11.5 % 12.9 %
Earnings from continuing operations before income taxes 186.9 67.2 254.1
Income taxes on continuing operations 17.3 16.0 33.3
Net earnings from continuing operations 169.9 51.3 221.2
Diluted earnings per share of common stock $ 1.07 $ 0.32 $ 1.39
1
Merger and acquisition-related and other charges relate primarily to the Black & Decker merger and Niscayah and Infastech acquisitions, including facility closure-related charges, employee-related charges and integration costs.
THIRD QUARTER 2012
Reported
Merger &
Acquisition-
Related and
Other
Charges2
Normalized3
Gross margin $ 911.9 $ 11.7 $ 923.6
% of Net Sales 36.2 % 36.7 %
Selling, general and administrative 609.2 (38.9 ) 570.3
% of Net Sales 24.2 % 22.7 %
Operating margin 302.7 50.6 353.3
% of Net Sales 12.0 % 14.0 %
Earnings from continuing operations before income taxes 102.9 157.3 260.2
Income taxes on continuing operations 12.9 44.6 57.5
Net earnings from continuing operations 90.2 112.7 202.9
Diluted earnings per share of common stock $ 0.54 $ 0.68 $ 1.22
2
Merger and acquisition-related charges relate primarily to the Black & Decker merger and Niscayah acquisition, including facility closure-related charges, employee-related charges, integration costs, as well as cost containment charges. Other charges relate to the loss on extinguishment of debt.
3
The normalized 2013 and 2012 information, as reconciled to GAAP above, is considered relevant to aid analysis of the Company’s margin and earnings results aside from the material impact of the merger & acquisition-related charges as well as charges associated with the loss on extinguishment of debt.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP EARNINGS FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars Except Per Share Amounts)
YEAR TO DATE 2013
Reported
Merger &
Acquisition-
Related and
Other
Charges1
Normalized3
Gross margin $ 2,902.2 26.4 $ 2,928.6
% of Net Sales 35.9 % 36.2 %
Selling, general and administrative 2,011.5 (90.3 ) 1,921.2
% of Net Sales 24.8 % 23.7 %
Operating margin 890.7 116.7 1,007.4
% of Net Sales 11.0 % 12.4 %
Earnings from continuing operations before income taxes 532.2 178.6 710.8
Income taxes on continuing operations 80.5 50.0 130.5
Net earnings from continuing operations 452.6 128.6 581.2
Diluted earnings per share of common stock $ 2.85 $ 0.81 $ 3.66
1
Merger and acquisition-related and other charges relate primarily to the Black & Decker merger and Niscayah and Infastech acquisitions, including facility closure-related charges, employee-related charges and integration costs, as well as a restructuring reversal due to the termination of a previously approved restructuring action.
YEAR TO DATE 2012
Reported
Merger &
Acquisition-
Related and
Other
Charges2
Normalized3
Gross margin $ 2,749.4 18.3 $ 2,767.7
% of Net Sales 36.7 % 37.0 %
Selling, general and administrative 1,863.3 (99.8 ) 1,763.5
% of Net Sales 24.9 % 23.5 %
Operating margin 886.1 118.1 1,004.2
% of Net Sales 11.8 % 13.4 %
Earnings from continuing operations before income taxes 409.2 310.9 720.1
Income taxes on continuing operations 82.9 76.5 159.4
Net earnings from continuing operations 327.5 234.4 561.9
Diluted earnings per share of common stock $ 1.95 $ 1.40 $ 3.35
2
Merger and acquisition-related charges relate primarily to the Black & Decker merger and Niscayah acquisition, including facility closure-related charges, employee-related charges, integration costs, as well as cost containment charges. Other charges relate to the loss on extinguishment of debt.
3
The normalized 2013 and 2012 information, as reconciled to GAAP above, is considered relevant to aid analysis of the Company’s margin and earnings results aside from the material impact of the merger & acquisition-related charges as well as charges associated with the loss on extinguishment of debt.
STANLEY BLACK & DECKER INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP CASH FLOW FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars)
THIRD QUARTER 2013
Reported
Merger &
Acquisition-
Related
Charges and
Payments1
Normalized4
Free Cash Flow Computation3
Net cash provided by operating activities $ 99.6 52.7 $ 152.3
Less: capital and software expenditures (94.2 ) 12.9 (81.3 )
Free Cash Inflow (before dividends) $ 5.4 $ 71.0
1
Merger and acquisition-related charges and payments relate primarily to the Black & Decker merger and Niscayah and Infastech acquisitions, including facility closure-related charges, employee-related charges and integration costs.
THIRD QUARTER 2012
Reported
Merger &
Acquisition-
Related
Charges and
Payments2
Normalized4
Free Cash Flow Computation3
Net cash provided by operating activities $ 151.2 83.5 $ 234.7
Less: capital and software expenditures (89.0 ) 23.2 (65.8 )
Free Cash Inflow (before dividends) $ 62.2 $ 168.9
2
Merger and acquisition-related charges and payments relate primarily to the Black & Decker merger and Niscayah acquisition, including facility closure-related charges, employee-related charges, integration costs, as well as cost containment charges.
3, 4
Free cash flow is defined as cash flow from operations less capital and software expenditures. Management considers free cash flow an important measure of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and business acquisitions, among other items. Normalized cash flow and free cash flow, as reconciled above, are considered meaningful pro forma metrics to aid the understanding of the Company's cash flow performance aside from the material impact of merger and acquisition-related activities.
STANLEY BLACK & DECKER INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP CASH FLOW FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars)
YEAR TO DATE 2013
Reported
Merger &
Acquisition-
Related
Charges and
Payments1
Normalized4
Free Cash Flow Computation3
Net cash provided by operating activities $ 136.3 223.7 $ 360.0
Less: capital and software expenditures (262.1 ) 58.6 (203.5 )
Free Cash (Outflow) Inflow (before dividends) $ (125.8 ) $ 156.5
1
Merger and acquisition-related charges and payments relate primarily to the Black & Decker merger and Niscayah and Infastech acquisitions, including facility closure-related charges, employee-related charges and integration costs.
YEAR TO DATE 2012
Reported
Merger &
Acquisition-
Related
Charges and
Payments2
Normalized4
Free Cash Flow Computation3
Net cash provided by operating activities $ 418.1 212.2 $ 630.3
Less: capital and software expenditures (259.5 ) 92.0 (167.5 )
Free Cash Inflow (before dividends) $ 158.6 $ 462.8
2
Merger and acquisition-related charges and payments relate primarily to the Black & Decker merger and Niscayah acquisition, including facility closure-related charges, employee-related charges, integration costs, as well as cost containment charges.
3, 4
Free cash flow is defined as cash flow from operations less capital and software expenditures. Management considers free cash flow an important measure of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and business acquisitions, among other items. Normalized cash flow and free cash flow, as reconciled above, are considered meaningful pro forma metrics to aid the understanding of the Company's cash flow performance aside from the material impact of merger and acquisition-related activities.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP SEGMENT PROFIT FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars)
THIRD QUARTER 2013
Reported
Merger &
Acquisition-
Related
Charges1
Normalized3
SEGMENT PROFIT
Construction & DIY $ 203.9 $ 3.1 $ 207.0
Industrial 109.2 2.3 111.5
Security 61.4 11.9 73.3
Segment Profit 374.5 17.3 391.8
Corporate Overhead (56.4 ) 19.9 (36.5 )
Total $ 318.1 $ 37.2 $ 355.3
Segment Profit as a Percentage of Net Sales
Construction & DIY 14.7 % 14.9 %
Industrial 14.2 % 14.5 %
Security 10.2 % 12.2 %
Segment Profit 13.6 % 14.2 %
Corporate Overhead (2.0 %) (1.3 %)
Total 11.5 % 12.9 %
1
Merger and acquisition-related charges relate primarily to the Black & Decker merger and Niscayah and Infastech acquisitions, including facility closure-related charges, employee-related charges and integration costs.
THIRD QUARTER 2012
Reported
Merger &
Acquisition-
Related
Charges2
Normalized3
SEGMENT PROFIT
Construction & DIY $ 186.9 $ 17.2 $ 204.1
Industrial 94.6 0.6 95.2
Security 83.1 10.3 93.4
Segment Profit 364.6 28.1 392.7
Corporate Overhead (61.9 ) 22.5 (39.4 )
Total $ 302.7 $ 50.6 $ 353.3
Segment Profit as a Percentage of Net Sales
Construction & DIY 14.2 % 15.5 %
Industrial 15.3 % 15.4 %
Security 14.2 % 16.0 %
Segment Profit 14.5 % 15.6 %
Corporate Overhead (2.5 %) (1.6 %)
Total 12.0 % 14.0 %
2
Merger and acquisition-related charges relate primarily to the Black & Decker merger and Niscayah acquisition, including facility closure-related charges, employee-related charges and integration costs.
3
The normalized 2013 and 2012 business segment information, as reconciled to GAAP above, is considered relevant to aid analysis of the Company’s segment profit results aside from the material impact of the merger and acquisition-related charges.
STANLEY BLACK & DECKER, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP SEGMENT PROFIT FINANCIAL MEASURES TO CORRESPONDING
NON-GAAP FINANCIAL MEASURES
(Unaudited, Millions of Dollars)
YEAR TO DATE 2013
Reported
Merger &
Acquisition-
Related
Charges1
Normalized3
SEGMENT PROFIT
Construction & DIY $ 588.8 $ 9.2 $ 598.0
Industrial 307.5 20.8 328.3
Security 173.5 27.1 200.6
Segment Profit 1,069.8 57.1 1,126.9
Corporate Overhead (179.1 ) 59.6 (119.5 )
Total $ 890.7 $ 116.7 $ 1,007.4
Segment Profit as a Percentage of Net Sales
Construction & DIY 14.6 % 14.9 %
Industrial 13.5 % 14.4 %
Security 9.7 % 11.2 %
Segment Profit 13.2 % 13.9 %
Corporate Overhead (2.2 %) (1.5 %)
Total 11.0 % 12.4 %
1
Merger and acquisition-related charges relate primarily to the Black & Decker merger and Niscayah and Infastech acquisitions, including facility closure-related charges, employee-related charges and integration costs.
YEAR TO DATE 2012
Reported
Merger &
Acquisition-
Related
Charges2
Normalized3
SEGMENT PROFIT
Construction & DIY $ 532.2 $ 31.0 $ 563.2
Industrial 314.2 3.6 317.8
Security 224.4 25.9 250.3
Segment Profit 1,070.8 60.5 1,131.3
Corporate Overhead (184.7 ) 57.6 (127.1 )
Total $ 886.1 $ 118.1 $ 1,004.2
Segment Profit as a Percentage of Net Sales
Construction & DIY 13.9 % 14.7 %
Industrial 16.5 % 16.6 %
Security 12.7 % 14.2 %
Segment Profit 14.3 % 15.1 %
Corporate Overhead (2.5 %) (1.7 %)
Total 11.8 % 13.4 %
2
Merger and acquisition-related charges relate primarily to the Black & Decker merger and Niscayah acquisition, including facility closure-related charges, employee-related charges and integration costs.
3
The normalized 2013 and 2012 business segment information, as reconciled to GAAP above, is considered relevant to aid analysis of the Company’s segment profit results aside from the material impact of the merger and acquisition-related charges.
.
.
Contact:.
.
Stanley Black & Decker
Greg Waybright, 860-827-3833
Newell Rubbermaid Announces Solid Third Quarter 2013 Results and Approval of $350 Million Accelerated Share Repurchase Plan
•Core Sales Growth of 3.3% and Normalized EPS of $0.52
•Reported Sales Growth of 2.1% and Reported EPS of $0.66
Business WirePress Release: Newell Rubbermaid – 19 hours ago..
Newell Rubbermaid (NWL) today announced its third quarter 2013 financial results.
“Our third quarter results represent an important inflection point in our progress advancing the Growth Game Plan,” said Michael Polk, President and Chief Executive Officer. “Core sales grew 3.3 percent and normalized EPS grew 10.6 percent to $0.52. The sequential improvement in our growth rate versus our first half results was driven by core sales growth of over 4 percent in North America and 35 percent in Latin America. Successful new product launches, expanded distribution and stronger marketing initiatives delivered market share gains in Baby & Parenting, Home Solutions and Tools. Our growth was supported by increased advertising and promotion spending funded by Project Renewal savings and disciplined discretionary cost management. This is the power of the Growth Game Plan in action.
“Concurrent with our third quarter earnings announcement, our Board has authorized a $350 million accelerated share repurchase plan. This plan reflects confidence in the future prospects for Newell Rubbermaid and is an efficient use of divestiture proceeds and current year cash flow. Our company is growing stronger each quarter and, as a result, we can deliver increased value to shareholders through the accelerated purchase of the company’s shares while simultaneously investing to drive the Growth Game Plan into action,” concluded Polk.
Third Quarter Executive Summary
• Net sales were $1.49 billion, a 2.1 percent increase versus prior year results.
• Core sales, which exclude the impact of changes in foreign currency, grew 3.3 percent.
• Normalized operating margin of 14.6 percent increased 30 basis points compared with prior year. Reported operating margin declined 80 basis points.
• Normalized diluted earnings per share were $0.52, a year-over-year increase of 10.6 percent.
• Reported diluted earnings per share were $0.66 compared with $0.37 in the year-ago period due largely to a gain on disposal of the company’s Hardware business.
• Operating cash flow was $360.8 million versus $301.5 million in the prior year.
• The company paid dividends of $44.0 million and repurchased 1.8 million shares at a cost of $46.8 million, for a total of $90.8 million returned to shareholders, up 65 percent versus prior year.
• 2013 guidance is unchanged. The company continues to expect 2013 core sales growth of 2 to 4 percent, operating margin improvement of up to 20 basis points, normalized EPS of $1.80 to $1.84, and operating cash flow of $575 to $625 million.
• Newell Rubbermaid’s Board of Directors approved a $350 million accelerated share repurchase plan in October 2013.
Third Quarter 2013 Operating Results
Net sales in the third quarter were $1.49 billion, compared with $1.46 billion in the prior year. Core sales, which exclude 120 basis points of negative foreign currency, grew 3.3 percent.
Normalized gross margin of 38.1 percent declined 30 basis points versus prior year, as improved productivity and pricing were more than offset by less favorable mix and inflation. Reported gross margin declined 40 basis points.
Third quarter reported operating margin was 12.0 percent compared with 12.8 percent in the prior year. Reported operating income was $178.6 million versus $187.0 million.
Normalized operating margin was 14.6 percent, compared with 14.3 percent in the prior year. The improvement was primarily attributable to Project Renewal fixed cost savings in strategic and structural SG&A and better leverage of the cost structure with the increase in net sales, partially offset by increased brand support as a percentage of net sales.
Normalized operating income was $216.7 million compared with $207.9 million in the prior year period. Third quarter 2013 normalized operating income excludes restructuring and restructuring-related costs of $38.1 million, while in 2012 normalized operating income excludes $20.9 million of restructuring and restructuring-related costs.
The reported tax rate for the quarter was 24.6 percent compared with 35.0 percent in the prior year. The normalized tax rate was 24.3 percent compared with 28.6 percent in the prior year, primarily a reflection of the geographic mix of earnings and resolution of certain tax matters.
Reported net income was $193.3 million, or $0.66 per diluted share, compared with $108.3 million, or $0.37 per diluted share, in the prior year. The increase was largely due to a gain on the sale of the company’s Hardware business.
Normalized net income was $151.6 million, compared with $136.5 million in the prior year. Normalized diluted earnings per share of $0.52 increased 10.6 percent versus the prior year’s $0.47, primarily due to improved operating income, lower interest expense and a lower tax rate.
For the third quarter 2013, normalized diluted earnings per share exclude $0.11 per diluted share for restructuring and restructuring-related costs associated with Project Renewal, $0.01 per diluted share of net tax benefits related to the expiration of statutes of limitation and nonrecurring discrete items, and a net gain from discontinued operations of $0.24 per diluted share. For the third quarter 2012, normalized diluted earnings per share exclude $0.06 per diluted share for restructuring and restructuring-related costs associated with Project Renewal and the European Transformation Plan, $0.01 per diluted share due to a loss on the extinguishment of debt, $0.01 per diluted share of net income associated with discontinued operations and $0.03 per diluted share related to non-recurring tax charges resulting from incremental tax contingencies. (A reconciliation of the “as reported” results to “normalized” results is included below.)
The company generated $360.8 million in operating cash flow during the third quarter compared with $301.5 million last year. The increase is in large part due to a decrease in working capital. Capital expenditures were $28.7 million compared with $45.2 million in the prior year.
A reconciliation of the third quarter 2013 and 2012 results is as follows:
Q3 2013* Q3 2012*
Diluted earnings per share (as reported) $ 0.66 $ 0.37
Restructuring and restructuring-related costs 0.11 0.06
Income tax items (0.01 ) 0.03
Loss on extinguishment of debt - 0.01
Income from discontinued operations
(0.24
)
(0.01
)
Normalized EPS $ 0.52 $ 0.47
*Totals may not add due to rounding
Third Quarter 2013 Operating Segment Results
Writing net sales for the third quarter were $454.7 million, a 0.9 percent decline compared to prior year. Core sales increased 0.2 percent, reflecting strong growth in North America in customers outside the office superstore channel and continued momentum in Latin America, largely offset by weakness in the North American office superstore channel and in EMEA. Normalized operating income was $109.1 million, or 24.0 percent of sales, compared with $84.8 million, or 18.5 percent of sales, in the prior year. The increase in operating margin was largely driven by strong productivity, pricing in Latin America and Project Renewal cost savings.
Home Solutions net sales were $431.4 million, a 6.8 percent increase compared to prior year. Core sales increased 7.2 percent, reflecting strong customer programming on Rubbermaid®, new Levolor® product launches and increased distribution of Calphalon®. Home Solutions operating income was $66.3 million, or 15.4 percent of sales, compared with $66.0 million, or 16.3 percent of sales, in the prior year. The decrease in operating margin was driven by increased advertising and promotions expense and negative mix associated with strong Rubbermaid and Levolor growth, offset in part by Project Renewal cost savings.
Tools net sales were $210.6 million, a 3.4 percent increase compared to prior year. Core sales increased 5.7 percent, driven by National Tradesman Day marketing activity in North America and new product launches in Latin America. Operating income in the Tools segment was $12.3 million, or 5.8 percent of sales, compared with $26.8 million, or 13.2 percent of sales, in the prior year. The decrease in operating margin was due to adverse foreign exchange impacts on gross margin and planned incremental advertising and promotion spend, partially offset by pricing and Project Renewal cost savings.
Commercial Products net sales were $196.3 million, a 4.5 percent decrease compared to prior year. Core sales declined 4.3 percent against a difficult year ago comparison of 8.4 percent growth. Softness in Rubbermaid Healthcare was the primary driver of the decline, attributed to uncertainty in the U.S. healthcare market. Operating income was $23.5 million, or 12.0 percent of sales, compared with $31.2 million, or 15.2 percent of sales, in the prior year. The decrease in operating margin was driven by increased investments in customer programming, advertising and promotion, selling and product marketing expense, partially offset by Project Renewal cost savings.
Baby & Parenting net sales were $194.2 million, a 4.8 percent increase compared to prior year. Core sales increased 7.9 percent, driven by strengthened distribution and successful new innovation. Normalized operating income was $24.7 million, or 12.7 percent of sales, compared with $18.3 million, or 9.9 percent of sales, in the prior year. The increase in operating margin was due primarily to pricing, Project Renewal cost savings, and fixed cost leverage associated with strong growth.
Accelerated Share Repurchase Plan
The Newell Rubbermaid Board of Directors has approved an accelerated share repurchase plan to repurchase $350 million of the company’s common shares. The company expects to enter into the plan during the fourth quarter. This $350 million is incremental to the current $300 million repurchase plan which was authorized in 2011. The company has used $257 million of the current repurchase authorization through the end of the third quarter of 2013.
Nine Month Results
Net sales for the nine months ended September 30, 2013 increased 1.7 percent to $4.20 billion, compared with $4.13 billion in the prior year. Core sales increased 2.8 percent. Foreign currency adversely impacted net sales by 1.1 percent.
Gross margin was 38.6 percent, compared with 38.7 percent in the prior year, as productivity gains were offset by the effect of input cost inflation, less favorable mix and increased investment in customer programs.
Normalized operating margin of 13.7 percent was an increase of 40 basis points compared with 13.3 percent in the prior year. Reported operating margin declined 80 basis points due to higher Project Renewal restructuring and restructuring-related costs.
Normalized earnings were $1.37 per diluted share compared with $1.24 per diluted share in the prior year. For the nine months ended September 30, 2013, normalized diluted earnings per share exclude $0.34 per diluted share for restructuring and restructuring-related costs associated with Project Renewal, $0.02 per diluted share resulting from the currency devaluation in Venezuela, $0.03 per diluted share of income tax benefits attributable to the resolution of tax contingencies and a net gain from discontinued operations of $0.19 per diluted share. For the nine months ended September 30, 2012, normalized diluted earnings per share exclude $0.17 per diluted share for restructuring and restructuring-related costs, $0.07 per diluted share associated with certain nonrecurring tax charges resulting from incremental tax contingencies, $0.01 per diluted share due to a loss on extinguishment of debt, as well as the impact on net income from discontinued operations of $0.03 per diluted share. (A reconciliation to “normalized” results is included below.)
Net income, as reported, was $357.3 million, or $1.22 per diluted share. This compares with $299.4 million, or $1.02 per diluted share, in the prior year.
The company generated $301.0 million in operating cash flow during the first nine months of 2013 compared with $357.2 million in the prior year. The difference was largely due to an incremental voluntary pension contribution of $50 million in 2013. Capital expenditures were $85.7 million compared with $130.2 million in the prior year.
A reconciliation of the nine month 2013 and 2012 results is as follows:
YTD Q3 2013*
YTD Q3 2012*
Diluted earnings per share (as reported)
$
1.22
$
1.02
Restructuring and restructuring-related costs
0.34
0.17
Currency devaluation - Venezuela
0.02
-
Income tax items
(0.03
)
0.07
Loss on extinguishment of debt
-
0.01
Income from discontinued operations
(0.19
)
(0.03
)
Normalized EPS
$
1.37
$
1.24
*Totals may not add due to rounding
2013 Outlook
Newell Rubbermaid reaffirmed its full year 2013 guidance for core sales growth, normalized operating margin, normalized EPS and operating cash flow, as follows:
• Core sales increase of 2 to 4 percent;
• Normalized operating margin improvement of up to 20 basis points;
• Normalized EPS of $1.80 to $1.84; and
• Operating cash flow of between $575 and $625 million.
2013 normalized EPS guidance excludes between $120 and $130 million of Project Renewal restructuring and restructuring-related costs. (A reconciliation to “normalized” results is included below.)
The company is on track to realize cumulative annualized cost savings of $270 to $325 million by the second quarter of 2015 related to Project Renewal. The majority of these savings will be reinvested in the business to strengthen brand building and selling capabilities and accelerate growth.
Operating cash flow guidance assumes $90 to $110 million in restructuring and restructuring-related cash payments. Capital expenditures are projected at $125 to $150 million.
A reconciliation of the 2013 earnings outlook is as follows:
FY 2013
Diluted earnings per share $1.61 to $1.65
Restructuring and restructuring-related costs $0.38 to $0.40
Currency devaluation - Venezuela
$0.02
Income tax item
($0.03)
Income from discontinued operations
($0.19)
Normalized EPS $1.80 to $1.84
Conference Call
The company’s third quarter 2013 earnings conference call will be held today, October 25, 2013, at 10am ET. A link to the webcast is provided under Events & Presentations in the Investor Relations section of Newell Rubbermaid’s Web site at www.newellrubbermaid.com. The webcast will be available for replay. A supporting slide presentation will be made available in the Investor Relations section on the company’s Web site under Quarterly Earnings.
Non-GAAP Financial Measures
This release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission and includes a reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated in accordance with GAAP.
The company uses certain financial measures that are included in this press release and the additional financial information both in explaining its results to stockholders and the investment community and in its internal evaluation and management of its businesses. The company’s management believes that these measures - including those that are “non-GAAP financial measures” - and the information they provide are useful to investors since these measures (a) permit investors to view the company’s performance using the same tools that management uses to evaluate the company’s past performance, reportable business segments and prospects for future performance and (b) determine certain elements of management’s incentive compensation.
The company’s management believes that core sales, as reflected in the Currency Analysis, is useful to investors because it demonstrates the effect of foreign currency on reported sales. The effect of foreign currency on reported sales is determined by applying a fixed exchange rate, calculated as the 12-month average in 2012, to the current and prior year local currency sales amounts, with the difference in these two amounts being the change in core sales and the difference between the change in as reported sales and the change in core sales reported as the currency impact. The company’s management believes that “normalized” gross margin, “normalized” SG&A expense, “normalized” operating income and “normalized” tax rates are useful because they provide investors with a meaningful perspective on the current underlying performance of the company’s core ongoing operations. The company’s management believes that “normalized” earnings per share, which excludes restructuring and restructuring-related charges and one-time events such as losses related to the extinguishments of debt, tax benefits and charges, impairment charges, discontinued operations and certain other items, is useful to investors because it permits investors to better understand year-over-year changes in underlying operating performance. The company uses both core sales and normalized earnings per share as two of the three performance criteria in its management cash bonus plan.
The company determines the tax effect of the items excluded from normalized diluted earnings per share by applying the estimated effective rate for the applicable jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected.
While the company believes that these non-GAAP financial measures are useful in evaluating the company’s performance, this information should be considered as supplemental in nature and not as a substitute for or superior to the related financial information prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may differ from similar measures presented by other companies.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of consumer and commercial products with 2012 sales of approximately $5.6 billion and a strong portfolio of leading brands, including Sharpie®, Paper Mate®, Rubbermaid Commercial Products®, Irwin®, Lenox®, Parker®, Waterman®, Rubbermaid®, Levolor®, Calphalon®, Goody®, Graco®, Aprica® and Dymo®. As part of the company’s Growth Game Plan, Newell Rubbermaid is making sharper portfolio choices and investing in new marketing and innovation to accelerate performance.
This press release and additional information about Newell Rubbermaid are available on the company’s Web site, www.newellrubbermaid.com.
Caution Concerning Forward-Looking Statements
Statements in this press release that are not historical in nature constitute forward-looking statements. These forward-looking statements relate to information or assumptions about the effects of sales, income/(loss), earnings per share, operating income, operating margin or gross margin improvements or declines, Project Renewal, capital and other expenditures, cash flow, dividends, restructuring and restructuring-related costs, costs and cost savings, inflation or deflation, particularly with respect to commodities such as oil and resin, debt ratings, and management's plans, projections and objectives for future operations and performance. These statements are accompanied by words such as "anticipate," "expect," "project," "will," "believe," "estimate" and similar expressions. Actual results could differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those suggested by the forward-looking statements include, but are not limited to, our dependence on the strength of retail, commercial and industrial sectors of the economy in light of the continuation or escalation of the global economic slowdown or regional sovereign debt issues; currency fluctuations; competition with other manufacturers and distributors of consumer products; major retailers' strong bargaining power; changes in the prices of raw materials and sourced products and our ability to obtain raw materials and sourced products in a timely manner from suppliers; our ability to develop innovative new products and to develop, maintain and strengthen our end-user brands; our ability to expeditiously close facilities and move operations while managing foreign regulations and other impediments; our ability to successfully implement information technology solutions throughout our organization; our ability to improve productivity and streamline operations; changes to our credit ratings; significant increases in the funding obligations related to our pension plans due to declining asset values, declining interest rates or otherwise; the imposition of tax liabilities greater than our provisions for such matters; the risks inherent in our foreign operations; our ability to consummate the transactions contemplated by the Accelerated Share Repurchase Plan; and those factors listed in the company’s most recently filed Quarterly Report on Form 10-Q and Exhibit 99.1 thereto, filed with the Securities and Exchange Commission. Changes in such assumptions or factors could produce significantly different results. The information contained in this new release is as of the date indicated. The company assumes no obligation to update any forward-looking statements contained in this news release as a result of new information or future events or developments.
Newell Rubbermaid Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share data)
Three Months Ended September 30,
YOY
2013 2012 % Change
Net sales $ 1,487.2 $ 1,456.9 2.1 %
Cost of products sold 922.3 897.9
GROSS MARGIN 564.9 559.0 1.1 %
% of sales 38.0 % 38.4 %
Selling, general &
administrative expenses 355.0 359.7 (1.3 )%
% of sales 23.9 % 24.7 %
Restructuring costs 31.3 12.3
OPERATING INCOME 178.6 187.0 (4.5 )%
% of sales 12.0 % 12.8 %
Nonoperating expenses:
Interest expense, net 15.7 18.0
Loss on extinguishment of debt - 6.8
Other expense (income), net 0.7 (1.3 )
16.4 23.5 (30.2 )%
INCOME BEFORE INCOME TAXES 162.2 163.5 (0.8 )%
% of sales 10.9 % 11.2 %
Income taxes 39.9 57.3 (30.4 )%
Effective rate 24.6 % 35.0 %
NET INCOME FROM CONTINUING OPERATIONS 122.3 106.2 15.2 %
% of sales 8.2 % 7.3 %
Income from discontinued operations, net of tax 71.0 2.1
NET INCOME $ 193.3 $ 108.3 78.5 %
13.0 % 7.4 %
EARNINGS PER SHARE:
Basic
Income from continuing operations $ 0.42 $ 0.37
Income from discontinued operations $ 0.24 $ 0.01
Net income $ 0.67 $ 0.37
Diluted
Income from continuing operations $ 0.42 $ 0.36
Income from discontinued operations $ 0.24 $ 0.01
Net income $ 0.66 $ 0.37
AVERAGE SHARES OUTSTANDING:
Basic 290.1 290.7
Diluted 292.9 292.7
Newell Rubbermaid Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in millions, except per share data)
Nine Months Ended September 30,
YOY
2013 2012 % Change
Net sales $ 4,202.7 $ 4,132.7 1.7 %
Cost of products sold 2,581.5 2,533.0
GROSS MARGIN 1,621.2 1,599.7 1.3 %
% of sales 38.6 % 38.7 %
Selling, general &
administrative expenses 1,061.7 1,077.7 (1.5 )%
% of sales 25.3 % 26.1 %
Restructuring costs 97.7 34.4
OPERATING INCOME 461.8 487.6 (5.3 )%
% of sales 11.0 % 11.8 %
Nonoperating expenses:
Interest expense, net 45.3 58.7
Loss on extinguishments of debt - 6.8
Other expense (income), net 17.9 (1.0 )
63.2 64.5 (2.0 )%
INCOME BEFORE INCOME TAXES 398.6 423.1 (5.8 )%
% of sales 9.5 % 10.2 %
Income taxes 95.9 132.3 (27.5 )%
Effective rate 24.1 % 31.3 %
NET INCOME FROM CONTINUING OPERATIONS 302.7 290.8 4.1 %
% of sales 7.2 % 7.0 %
Income from discontinued operations, net of tax 54.6 8.6
NET INCOME $ 357.3 $ 299.4 19.3 %
8.5 % 7.2 %
EARNINGS PER SHARE:
Basic
Income from continuing operations $ 1.04 $ 1.00
Income from discontinued operations $ 0.19 $ 0.03
Net income $ 1.23 $ 1.03
Diluted
Income from continuing operations $ 1.03 $ 0.99
Income from discontinued operations $ 0.19 $ 0.03
Net income $ 1.22 $ 1.02
AVERAGE SHARES OUTSTANDING:
Basic 290.3 291.7
Diluted 293.4 293.8
Newell Rubbermaid Inc.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
CERTAIN LINE ITEMS
(in millions, except per share data)
Three Months Ended September 30, 2013
GAAP Measure Restructuring and Non-GAAP Measure
restructuring-related Non-recurring Discontinued Percentage
Reported costs (1) tax items (2) operations (3) Normalized* of Sales
Cost of products sold $ 922.3 $ (1.1 ) $ - $ - $ 921.2 61.9 %
Gross margin $ 564.9 $ 1.1 $ - $ - $ 566.0 38.1 %
Selling, general & administrative expenses $ 355.0 $ (5.7 ) $ - $ - $ 349.3 23.5 %
Operating income $ 178.6 $ 38.1 $ - $ - $ 216.7 14.6 %
Income before income taxes $ 162.2 $ 38.1 $ - $ - $ 200.3
Income taxes (4) $ 39.9 $ 5.7 $ 3.1 $ - $ 48.7
Net income from continuing operations $ 122.3 $ 32.4 $ (3.1 ) $ - $ 151.6
Net income $ 193.3 $ 32.4 $ (3.1 ) $ (71.0 ) $ 151.6
Diluted earnings per share** $ 0.66 $ 0.11 $ (0.01 ) $ (0.24 ) $ 0.52
Three Months Ended September 30, 2012
GAAP Measure Restructuring and Loss on Non-GAAP Measure
restructuring-related Non-recurring Discontinued extinguishment Percentage
Reported costs (1) tax items (2) operations (3) of debt (5) Normalized* of Sales
Selling, general & administrative expenses $ 359.7 $ (8.6 ) $ - $ - $ - $ 351.1 24.1 %
Operating income $ 187.0 $ 20.9 $ - $ - $ - $ 207.9 14.3 %
Nonoperating expenses $ 23.5 $ - $ - $ - $ (6.8 ) $ 16.7
Income before income taxes $ 163.5 $ 20.9 $ - $ - $ 6.8 $ 191.2
Income taxes (4) $ 57.3 $ 3.0 $ (8.1 ) $ - $ 2.5 $ 54.7
Net income from continuing operations $ 106.2 $ 17.9 $ 8.1 $ - $ 4.3 $ 136.5
Net income $ 108.3 $ 17.9 $ 8.1 $ (2.1 ) $ 4.3 $ 136.5
Diluted earnings per share** $ 0.37 $ 0.06 $ 0.03 $ (0.01 ) $ 0.01 $ 0.47
*Normalized results are financial measures that are not in accordance with GAAP and exclude the above normalized adjustments. See below for a discussion of each of these adjustments.
**Totals may not add due to rounding.
(1) Restructuring and restructuring-related charges during the three months ended September 30, 2013 include $6.8 million of organizational change implementation and restructuring-related costs and $31.3 million of restructuring costs incurred in connection with Project Renewal. Restructuring and restructuring-related charges during the three months ended September 30, 2012 include $8.6 million of restructuring-related costs and $12.3 million of restructuring costs incurred in connection with the European Transformation Plan and Project Renewal.
(2) During the three months ended September 30, 2013, the Company recognized a non-recurring tax benefit of $3.1 million resulting from the resolution of various income tax contingencies and the expiration of various statutes of limitation. During the three months ended September 30, 2012, the Company incurred $8.1 million of non-recurring income tax charges resulting from tax contingencies and the expiration of various statutes of limitation.
(3) During the three months ended September 30, 2013, the Company recognized a net loss of $5.6 million in discontinued operations relating to the operations of the Hardware and Teach businesses and a $76.6 million gain related to the sale of the Hardware and Teach businesses. During the three months ended September 30, 2012, the Company recognized net income of $0.4 million in discontinued operations relating to the operations of the Hardware and Teach businesses and a $1.7 million gain primarily relating to the sale of the hand torch and solder business.
(4) The Company determined the tax effect of the items excluded from normalized results by applying the estimated effective rate for the applicable jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected.
(5) Loss on extinguishment of debt of $6.8 million during the three months ended September 30, 2012 primarily represents the write-off of debt issuance costs associated with the extinguishment of the junior convertible subordinated debentures underlying the quarterly income preferred securities (QUIPS).
Newell Rubbermaid Inc.
RECONCILIATION OF GAAP AND NON-GAAP INFORMATION
CERTAIN LINE ITEMS
(in millions, except per share data)
Nine Months Ended September 30, 2013
GAAP Measure Restructuring Charge resulting from Non-GAAP Measure
and restructuring- the devaluation of the Non-recurring Discontinued Percentage
Reported related costs (1) Venezuelan Bolivar (2) tax items (3) operations (4) Normalized* of Sales
Cost of products sold $ 2,581.5 $ (1.1 ) $ - $ - $ - $ 2,580.4 61.4 %
Gross margin $ 1,621.2 $ 1.1 $ - $ - $ - $ 1,622.3 38.6 %
Selling, general & administrative expenses $ 1,061.7 $ (14.4 ) $ - $ - $ - $ 1,047.3 24.9 %
Operating income $ 461.8 $ 113.2 $ - $ - $ - $ 575.0 13.7 %
Nonoperating expenses $ 63.2 $ - $ (11.1 ) $ - $ - $ 52.1
Income before income taxes $ 398.6 $ 113.2 $ 11.1 $ - $ - $ 522.9
Income taxes (5) $ 95.9 $ 14.2 $ 4.1 $ 7.9 $ - $ 122.1
Net income from continuing operations $ 302.7 $ 99.0 $ 7.0 $ (7.9 ) $ - $ 400.8
Net income $ 357.3 $ 99.0 $ 7.0 $ (7.9 ) $ (54.6 ) $ 400.8
Diluted earnings per share** $ 1.22 $ 0.34 $ 0.02 $ (0.03 ) $ (0.19 ) $ 1.37
Nine Months Ended September 30, 2012
GAAP Measure Restructuring Loss on Non-GAAP Measure
and restructuring- Non-recurring Discontinued extinguishment Percentage
Reported related costs (1) tax items (3) operations (4) of debt (6) Normalized* of Sales
Selling, general & administrative expenses $ 1,077.7 $ (29.1 ) $ - $ - $ - $ 1,048.6 25.4 %
Operating income $ 487.6 $ 63.5 $ - $ - $ - $ 551.1 13.3 %
Nonoperating expenses $ 64.5 $ - $ - $ - $ (6.8 ) $ 57.7
Income before income taxes $ 423.1 $ 63.5 $ - $ - $ 6.8 $ 493.4
Income taxes (5) $ 132.3 $ 13.8 $ (19.2 ) $ - $ 2.5 $ 129.4
Net income from continuing operations $ 290.8 $ 49.7 $ 19.2 $ - $ 4.3 $ 364.0
Net income $ 299.4 $ 49.7 $ 19.2 $ (8.6 ) $ 4.3 $ 364.0
Diluted earnings per share** $ 1.02 $ 0.17 $ 0.07 $ (0.03 ) $ 0.01 $ 1.24
* Normalized results are financial measures that are not in accordance with GAAP and exclude the above normalized adjustments. See below for a discussion of each of these adjustments.
**Totals may not add due to rounding.
(1) Restructuring and restructuring-related charges during the nine months ended September 30, 2013 include $15.5 million of organizational change implementation and restructuring-related costs and $97.7 million of restructuring costs incurred in connection with Project Renewal. Restructuring and restructuring-related charges during the nine months ended September 30, 2012 include $29.1 million of restructuring-related costs and $34.4 million of restructuring costs incurred in connection with the European Transformation Plan and Project Renewal.
(2) During the nine months ended September 30, 2013, the Company recognized a foreign exchange loss of $11.1 million resulting from the devaluation of the Venezuelan Bolivar, which under hyperinflationary accounting is recorded in the Statement of Operations.
(3) During the nine months ended September 30, 2013, the Company recognized a non-recurring tax benefit of $7.9 million resulting from the resolution of various income tax contingencies and the expiration of various statutes of limitation. During the nine months ended September 30, 2012, the Company incurred $19.2 million of non-recurring tax charges resulting from incremental tax contingencies and the expiration of various statutes of limitation.
(4) During the nine months ended September 30, 2013, the Company recognized a net loss of $3.3 million in discontinued operations relating to the operations of the Hardware and Teach businesses and a $57.9 million net gain, including impairments, relating to the sale of the Hardware and Teach businesses. During the nine months ended September 30, 2012, the Company recognized net income of $6.9 million in discontinued operations relating to the operations of the Hardware and Teach businesses and a $1.7 million gain primarily related to the sale of the hand torch and solder business.
(5) The Company determined the tax effect of the items excluded from normalized results by applying the estimated effective rate for the applicable jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected.
(6) Loss on extinguishment of debt of $6.8 million during the nine months ended September 30, 2012 primarily represents the write-off of debt issuance costs associated with the extinguishment of the junior convertible subordinated debentures underlying the quarterly income preferred securities (QUIPS).
Newell Rubbermaid Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions)
September 30, September 30,
Assets: 2013 2012
Cash and cash equivalents $ 197.4 $ 250.1
Accounts receivable, net 1,056.9 1,074.3
Inventories, net 822.6 822.8
Deferred income taxes 152.9 115.8
Prepaid expenses and other 154.4 161.3
Total Current Assets 2,384.2 2,424.3
Property, plant and equipment, net 523.1 549.6
Goodwill 2,351.4 2,355.7
Other intangible assets, net 619.2 661.4
Other assets 275.0 372.3
Total Assets $ 6,152.9 $ 6,363.3
Liabilities and Stockholders' Equity:
Accounts payable $ 575.1 $ 530.0
Accrued compensation 145.3 144.8
Other accrued liabilities 692.3 673.4
Short-term debt 29.2 291.0
Current portion of long-term debt 0.9 507.0
Total Current Liabilities 1,442.8 2,146.2
Long-term debt 1,671.1 1,366.1
Other noncurrent liabilities 845.9 784.2
Stockholders' Equity - Parent 2,189.6 2,063.3
Stockholders' Equity - Noncontrolling Interests 3.5 3.5
Total Stockholders' Equity 2,193.1 2,066.8
Total Liabilities and Stockholders' Equity $ 6,152.9 $ 6,363.3
Newell Rubbermaid Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
(in millions)
Nine Months Ended September 30,
2013 2012
Operating Activities:
Net income $ 357.3 $ 299.4
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 119.4 122.1
Net gain from sale of discontinued operations (86.1 ) (5.2 )
Loss on extinguishment of debt - 6.8
Non-cash restructuring costs 3.9 1.3
Deferred income taxes 76.3 72.7
Stock-based compensation expense 27.7 26.3
Other, net 27.3 8.9
Changes in operating assets and liabilities, excluding the effects of
acquisitions and divestitures:
Accounts receivable 35.6 (61.5 )
Inventories (195.7 ) (119.9 )
Accounts payable 74.7 59.4
Accrued liabilities and other (139.4 ) (53.1 )
Net cash provided by operating activities $ 301.0 $ 357.2
Investing Activities:
Proceeds from sale of discontinued operations and noncurrent assets $ 180.9 $ 20.9
Acquisitions and acquisition-related activity - (26.5 )
Capital expenditures (85.7 ) (130.2 )
Other ... 1.8 (3.2 )
Net cash provided by (used in) investing activities $ 97.0 $ (139.0 )
Financing Activities:
Net short-term borrowings $ (180.9 ) $ 186.4
Proceeds from issuance of debt, net of debt issuance costs - 495.1
Payments on debt - (696.3 )
Repurchase and retirement of shares of common stock (119.2 ) (67.2 )
Cash dividends (132.1 ) (82.4 )
Excess tax benefits related to stock-based compensation 14.1 11.6
Other stock-based compensation activity, net 35.9 11.1
Net cash used in financing activities $ (382.2 ) $ (141.7 )
Currency rate effect on cash and cash equivalents $ (2.2 ) $ 3.4
Increase in cash and cash equivalents $ 13.6 $ 79.9
Cash and cash equivalents at beginning of period 183.8 170.2
Cash and cash equivalents at end of period $ 197.4 $ 250.1
Newell Rubbermaid Inc.
Financial Worksheet- Segment Reporting
(In Millions)
2013 2012
Reconciliation (1) Reconciliation (1) Year-over-year changes
Reported Excluded Normalized Operating Reported Excluded Normalized Operating Net Sales Normalized OI
Net Sales OI Items OI Margin Net Sales OI Items OI Margin $ % $ %
Q1:
Writing $ 340.6 $ 63.2 $ - $ 63.2 18.6 % $ 375.6 $ 66.4 $ - $ 66.4 17.7 % $ (35.0 ) (9.3 )% $ (3.2 ) (4.8 )%
Home Solutions 338.9 34.1 - 34.1 10.1 % 326.7 30.9 - 30.9 9.5 % 12.2 3.7 % 3.2 10.4 %
Tools 188.6 18.7 - 18.7 9.9 % 190.6 28.7 - 28.7 15.1 % (2.0 ) (1.0 )% (10.0 ) (34.8 )%
Commercial Products 183.1 21.6 - 21.6 11.8 % 175.4 18.6 - 18.6 10.6 % 7.7 4.4 % 3.0 16.1 %
Baby & Parenting 189.6 23.9 - 23.9 12.6 % 182.2 22.4 - 22.4 12.3 % 7.4 4.1 % 1.5 6.7 %
Restructuring Costs - (34.4 ) 34.4 - - (12.1 ) 12.1 - - -
Corporate - (29.3 ) 6.6 (22.7 ) - (31.7 ) 10.0 (21.7 ) - (1.0 ) (4.6 )%
Total $ 1,240.8 $ 97.8 $ 41.0 $ 138.8 11.2 % $ 1,250.5 $ 123.2 $ 22.1 $ 145.3 11.6 % $ (9.7 ) (0.8 )% $ (6.5 ) (4.5 )%
2013 2012
Reconciliation (1) Reconciliation (1) Year-over-year changes
Reported Excluded Normalized Operating Reported Excluded Normalized Operating Net Sales Normalized OI
Net Sales OI Items OI Margin Net Sales OI Items OI Margin $ % $ %
Q2:
Writing $ 477.8 $ 123.6 $ - $ 123.6 25.9 % $ 459.1 $ 105.7 $ - $ 105.7 23.0 % $ 18.7 4.1 % $ 17.9 16.9 %
Home Solutions 399.1 53.7 - 53.7 13.5 % 391.3 42.6 - 42.6 10.9 % 7.8 2.0 % 11.1 26.1 %
Tools 198.0 18.3 - 18.3 9.2 % 202.4 30.5 - 30.5 15.1 % (4.4 ) (2.2 )% (12.2 ) (40.0 )%
Commercial Products 203.6 21.9 - 21.9 10.8 % 190.1 21.1 - 21.1 11.1 % 13.5 7.1 % 0.8 3.8 %
Baby & Parenting 196.2 23.8 - 23.8 12.1 % 182.4 19.2 - 19.2 10.5 % 13.8 7.6 % 4.6 24.0 %
Restructuring Costs - (32.0 ) 32.0 - (10.0 ) 10.0 - - -
Corporate - (23.9 ) 2.1 (21.8 ) (31.7 ) 10.5 (21.2 ) - (0.6 ) (2.8 )%
Total $ 1,474.7 $ 185.4 $ 34.1 $ 219.5 14.9 % $ 1,425.3 $ 177.4 $ 20.5 $ 197.9 13.9 % $ 49.4 3.5 % $ 21.6 10.9 %
2013 2012
Reconciliation (1) Reconciliation (1) Year-over-year changes
Reported Excluded Normalized Operating Reported Excluded Normalized Operating Net Sales Normalized OI
Net Sales OI Items OI Margin Net Sales OI Items OI Margin $ % $ %
Q3:
Writing $ 454.7 $ 108.8 $ 0.3 $ 109.1 24.0 % $ 458.6 $ 83.6 $ 1.2 $ 84.8 18.5 % $ (3.9 ) (0.9 )% $ 24.3 28.7 %
Home Solutions 431.4 66.3 - 66.3 15.4 % 403.8 64.0 2.0 66.0 16.3 % 27.6 6.8 % 0.3 0.5 %
Tools 210.6 12.3 - 12.3 5.8 % 203.6 26.8 - 26.8 13.2 % 7.0 3.4 % (14.5 ) (54.1 )%
Commercial Products 196.3 23.5 - 23.5 12.0 % 205.6 31.2 - 31.2 15.2 % (9.3 ) (4.5 )% (7.7 ) (24.7 )%
Baby & Parenting 194.2 23.9 0.8 24.7 12.7 % 185.3 18.3 - 18.3 9.9 % 8.9 4.8 % 6.4 35.0 %
Restructuring Costs - (31.3 ) 31.3 - - (12.3 ) 12.3 - - -
Corporate - (24.9 ) 5.7 (19.2 ) - (24.6 ) 5.4 (19.2 ) - - 0.0 %
Total $ 1,487.2 $ 178.6 $ 38.1 $ 216.7 14.6 % $ 1,456.9 $ 187.0 $ 20.9 $ 207.9 14.3 % $ 30.3 2.1 % $ 8.8 4.2 %
2013 2012
Reconciliation (1) Reconciliation (1) Year-over-year changes
Reported Excluded Normalized Operating Reported Excluded Normalized Operating Net Sales Normalized OI
Net Sales OI Items OI Margin Net Sales OI Items OI Margin $ % $ %
YTD:
Writing $ 1,273.1 $ 295.6 $ 0.3 $ 295.9 23.2 % $ 1,293.3 $ 255.7 $ 1.2 $ 256.9 19.9 % $ (20.2 ) (1.6 )% $ 39.0 15.2 %
Home Solutions 1,169.4 154.1 - 154.1 13.2 % 1,121.8 137.5 2.0 139.5 12.4 % 47.6 4.2 % 14.6 10.5 %
Tools 597.2 49.3 - 49.3 8.3 % 596.6 86.0 - 86.0 14.4 % 0.6 0.1 % (36.7 ) (42.7 )%
Commercial Products 583.0 67.0 - 67.0 11.5 % 571.1 70.9 - 70.9 12.4 % 11.9 2.1 % (3.9 ) (5.5 )%
Baby & Parenting 580.0 71.6 0.8 72.4 12.5 % 549.9 59.9 - 59.9 10.9 % 30.1 5.5 % 12.5 20.9 %
Restructuring Costs - (97.7 ) 97.7 - - (34.4 ) 34.4 - - -
Corporate - (78.1 ) 14.4 (63.7 ) - (88.0 ) 25.9 (62.1 ) - (1.6 ) (2.6 )%
Total $ 4,202.7 $ 461.8 $ 113.2 $ 575.0 13.7 % $ 4,132.7 $ 487.6 $ 63.5 $ 551.1 13.3 % $ 70.0 1.7 % $ 23.9 4.3 %
(1) Excluded items consist of organizational change implementation, restructuring-related and restructuring costs. Organizational change implementation and restructuring-related costs of $15.5 million and restructuring costs of $97.7 million incurred during the nine months ended September 30, 2013 relate to Project Renewal. Restructuring-related costs of $29.1 million and restructuring costs of $34.4 million during the nine months ended September 30, 2012 relate to the European Transformation Plan and Project Renewal.
Newell Rubbermaid Inc.
Three Months Ended September 30, 2013
In Millions
Currency Analysis
By Segment
As Reported Core Sales (1) Year-Over-Year Increase (Decrease)
(Decrease) Increase Currency Excluding Including Currency
2013 2012 Increase 2013 2012 (Decrease) Impact Currency Currency Impact
Writing $ 454.7 $ 458.6 $ (3.9 ) $ 463.1 $ 462.0 $ 1.1 $ (5.0 ) 0.2 % (0.9 )% (1.1 )%
Home Solutions 431.4 403.8 27.6 433.5 404.2 29.3 (1.7 ) 7.2 % 6.8 % (0.4 )%
Tools 210.6 203.6 7.0 217.8 206.0 11.8 (4.8 ) 5.7 % 3.4 % (2.3 )%
Commercial Products 196.3 205.6 (9.3 ) 197.5 206.3 (8.8 ) (0.5 ) (4.3 )% (4.5 )% (0.2 )%
Baby & Parenting 194.2 185.3 8.9 200.2 185.6 14.6 (5.7 ) 7.9 % 4.8 % (3.1 )%
Total Company $ 1,487.2 $ 1,456.9 $ 30.3 $ 1,512.1 $ 1,464.1 $ 48.0 $ (17.7 ) 3.3 % 2.1 % (1.2 )%
By Geography
United States $ 1,035.9 $ 994.6 $ 41.3 $ 1,035.9 $ 994.6 $ 41.3 $ - 4.2 % 4.2 % (0.0 )%
Canada 84.8 84.7 0.1 88.2 85.4 2.8 (2.7 ) 3.3 % 0.1 % (3.2 )%
Total North America 1,120.7 1,079.3 41.4 1,124.1 1,080.0 44.1 (2.7 ) 4.1 % 3.8 % (0.3 )%
Europe, Middle East and Africa 162.9 172.4 (9.5 ) 159.9 177.5 (17.6 ) 8.1 (9.9 )% (5.5 )% 4.4 %
Latin America 104.3 85.5 18.8 117.5 87.2 30.3 (11.5 ) 34.7 % 22.0 % (12.7 )%
Asia Pacific 99.3 119.7 (20.4 ) 110.6 119.4 (8.8 ) (11.6 ) (7.4 )% (17.0 )% (9.6 )%
Total International 366.5 377.6 (11.1 ) 388.0 384.1 3.9 (15.0 ) 1.0 % (2.9 )% (3.9 )%
Total Company $ 1,487.2 $ 1,456.9 $ 30.3 $ 1,512.1 $ 1,464.1 $ 48.0 $ (17.7 ) 3.3 % 2.1 % (1.2 )%
(1) "Core Sales" is determined by applying a fixed exchange rate, calculated as the 12-month average in 2012, to the current and prior year local currency sales amounts, with the difference between the change in "As Reported" sales and the change in "Core Sales" reported in the table as "Currency Impact".
Newell Rubbermaid Inc.
Nine Months Ended September 30, 2013
In Millions
Currency Analysis
By Segment
As Reported Core Sales (1) Year-Over-Year (Decrease) Increase
(Decrease) (Decrease) Currency Excluding Including Currency
2013 2012 Increase 2013 2012 Increase Impact Currency Currency Impact
Writing $ 1,273.1 $ 1,293.3 $ (20.2 ) $ 1,287.6 $ 1,295.4 $ (7.8 ) $ (12.4 ) (0.6 )% (1.6 )% (1.0 )%
Home Solutions 1,169.4 1,121.8 47.6 1,173.1 1,122.2 50.9 (3.3 ) 4.5 % 4.2 % (0.3 )%
Tools 597.2 596.6 0.6 607.4 596.9 10.5 (9.9 ) 1.8 % 0.1 % (1.7 )%
Commercial Products 583.0 571.1 11.9 585.5 571.3 14.2 (2.3 ) 2.5 % 2.1 % (0.4 )%
Baby & Parenting 580.0 549.9 30.1 596.8 549.9 46.9 (16.8 ) 8.5 % 5.5 % (3.0 )%
Total Company $ 4,202.7 $ 4,132.7 $ 70.0 $ 4,250.4 $ 4,135.7 $ 114.7 $ (44.7 ) 2.8 % 1.7 % (1.1 )%
By Geography
United States $ 2,870.9 $ 2,775.5 $ 95.4 $ 2,870.9 $ 2,775.5 $ 95.4 $ - 3.4 % 3.4 % 0.0 %
Canada 230.0 236.0 (6.0 ) 236.2 237.0 (0.8 ) (5.2 ) (0.3 )% (2.5 )% (2.2 )%
Total North America 3,100.9 3,011.5 89.4 3,107.1 3,012.5 94.6 (5.2 ) 3.1 % 3.0 % (0.1 )%
Europe, Middle East and Africa 511.4 529.3 (17.9 ) 506.4 531.7 (25.3 ) 7.4 (4.8 )% (3.4 )% 1.4 %
Latin America 281.7 243.0 38.7 301.9 242.5 59.4 (20.7 ) 24.5 % 15.9 % (8.6 )%
Asia Pacific 308.7 348.9 (40.2 ) 335.0 349.0 (14.0 ) (26.2 ) (4.0 )% (11.5 )% (7.5 )%
Total International 1,101.8 1,121.2 (19.4 ) 1,143.3 1,123.2 20.1 (39.5 ) 1.8 % (1.7 )% (3.5 )%
Total Company $ 4,202.7 $ 4,132.7 $ 70.0 $ 4,250.4 $ 4,135.7 $ 114.7 $ (44.7 ) 2.8 % 1.7 % (1.1 )%
(1) "Core Sales" is determined by applying a fixed exchange rate, calculated as the 12-month average in 2012, to the current and prior year local currency sales amounts, with the difference between the change in "As Reported" sales and the change in "Core Sales" reported in the table as "Currency Impact".
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Contact:.
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Newell Rubbermaid
Nancy O’Donnell, (770) 418-7723
Vice President, Investor Relations
or
David Doolittle, (770) 418-7519
Vice President, Global Communications
Tupperware Brands Reports Record Third Quarter Sales and Profit; Continued Strong Emerging Market Performance
- Sales up 1% in U.S. dollars and up 6% local currency+ versus last year.
- GAAP diluted E.P.S. $0.95, versus $0.85 last year. Adjusted*, diluted E.P.S. $1.00, up 16% in local currency.
- Share repurchases of $100 million / 1.21 million shares.
PR NewswirePress Release: Tupperware Brands Corporation – Wed, Oct 23, 2013 7:00 AM EDT..
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RELATED QUOTES.
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TUP 89.57
ORLANDO, Fla., Oct. 23, 2013 /PRNewswire/ -- (TUP) Tupperware Brands Corporation today announced record third quarter 2013 operating results.
Rick Goings, Chairman and CEO, commented, "The strength of our emerging markets drove our 6% local currency sales increase in the quarter. With over 85% of the world's population living in emerging markets, this continues to be a key advantage for our business. We are, however, an AND story with opportunities both in emerging and established markets in a well-balanced global portfolio. While our established markets in total did not perform as we would have hoped in the quarter, overall we continue to generate significant sales in these markets with a solid return on sales. Our success is driven by the power of our brand as well as our channel of distribution, through our world-wide sales force of 2.8 million."
Goings continued, "There were a number of external events during the quarter including storms and floods, impacts on consumer spending from currency devaluations and tax increases, and political unrest. While we are not immune to their impact, the flexibility of our business model enabled us to navigate through these external factors and deliver another strong quarter. A key reason we are able to do this is our institutional skill in direct selling fundamentals. We have strong local management teams in place and they will continue to implement strategies to ensure our markets are on track and to profitably grow our sales force and sales in spite of external influences."
Third Quarter Executive Summary
•Third quarter 2013 net sales were $603 million. Emerging markets, accounting for 69% of sales, achieved a 13% increase in local currency, driven by large populations, penetration of un-served and underserved consumers and emerging middle classes. Established markets** were down 8% in local currency.
•GAAP net income of $49.9 million versus $47.5 million in the prior year was up 5% in dollars and 17% in local currency. Adjusted diluted E.P.S. of $1.00 included 9 cents of negative impact versus 2012 from changes in foreign exchange rates, which was 4 cents worse than assumed in July's guidance.
•September year-to-date cash flow from operating activities net of investing activities was $92 million, $21 million ahead of the same period last year.
•In the third quarter, the Company returned $132 million to shareholders through a dividend payout of $32 million and the repurchase of 1.21 million shares for $100 million. Since 2007, 19 million shares have been repurchased for $1.1 billion, with $872 million left under an authorization that runs until February 2017.
•Total sales force was even with the prior year at the end of the quarter. Compared with the 3 percent advantage at the end of the second quarter, the decrease came primarily in 3 emerging markets that have large sales force levels but low order sizes: India, Tupperware South Africa and Fuller Mexico; and at BeautiControl.
Third Quarter Business Highlights
Europe: Good performance in Turkey offset by impact of low activity in established markets
•Segment sales, down 7% versus last year reported and down 6% in local currency.
•Emerging markets were up 2% in local currency. This was primarily from Turkey, up 34% in local currency, with a partial offset in Tupperware South Africa down 11%.
•Established markets were down 11% in local currency. Germany was down 20% in the quarter, a continuation of the downward trend from the first half of the year, as a result of lower sales force recruiting. Sales force and sales trends improved during the quarter. France was down 13% mostly a result of announced personal tax law changes that negatively impacted consumer sentiment.
Asia Pacific: Indonesia, continued strong double digit growth in spite of external factors
•Sales for the segment up 4% reported and 13% in local currency, driven by the emerging markets up 17% in local currency. This was led by Indonesia, up 31% and China up over 20%. Malaysia Singapore up 10% recovered from previous quarter macroeconomic and air quality issues. India up 3% versus historical double digit increases, primarily a result of macroeconomic factors and less motivation and training by some at the top end of the sales force.
•Established markets in the segment were down 2% as they continued to execute strategies to stabilize and improve sales force and sales force leadership levels.
•Active sales force up 5%. The 8 percentage point difference between the sales and active seller comparisons was primarily related to productivity improvement in Indonesia related to higher sales force standards and China due to product mix, as well as from a mix shift toward units with higher average order size.
Tupperware North America: Emphasis on stabilizing underlying sales organization
•Segment sales, up 2% in reported and in local currency. Tupperware Mexico sales up 4%, including approximate 1 percentage point negative impact of 2 hurricanes late in the quarter.
•Tupperware United States and Canada sales were even with prior year. The focus continued on building and strengthening the sales force structure and leadership levels resulting in improved productivity.
Beauty North America: Continued focus on executing and leveraging recently implemented programs
•Sales for the segment were down 12% reported and 13% in local currency. Fuller Mexico sales were down 11% in local currency. Continued focus on raising perception of product offering and stabilizing and growing sales manager level. Sales force productivity was up, but total sales force size and activity were down.
•BeautiControl sales were down 20%, largely a result of lower sales force size. Through engagement of the top end of the sales force, there is a continuing focus on developing a larger sales force and executing on the programs in place.
South America: Strong recruiting resulting in 18% sales force increase
•Sales up 27% reported and 38% in local currency, primarily as a result of continued growth in Brazil that was up 36% in local currency driven by a larger sales force size. Venezuela was up 63% and reflected higher volume and prices due to inflation.
•Active sales force up 7%, a 10 percentage point improvement over the second quarter. The 31 point difference between the sales and active seller comparisons primarily reflected the ongoing strategy to increase average order size in Argentina and inflation related price increases.
2013 Updated Outlook (Unaudited)
Based on current business trends and foreign currency rates, the Company's fourth quarter and full year 2013 guidance is provided below.
Company Level
13 Weeks Ended
13 Weeks
52 Weeks Ended
52 Weeks
Dec 28, 2013
Ended
Dec 28, 2013
Ended
Low
High
Dec 29, 2012
Low
High
Dec 29, 2012
USD Sales Growth vs Prior Year
2
%
4
%
5
%
4
%
4
%
0
%
(a)
GAAP EPS
$1.75
$1.80
$1.34
$5.17
$5.22
$3.42
GAAP Pre-Tax ROS
16.4
%
16.6
%
14.6
%
13.6
%
13.6
%
10.6
%
Local Currency+ Sales Growth vs Prior Year
5
%
7
%
6
%
6
%
7
%
5
%
(a)
EPS Excluding Items*
$1.83
$1.88
$1.71
$5.45
$5.50
$4.99
Pre-Tax ROS Excluding Items
17.3
%
17.4
%
17.2
%
14.3
%
14.3
%
14.2
%
FX Impact on EPS Excluding Items Comparison
($0.06)
($0.06)
($0.19)
($0.19)
(a) 2011 had a 53rd week under the Company's fiscal calendar, and this negatively impacted the year-over-year sales comparison by 1% for full year 2012.
•Full year 2013 net interest expense is expected to increase over 2012 by about $6 million, due to higher borrowings and interest rates in conjunction with reaching the Company's leverage target announced in January 2013.
•Full year tax rate excluding items is expected to be 24.2%, and 24.5% on a U.S. GAAP basis.
•The reduction in the high end of the diluted earnings per share guidance range versus that provided in July, without items, reflects negative 4 cents from changes in foreign exchange rates.
•Fourth quarter reflects $75 million in open market share repurchases.
•The full year GAAP diluted earnings per share guidance continues to include a negative 8 cent impact from the first quarter devaluation of the Venezuelan bolivar related to the Company's net monetary asset, inventory and non-recurring deferred tax balance sheet positions at the time of the devaluation.
Segment Level
•For the full year, sales in local currency are expected to be even to down slightly in Europe, up by a mid-teen percentage in Asia Pacific, up low single digit in the Tupperware North America segment, down by high single digit in Beauty North America and to be up by 27 or 28 percent in the South America segment.
•Pre-tax return on sales without items for the full year, versus 2012, is expected to increase slightly in Europe, to increase by about half a percentage point in Asia Pacific, to be down approaching 1 point in Tupperware North America, to be down 2 plus percentage points in Beauty North America (GAAP ROS expected to be down 3 percentage points) and to be up approaching 2 percentage points in South America.
•The outlook for return on sales in South America excludes the impact of the devaluation of the Venezuelan bolivar on the Company's balance sheet positions at the time of the devaluation and assumes no change in the current 6.3 Venezuelan bolivar to U.S. dollar exchange rate.
* See Non-GAAP Financial Measures Reconciliation Schedules.
** The Company classifies Established Market Units as those operating in Western Europe (including Scandinavia), the United States, Canada, Australia and Japan and its remaining units as Emerging Market Units.
+ Local currency changes are measured by comparing current year results with those of the prior year translated at the current year's foreign exchange rates.
Third Quarter Earnings Conference Call
Tupperware Brands will conduct a conference call and simultaneous webcast presentation including slides today, Wednesday, October 23, 2013, at 8:30 am Eastern time. The conference call and slides will be webcast and accessible, along with a copy of this news release, on www.tupperwarebrands.com.
Tupperware Brands Corporation is a portfolio of global direct selling companies, selling innovative, premium products across multiple brands and categories through an independent sales force of 2.8 million. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products for consumers through the Armand Dupree, Avroy Shlain, BeautiControl, Fuller Cosmetics, NaturCare, Nutrimetics, and Nuvo brands.
The Company's stock is listed on the New York Stock Exchange (TUP). Statements contained in this release, which are not historical fact and use predictive words such as "outlook", "expects" or "target" are forward-looking statements. These statements involve risks and uncertainties that include recruiting and activity of the Company's independent sales forces, the success of new product introductions and promotional programs, governmental approvals of materials for use in food containers and beauty and personal care products, changes in the fair value of previously acquired businesses and trade names, the success of buyers in obtaining financing or attracting tenants for commercial and residential developments, the effects of economic and political conditions generally and foreign exchange risk in particular and other risks detailed in the Company's periodic reports as filed in accordance with the Securities Exchange Act of 1934.
The Company does not intend to update forward-looking information, other than through its quarterly earnings releases, unless it expects diluted earnings per share for the current quarter, excluding items impacting comparability and the impact of changes in foreign exchange rates, to be significantly below its previous guidance.
Non-GAAP Financial Measures
The Company has utilized non-GAAP financial measures in this release, which are provided to assist readers' understanding of the Company's results of operations. These amounts, identified as items impacting comparability, at times materially impact the comparability of the Company's results of operations. The adjusted information is intended to be indicative of Tupperware Brands' primary operations, and to assist readers in evaluating performance and analyzing trends across periods.
The non-GAAP financial measures exclude gains from the sale of property, plant and equipment and insurance settlements related to casualty losses, inventory obsolescence in conjunction with decisions to exit or significantly restructure businesses, asset retirement obligations, and re-engineering and impairment charges. Further, while the Company is engaged in a multi-year program to sell land adjacent to its Orlando, Florida headquarters, and also disposes of other excess land and facilities periodically, these activities are not part of the Company's primary business operations. Additionally, amounts recognized in any given period are not indicative of amounts that may be recognized in any particular future period. For this reason, these amounts are excluded as indicated. Further, the Company excludes significant charges related to casualty losses caused by significant weather events, fires or similar circumstances. It also excludes any related gains resulting from the settlement of associated insurance claims. While these types of events can and do recur periodically, they are excluded from indicated financial information due to their distinction from ongoing business operations, inherent volatility and impact on the comparability of earnings across quarters. Also, the Company periodically records exit costs accounted for using the applicable accounting guidance for exit or disposal cost obligations and other amounts related to rationalizing its supply chain operations and other restructuring activities, including upon liquidation of operations in a country the recognition in income of amounts previously recorded in equity as a cumulative translation adjustment, and believes these amounts are similarly volatile and impact the comparability of earnings across quarters. Therefore, they are also excluded from indicated financial information to provide what the Company believes represents a useful measure for analysis and predictive purposes.
The Company believes that excluding from indicated financial information costs incurred in connection with a significant change in its capital structure that is of a nature that would be expected to recur sporadically, also provides a useful measure for analysis and predictive purposes. During the first quarter of 2013, the Venezuelan government abolished the exchange rate that the Company had previously used in translating the results of its Venezuelan operations, and at the same time devalued the official foreign exchange rate in that country. Due to the lack of a connection between the market perceived value of the Venezuelan bolivar and the exchange rate mandated by the Venezuelan government, and now used by the Company, and the sporadic timing of such mandated changes in the exchange rate, the non-GAAP measures exclude for analysis and predictive purposes, the impact from the devaluation on the bolivar denominated net monetary asset, inventory and non-recurring deferred tax balance sheet positions of the Company in Venezuela at the time of the devaluation.
The Company has also elected to present financial measures excluding the impact of amortizing the purchase accounting carrying value of certain definite-lived intangible assets, primarily the value of its Fuller trade name and its independent sales forces recorded in connection with the Company's December 2005 acquisition of the direct selling businesses of Sara Lee Corporation. The amortization expense related to these assets will continue for several years. Similarly, in connection with its evaluation of the carrying value of acquired intangible assets and goodwill, the Company has periodically recognized impairment charges. The Company believes that these types of non-cash charges will not be representative in any single reporting period of amounts recorded in prior reporting periods or expected to be recorded in future reporting periods. Therefore, they are excluded from indicated financial information to also provide a useful measure for analysis and predictive purposes.
As the impact of changes in exchange rates are an important factor in understanding period-to-period comparisons, the Company believes the presentation of results on a local currency basis, in addition to reported results, helps improve readers' ability to understand the Company's operating results and evaluate performance in comparison with prior periods. The Company presents local currency information that compares results between periods as if current period exchange rates had been the exchange rates in the prior period. The Company uses results on a local currency basis as one measure to evaluate performance. The Company generally refers to such amounts as calculated on a local currency basis, as restated or excluding the impact of foreign currency. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a local currency basis may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP.
In information included with this release, the Company has referred to Adjusted EBITDA and a Debt/Adjusted EBITDA ratio, which are non-GAAP financial measures used in the Company's credit agreement. The Company uses these measures in its capital allocation decision process and in discussions with investors, analysts and other interested parties and therefore believes it is useful to disclose this amount and ratio. The Company's calculation of these measures is in accordance with its credit agreement, and is set forth in the reconciliation from GAAP amounts in an attachment to this release; however, the reader is cautioned that other companies define these measures in different ways, and consequently they will likely not be comparable with similarly labeled amounts disclosed by others.
TUPPERWARE BRANDS CORPORATION
THIRD QUARTER SALES STATISTICS*
(UNAUDITED)
All Units
Reported
Sales
Inc/(Dec)%
Restated+
Sales
Inc/(Dec)%
Active
Sales
Force
Inc/(Dec)
vs. Q3' 12
%
Total
Sales
Force
Inc/(Dec)
vs. Q3' 12
%
Europe
(7)
(6)
90,577
(2)
638,496
(1)
Asia Pacific
4
13
239,306
5
a
985,975
3
TW North America
2
2
95,986
(7)
b
340,475
1
Beauty North America
(12)
(13)
234,767
(17)
468,261
(13)
e
South America
27
38
103,912
7
c
353,600
18
Total All Units
1
6
764,548
(5)
b,d
2,786,807
0
Emerging Market Units
Europe
(8)
2
64,182
5
461,536
0
Asia Pacific
10
17
211,345
6
a
886,706
4
TW North America
5
4
86,213
3
257,523
0
Beauty North America
(10)
(11)
206,036
(17)
389,171
(13)
e
South America
27
38
103,912
7
c
353,600
18
c
Total Emerging Market Units
7
13
671,688
(2)
2,348,536
1
Established Market Units
Europe
(6)
(11)
26,395
(15)
176,960
(3)
f
Asia Pacific
(16)
(2)
27,961
(4)
99,269
(4)
TW North America
(1)
0
9,773
(50)
b
82,952
4
Beauty North America
(17)
(17)
28,731
(16)
79,090
(14)
e
South America
-
-
-
-
-
-
Total Established Market Units
(8)
(8)
92,860
(19)
b
438,271
(4)
* Sales force statistics as collected by the Company and, in some cases, provided by distributors and sales force. The Company classifies Established Market Units as those operating in Western Europe, including Scandinavia, the United States, Canada, Australia and Japan, and its remaining units as Emerging Market Units. Active Sales Force is defined as the average number of people ordering in each cycle over the course of the quarter, and Total Sales Force is defined as the number of sales force members of the units as of the end of the quarter.
+ Local currency changes are measured by comparing current year results with those of the prior year translated at the current year's foreign exchange rates.
Notes
(a) Local currency sales increase above active seller increase reflected productivity improvement in Indonesia, as the result of higher prices and standards, higher sales in China, which operates an outlet model without a traditional sales force, and also a mix shift toward these units that have higher than average order sizes.
(b) In the fourth quarter of 2012, the Tupperware U.S. and Canada business began measuring sales force activity on a weekly rather than a monthly basis. For the third quarter, this had a negative 10, 2, 58 and 9 percentage point impact on the total Tupperware North America, total company, Tupperware North America established markets and total company established market active sales force size comparisons, respectively.
(c) The active seller comparison in South America lagging the local currency sales increase reflected a change in approach in Argentina to focus on a lower number of more profitable sales zones and to shift the product assortment toward housewares at higher price points. Also impacting the comparison were inflation related price increases across the segment. The changes in Argentina were also the main source of the difference between the total and active seller increases.
(d) The local currency sales increase despite a decrease in active sellers, reflected the change in definition of activity in the Tupperware United States and Canada business described above; 6 points from mix shifts away from Beauty North America that has a lower-than-average order size; and 3 points from productivity increases in individual markets including from significant price increases in South America, the change in approach in Argentina, and improved productivity in Asia, each as described above.
(e) Decrease in the total sales force in Beauty North America reflected unfilled Field Manager positions at Fuller Mexico, where the Field Managers are Company employees that recruit the sales force, and a higher minimum order size. Also impacting the comparison were less total and active sellers at BeautiControl, where the Company is seeking to reinvigorate its recruiting and sales force development through its programs and better engagement with its top sales force leaders.
(f) The larger decrease in the active versus total sales force in the Europe established market category reflected fewer new sales force members recruited in the third quarter of 2013 versus 2012, as new sellers contribute significantly to the active sales force count, and independent distributors' decisions on when to remove sellers from the sales force count.
TUPPERWARE BRANDS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
13 Weeks Ended
13 Weeks Ended
39 Weeks Ended
39 Weeks Ended
Sep 28,
Sep 29,
Sep 28,
Sep 29,
(In millions, except per share data)
2013
2012
2013
2012
Net sales
$ 603.2
$ 594.4
$ 1,954.5
$ 1,872.8
Cost of products sold
199.6
199.5
648.4
619.3
Gross margin
403.6
394.9
1,306.1
1,253.5
Delivery, sales and administrative expense
325.4
318.0
1,023.2
986.1
Re-engineering and impairment charges
2.7
2.0
7.1
4.0
Impairment of goodwill and intangible assets
-
-
-
76.9
Gains on disposal of assets including insurance recoveries
0.9
0.3
1.1
8.0
Operating income
76.4
75.2
276.9
194.5
Interest income
0.6
0.6
1.9
1.9
Interest expense
10.3
8.5
29.5
27.0
Other expense
1.5
-
5.0
0.1
Income before income taxes
65.2
67.3
244.3
169.3
Provision for income taxes
15.3
19.8
59.8
50.8
Net income
$ 49.9
$ 47.5
$ 184.5
$ 118.5
Net income per common share:
Basic earnings per share
$ 0.97
$ 0.86
$ 3.52
$ 2.14
Diluted earnings per share
$ 0.95
$ 0.85
$ 3.44
$ 2.09
TUPPERWARE BRANDS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in millions, except per share)
13 Weeks
13 Weeks
39 Weeks
39 Weeks
Ended
Ended
Reported
Restated
Foreign
Ended
Ended
Reported
Restated
Foreign
Sep 28,
Sep 29,
%
%
Exchange
Sep 28,
Sep 29,
%
%
Exchange
2013
2012
Inc (Dec)
Inc (Dec)
Impact *
2013
2012
Inc (Dec)
Inc (Dec)
Impact *
Net Sales:
Europe
$ 146.9
$ 157.8
(7)
(6)
$ (0.9)
$ 564.3
$ 570.2
(1)
0
$ (7.8)
Asia Pacific
205.1
197.5
4
13
(16.2)
614.5
561.5
9
15
(27.8)
TW North America
80.6
78.9
2
2
0.1
263.1
253.3
4
2
3.4
Beauty North America
73.9
83.8
(12)
(13)
0.6
241.2
257.0
(6)
(8)
6.5
South America
96.7
76.4
27
38
(6.4)
271.4
230.8
18
26
(15.4)
$ 603.2
$ 594.4
1
6
$ (22.8)
$ 1,954.5
$ 1,872.8
4
7
$ (41.1)
Segment profit:
Europe
$ 10.6
$ 12.7
(16)
(8)
$ (1.6)
$ 82.2
$ 80.9
2
5
$ (2.8)
Asia Pacific
44.2
44.0
-
8
(3.3)
133.3
118.7
12
18
(5.6)
TW North America
14.9
14.1
6
5
0.1
44.2
45.3
(2)
(5)
1.1
Beauty North America
1.5
6.0
(75)
(75)
-
15.0
23.0
(35)
(38)
1.1
South America
21.8
15.6
40
53
(1.3)
49.5
42.2
17
25
(2.6)
93.0
92.4
1
7
(6.1)
324.2
310.1
5
7
(8.8)
Unallocated expenses
(16.2)
(15.5)
5
+
(0.3)
(46.3)
(42.8)
8
6
(0.5)
Gains on disposal of assets including insurance recoveries
0.8
0.3
+
+
-
1.1
8.0
(87)
(87)
-
Re-engineering and impairment charges
(2.7)
(2.0)
35
35
-
(7.1)
(4.0)
76
76
-
Impairment of goodwill and intangible assets
-
-
-
-
-
-
(76.9)
(100)
(100)
-
Interest expense, net
(9.7)
(7.9)
23
23
-
(27.6)
(25.1)
10
10
-
Income before taxes
65.2
67.3
(3)
7
(6.4)
244.3
169.3
44
53
(9.3)
Provision for income taxes
15.3
19.8
(23)
(16)
(1.5)
59.8
50.8
18
23
(2.2)
Net income
$ 49.9
$ 47.5
5
17
$ (4.9)
$ 184.5
$ 118.5
56
65
$ (7.1)
Net income per common share (diluted)
$ 0.95
$ 0.85
12
25
(0.09)
$ 3.44
$ 2.09
65
75
(0.12)
Weighted Average number of diluted shares
52.4
56.2
53.6
56.6
* 2013 actual compared with 2012 translated at 2013 exchange rates.
TUPPERWARE BRANDS CORPORATION
NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
(In millions except per share data)
13 Weeks Ended Sep 28, 2013
13 Weeks Ended Sep 29, 2012
Reported
Adj's
Excl Adj's
Reported
Adj's
Excl Adj's
Segment profit
Europe
$ 10.6
$ -
$ 10.6
$ 12.7
$ 0.6
a
$ 13.3
Asia Pacific
44.2
0.3
a
44.5
44.0
0.2
a
44.2
TW North America
14.9
-
14.9
14.1
-
14.1
Beauty North America
1.5
0.8
a
2.3
6.0
0.2
a
6.2
South America
21.8
0.1
a
21.9
15.6
-
15.6
93.0
1.2
94.2
92.4
1.0
93.4
Unallocated expenses
(16.2)
$ -
(16.2)
(15.5)
$ -
(15.5)
Gains on disposal of assets
0.8
(0.8)
c
-
0.3
(0.3)
c
-
Re-eng and impairment chgs
(2.7)
2.7
d
-
(2.0)
2.0
d
-
Interest expense, net
(9.7)
-
(9.7)
(7.9)
-
(7.9)
Income before taxes
65.2
3.1
68.3
67.3
2.7
70.0
Provision for income taxes
15.3
0.5
e
15.8
19.8
(3.0)
e
16.8
Net income
$ 49.9
$ 2.6
$ 52.5
$ 47.5
$ 5.7
$ 53.2
Net income per common share (diluted)
$ 0.95
$0.05
$ 1.00
$ 0.85
$0.10
$ 0.95
39 Weeks Ended Sep 28, 2013
39 Weeks Ended Sep 29, 2012
Reported
Adj's
Excl Adj's
Reported
Adj's
Excl Adj's
Segment profit
Europe
$ 82.2
$ 0.1
a
$ 82.3
$ 80.9
$ 0.8
a
$ 81.7
Asia Pacific
133.3
0.6
a
133.9
118.7
0.7
a
119.4
TW North America
44.2
-
44.2
45.3
-
45.3
Beauty North America
15.0
1.1
a
16.1
23.0
0.6
a
23.6
South America
49.5
4.3
a,g
53.8
42.2
-
42.2
324.2
6.1
330.3
310.1
2.1
312.2
Unallocated expenses
(46.3)
-
(46.3)
(42.8)
(0.5)
b
(43.3)
Gains on disposal of assets including insurance rec
1.1
(1.1)
c
-
8.0
(8.0)
c
-
Re-eng and impairment chgs
(7.1)
7.1
d
-
(4.0)
4.0
d
-
Impairment of goodwill and intangible assets
-
-
-
(76.9)
76.9
f
-
Interest expense, net
(27.6)
-
(27.6)
(25.1)
-
(25.1)
Income before taxes
244.3
12.1
256.4
169.3
74.5
243.8
Provision for income taxes
59.8
1.5
e
61.3
50.8
6.9
e
57.7
Net income
$ 184.5
$10.6
$ 195.1
$ 118.5
$67.6
$ 186.1
Net income per common share (diluted)
$ 3.44
$0.20
$ 3.64
$ 2.09
$1.20
$ 3.29
(a) Amortization of intangibles of acquired beauty units .
(b) Change in estimate of asset retirement obligation for the Company's Orlando and South Carolina locations.
(c) Gain on disposal of assets of $1.1 million in 2013 is primarily from the sale of land for $0.8 in the third quarter and sale of a facility in the Company's Australia location in the second quarter. Gain on disposal of assets of $8.0 million in 2012 was primarily from $0.2 million of insurance proceeds in the first quarter related to a flood in the Company's Venezuela operations, $7.5 million in the second quarter from the sale of a facility in Belgium, and in the third quarter, $0.3 million primarily related to the sale of property in New Jersey.
(d) The Company recorded $2.7 million and $2.0 million in re-engineering and impairment charges during the third quarters of 2013 and 2012, respectively, and $7.1 million and $4.0 million for the respective year-to-date periods. In both years, these charges were primarily related to severance costs incurred for headcount reductions in several of the Company's operations in connection with changes in its management and organizational structures, and in 2012, the decision to cease operating its Nutrimetics businesses in Greece and the United Kingdom, as well as the relocation of the Company's office in Poland.
(e) Provision for income taxes represented the net tax impact of adjusted amounts.
(f) After review, the purchase accounting intangibles of BeautiControl, NaturCare Japan and Nutrimetics were deemed to be impaired, resulting in non-cash charges of $76.9 million.
(g) Translation impact of $4.2 million in 2013 is related to the net monetary asset, inventory and non-recurring deferred tax balance sheet positions when, in the first quarter of 2013, the Venezuelan government devalued the bolivar to U.S. dollar exchange rate to 6.3.
See note regarding non-GAAP financial measures in the attached press release.
TUPPERWARE BRANDS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
39 Weeks Ended
39 Weeks Ended
September 28,
September 29,
(In millions)
2013
2012
OPERATING ACTIVITIES
Net cash provided by operating activities
$ 126.0
$ 111.5
INVESTING ACTIVITIES
Capital expenditures
(42.9)
(51.0)
Proceeds from disposal of property, plant & equipment
8.4
9.8
Net cash used in investing activities
(34.5)
(41.2)
FINANCING ACTIVITIES
Dividend payments to shareholders
(84.9)
(57.5)
Net proceeds from issuance of senior notes
200.0
-
Repurchase of common stock
(303.7)
(104.3)
Repayment of long-term debt and capital lease obligations
(1.9)
(1.8)
Net change in short-term debt
87.3
47.4
Debt issuance costs
(2.1)
-
Proceeds from exercise of stock options
18.9
9.7
Excess tax benefits from share-based payment arrangements
13.6
11.9
Net cash used in financing activities
(72.8)
(94.6)
Effect of exchange rate changes on cash and
cash equivalents
(12.5)
(0.1)
Net change in cash and cash equivalents
6.2
(24.4)
Cash and cash equivalents at beginning of year
119.8
138.2
Cash and cash equivalents at end of period
$ 126.0
$ 113.8
TUPPERWARE BRANDS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
Sept. 28,
Dec. 29,
(In millions)
2013
2012
Assets
Cash and cash equivalents
$
126.0
$
119.8
Other current assets
727.7
646.7
Total current assets
853.7
766.5
Property, plant and equipment, net
291.0
298.8
Other assets
736.4
756.5
Total assets
$
1,881.1
$
1,821.8
Liabilities and Shareholders' Equity
Short-term borrowings and current
portion of long-term debt
$
292.8
$
203.4
Accounts payable and other current liabilities
475.1
491.1
Total current liabilities
767.9
694.5
Long-term debt
619.0
414.4
Other liabilities
222.0
233.8
Total shareholders' equity
272.2
479.1
Total liabilities and shareholders' equity
$
1,881.1
$
1,821.8
Debt to Adjusted EBITDA* Ratio as of and for the four quarters ended Sept 28, 2013: 1.93 times
*Adjusted EBITDA as defined in the Company's credit agreement under Consolidated EBITDA. See calculation attached to this release.
TUPPERWARE BRANDS CORPORATION
NON-GAAP FINANCIAL MEASURES OUTLOOK RECONCILIATION SCHEDULE
October 23, 2013
(UNAUDITED)
($ in millions, except per share amounts)
Fourth Quarter
Fourth Quarter
2012 Actual
2013 Outlook
Range
Low
High
Income before income taxes
$ 103.5
$ 118.8
$ 122.3
Income tax
29.0
29.0
29.8
Effective Rate
28%
24%
24%
Net Income (GAAP)
$ 74.5
$ 89.8
$ 92.5
% change from prior year
21%
24%
Adjustments(1):
Gains on disposal of assets including insurance recoveries
$ 0.1
$ -
$ -
Re-engineering and other restructuring costs
18.4
3.3
3.3
Acquired intangible asset amortization
0.5
2.9
2.9
Income tax (2)
1.8
(2.1)
(2.1)
Net Income (adjusted)
95.3
93.9
96.6
Exchange rate impact (3)
(3.7)
-
-
Net Income (adjusted and 2012 restated for currency changes)
91.6
93.9
96.6
% change from prior year
3%
5%
Net income (GAAP) per common share (diluted)
$ 1.34
$ 1.75
$ 1.80
% change from prior year
31%
34%
Net Income (adjusted) per common share (diluted)
$ 1.71
$ 1.83
$ 1.88
Net Income (adjusted & restated) per common share (diluted)
$ 1.65
$ 1.83
$ 1.88
% change from prior year
11%
14%
Average number of diluted shares (millions)
55.6
51.3
51.3
(1) Refer to Non-GAAP Financial Measures section of attached release for description of the general nature of adjustment items
(2) Represents income tax impact of adjustments on an item-by-item basis
(3) Difference between 2012 actual and 2012 restated at current currency exchange rates
See the note related to Venezuela foreign exchange on the following page
TUPPERWARE BRANDS CORPORATION
NON-GAAP FINANCIAL MEASURES OUTLOOK RECONCILIATION SCHEDULE
October 23, 2013
(UNAUDITED)
($ in millions, except per share amounts)
Full Year
Full Year
2012 Actual
2013 Outlook
Range
Low
High
Income before income taxes
$ 272.8
$ 362.9
$ 366.5
Income tax
79.8
88.7
89.6
Effective Rate
29%
24%
24%
Net Income (GAAP)
$ 193.0
$ 274.2
$ 276.9
% change from prior year
42%
43%
Adjustments(1):
Gains on disposal of assets including insurance recoveries
$ (7.9)
$ (1.1)
$ (1.1)
Re-engineering and other restructuring costs
22.1
10.4
10.4
Impact of Venezuelan bolivar devaluation on balance sheet positions
-
4.2
4.2
Acquired intangible asset amortization
2.1
4.8
4.8
Purchase accounting intangibles impairments
76.9
-
-
Income tax (2)
(4.8)
(3.5)
(3.5)
Net Income (adjusted)
281.4
289.0
291.7
Exchange rate impact (3)
(10.7)
-
-
Net Income (adjusted and 2012 restated for currency changes)
270.7
289.0
291.7
% change from prior year
7%
8%
Net income (GAAP) per common share (diluted)
$ 3.42
$ 5.17
$ 5.22
% change from prior year
51%
53%
Net Income (adjusted) per common share (diluted)
$ 4.99
$ 5.45
$ 5.50
Net Income (adjusted & restated) per common share (diluted)
$ 4.80
$ 5.45
$ 5.50
% change from prior year
14%
15%
Average number of diluted shares (millions)
56.4
53.0
53.0
(1) Refer to Non-GAAP Financial Measures section of attached release for description of the general nature of adjustment items
(2) Represents income tax impact of adjustments on an item-by-item basis
(3) Difference between 2012 actual and 2012 restated at current currency exchange rates
The Company's outlook assumes no change in the current Venezuelan exchange rate of 6.3 bolivars to the U.S. dollar. If the rate had gone to 42 bolivars to the dollar as of the beginning of the fourth quarter of 2013, the Company estimates its full-year 2013 pre-tax earnings would be $36 million lower than shown above, of which $32 million would relate to amounts already on the balance sheet at the end of September 2013, and the rest to the translation of 2013 activity at the lower rate.
TUPPERWARE BRANDS CORPORATION
ADJUSTED EBITDA AND DEBT/ADJUSTED EBITDA *
(UNAUDITED)
As of and for
the Four Quarters
Ended
Sept 28,
2013
Adjusted EBITDA:
Net income
$
259.0
Add:
Depreciation and amortization
51.6
Gross interest expense
37.4
Provision for income taxes
88.8
Pretax non-cash re-engineering and impairment charges
16.4
Equity compensation
20.7
Deduct:
Gains on land sales, insurance recoveries, etc.
(1.0)
Total Adjusted EBITDA
$
472.9
Consolidated total debt
$
911.8
Divided by adjusted EBITDA
472.9
Debt to Adjusted EBITDA Ratio
1.93
*
Amounts and calculations are based on the definitions and provisions of the Company's $450 million Credit Agreement dated June 2, 2011 and, where applicable, are based on the trailing four quarter amounts. "Adjusted EBITDA" is calculated as defined for "Consolidated EBITDA" in the Credit Agreement.
Utah Medical Products, Inc. Reports Financial Performance for Third Quarter 2013
GlobeNewswirePress Release: Utah Medical Products, Inc. – 13 hours ago..
SALT LAKE CITY, Oct. 24, 2013 (GLOBE NEWSWIRE) -- In the third calendar quarter (3Q) and first nine months (9M) of 2013, Utah Medical Products, Inc.'s (UTMD) changes in financial results compared to the same time period in the prior calendar year were as follows:
3Q
(July --
September) 9M
(January --
September)
Sales: (4%) (4%)
Gross Profit: (8%) (5%)
Operating Income: (7%) (3%)
Net Income: (6%) -
Earnings Per Share: (7%) (1%)
Earnings per share for the most recent twelve months (TTM) were $2.71. Excluding the noncash effects of depreciation, amortization of intangible assets and stock option expense, TTM consolidated earnings before taxes plus interest expense were $18,189. Currency amounts throughout this report are in thousands, except per share amounts and where noted.
UTMD achieved the following profit margins in 3Q 2013 and 9M 2013 compared to 3Q 2012 and 9M 2012:
3Q 2013 3Q 2012 9M 2013 9M 2012
(Jul -- Sep) (Jul -- Sep) (Jan -- Sep) (Jan -- Sep)
Gross Profit Margin (gross profits/ sales): 59.3% 61.7% 60.1% 60.8%
Operating Profit Margin (operating profits/ sales): 36.5% 37.8% 37.1% 36.7%
Net Profit Margin (profit after taxes/ sales): 25.6% 25.9% 26.1% 24.9%
Income Statement Summary.
Due to quarter-to-quarter fluctuation in sales to distributors, the comparison of 2013 quarterly income statement results with the prior year have varied. For example, excluding sales to Cooper Surgical, UTMD's distributor of the Filshie Clip System in the U.S., 3Q 2013 consolidated sales were 1% higher than in 3Q 2012. Excluding, in addition, the negative impact of a stronger U.S. Dollar [USD or $] relative to the Australian Dollar [AUD] and the British Pound [GBP], total consolidated 3Q 2013 sales would have been up 2.4% compared to 3Q 2012 (in contrast to down 4.4%).
Total consolidated sales in 3Q 2013 were consistent with the prior quarter 2Q 2013, but UTMD's gross profit was $100 less due to a less favorable product mix, and a substantial decline in the value of the AUD relative to the USD. A decline in the AUD has a "double-whammy" effect on UTMD's gross profits because USD-denominated sales decline, while variable direct material costs go up because Femcare-Australia is a distributor of UTMD finished devices purchased at fixed USD or British Pound [GBP] prices.
Net income for 9M year-to-date 2013 was slightly higher than for 9M 2012, because operating profit and net income margins were higher than in the prior year.
Shareholders may recall UTMD's guidance for 2013 provided in its year-end December 31, 2012 SEC Form 10-K, as follows:
"In summary, management expects revenues and net income in 2013 to decline about 2%, and gross profit, operating income, EBT and EPS to be down about 3% compared to 2012."
Anticipating that 4Q may be the lowest quarter in 2013 sales, as was the case in 2012, and based on 9M 2013 actual results, the Company now expects consolidated sales and gross profits for the 2013 year to be down 4% to 5% compared to 2012. However, UTMD expects to exceed its 2013 plan for EBT, net income and EPS.
According to CEO Kevin Cornwell,
"After an outstanding financial performance year in 2012, UTMD expected a slightly negative comparison in 2013 particularly because of a difficult environment for medical device companies in the U.S. However, we did not factor in a stronger USD in making our projections. After the first nine months of 2013, although some sales categories and gross profit margins are lagging our beginning projections, profits from excellent operational performance are exceeding plan to the point that UTMD management now expects to be able to match last year's outstanding net income and EPS, instead of being down 3% as initially projected."
Sales. The global consolidated sales comparisons of 3Q 2013 to 3Q 2012 and 9M 2013 to 9M 2012 were substantially affected by the currency exchange impact of a stronger USD relative to the AUD and the GBP. The AUD was 12% weaker in the 3Q 2013 compared to 3Q 2012, and 5.4% weaker for 9M 2013. The GBP was 2% weaker in the 3Q 2013 compared to 3Q 2012 and 2.1% weaker for 9M 2013. If the same AUD and GBP currency exchange rates in 2012 were applied to 3Q and 9M 2013, sales would have been $145 higher in 3Q 2013 and $257 higher in 9M 2013.
In contrast, the Euro was about 5% stronger relative to the USD in 3Q 2013 compared to 3Q 2012, and about 2% stronger for 9M 2013. If Euro currency exchange rates in 2013 had been the same as in 2012, sales would have been about $52 lower in 3Q 2013, and about $57 lower in 9M 2013.
At the beginning of 2013, sales of Femcare's Filshie Clip System devices to Cooper Surgical Inc. for distribution in the U.S. were projected to be $650 lower in 2013. Sales of Femcare's Filshie Clip System devices to Cooper Surgical Inc. were 49% lower ($540) in 3Q 2013 than in 3Q 2012, and 20% lower ($673) in 9M 2013 than in 9M 2012. Filshie Clip System sales to Cooper were 12% of total domestic sales in 3Q 2013 compared to 22% in 3Q 2012. Filshie Clip System sales to Cooper were 19% of total domestic sales in 9M 2013 compared to 22% in 9M 2012. Excluding sales of Femcare's Filshie Clip System devices to Cooper, U.S. domestic sales were 1% lower in 3Q 2013 than in 3Q 2012, and 4% lower in 9M 2013 than in 9M 2012.
Consolidated international sales in 3Q 2013 were up 2% despite the negative impact of a stronger USD. For 9M 2013, international sales were down 1%. International sales were 55% of total consolidated 3Q 2013 sales, and 53% of 9M 2013 sales, compared to 51% in both 3Q 2012 and 9M 2012. UK subsidiary USD-denominated sales were 40% of total international sales in 3Q 2013 compared to 41% in 3Q 2012, and 41% in 9M 2013 compared to 44% in 9M 2012. Australia subsidiary USD-denominated sales were 15% of total international sales in both 3Q 2013 and 9M 2013 compared to 16% in both 3Q 2012 and 9M 2012. Ireland subsidiary USD-denominated sales were 21% of total international sales in 3Q 2013 compared to 16% in 3Q 2012, and 21% in 9M 2013 compared to 17% in 9M 2012.
In product categories, 3Q 2013 blood pressure monitoring device/ components (BPM) sales were up 4%, neonatal device sales were down 1%, gynecology/ electrosurgery device sales were down 7% and obstetrics device sales were down 5%. For 9M 2013 compared to 9M 2012 consolidated global sales in product categories, BPM sales were up 3%, neonatal device sales were down 8%, gynecology/ electrosurgery device sales were down 5% and obstetrics device sales were down 5%.
Gross Profit. UTMD's consolidated gross profit margin (GPM), gross profits divided by sales, was 2.4 percentage points lower in 3Q 2013 than in 3Q 2012. This was due primarily to two factors: 1) an unfavorable product mix, as BPM products, which sales were up, have significantly lower GPMs than the other product categories, which sales were down, and 2) a significantly weaker AUD compared to the USD. As Femcare-Australia purchases its products from UTMD's other subsidiaries in their respective currencies, Femcare-Australia's GPM was down 3.9 percentage points compared to 3Q 2012. UTMD's consolidated GPM for 9M 2013 was 60.1% compared to 60.8% in 9M 2012. This reduced GPM is consistent with management's expectation for 2013 described in the 2012 SEC Form 10-K.
Operating Income. UTMD's 3Q 2013 operating profit margin (OPM) was 1.2 percentage points lower than in 3Q 2012 because of the lower 3Q 2013 GPM. The year-to-date 9M 2013 OPM, however, improved slightly compared to 9M 2012 because of $650 lower operating expenses in 9M 2013 than in 9M 2012. About 89% ($577) of the 9M operating expense decline was in general and administrative (G&A) expenses. Operating expenses in 3Q 2013 were $232 lower than in 3Q 2012. About 94% ($217) of the 3Q decline was in G&A expenses. G&A expenses declined primarily as a result of 1) further consolidation of overhead resources in the UK and AUS, 2) lower litigation expenses, and 3) the weaker GBP and AUD. In contrast to the negative impact on sales, the currency exchange resulting from a stronger USD had a positive impact on consolidated operating expenses (in contrast to cost of goods sold) from UTMD's UK and Australia subsidiaries.
Earnings before Tax (EBT). EBT benefited from lower interest expense as a result of repaying the debt obtained to help acquire Femcare in March 2011. Interest expense in 3Q and 9M 2013 was $104 and $339, respectively, compared to $157 and $516 in the same periods of 2012.
Net Income. UTMD's net income decreased $150 in 3Q 2013, and increased $28 in 9M 2013 compared to the same periods in the prior year. Although diluted by the amortization of intangible assets and interest expense on debt assumed in completing the Femcare acquisition, 3Q 2013 and 9M 2013 net profit margins (NPMs), net income divided by sales, remained excellent at 25.6% and 26.1% for 3Q and 9M 2013, respectively, compared to 25.9% and 24.9% for 3Q 2012 and 9M 2012, respectively. UTMD's consolidated tax provision, as a percentage of EBT, was 28.1% and 27.8% for 3Q and 9M 2013, respectively, compared to 29.3% and 29.5% for 3Q 2012 and 9M 2012. The lower rates in 2013 were due to a corporate income tax rate reduction of one percentage point in the UK, and an increase in profits in Ireland, which has the lowest corporate income tax rate.
Earnings per share (EPS). UTMD's 3Q 2013 EPS decreased 5.0 cents (7%) compared to 3Q 2012 primarily as a result of lower operating income. Shares outstanding used to calculate 3Q 2013 EPS increased to 3,781,389 from 3,725,538 in 3Q 2012. For 9M 2013, EPS decreased 2.9 cents (1%) compared to 9M 2012. Since 9M 2013 net income was slightly higher than in 9M 2012, the 9M 2013 EPS decrease was due solely to an increase in diluted shares outstanding. Diluted shares used to calculate 9M 2013 EPS increased to 3,770,886 from 3,705,992 in 9M 2012. The increases in both periods were due to a much higher average share price in the stock market during 2013 compared to the prior year, and exercises of employee/ director stock options. The Company has not repurchased any of its shares to date in 2013. The same was true in 2012. Notwithstanding, the Company retains the financial ability for repurchasing its shares when they seem undervalued. The closing share price at the end of 3Q 2013 was $59.44 compared to $36.05 at the end of calendar year 2012, and $33.99 at the end of 3Q 2012.
Excluding the noncash effects of depreciation, amortization of intangible assets and stock option expense, 3Q 2013 and 9M 2013 consolidated earnings before taxes plus interest expense were $4,479 and $13,723 respectively.
UTMD's September 30, 2013 balance sheet is substantially stronger than one year earlier. Stockholders' Equity is up $8.4 million (17%) after payment of another $3.6 million in cash dividends to shareholders. Cash balances are up $4.6 million after reduction of loan principal by another $4.9 million. Debt incurred in March 2011 to help finance the Femcare acquisition was $26,934. As of September 30, 2013, the remaining debt balance was $9,972. In ten calendar quarters, UTMD has repaid 63% of the acquisition debt. 9M 2013 capital expenditures were $222, less than depreciation of fixed assets by $237.
Key balance sheet changes as of September 30, 2013 from December 31, 2012 follow:
[Million $$]
Cash & Investments: +5.0
Receivables & Inventory: +0.9
Intangible Assets (net): (2.2)
Notes Payable: (3.0)
Stockholders' Equity: +6.1
Financial ratios as of September 30, 2013 follow:
1) Current Ratio (including the current portion of loans) = 2.7
2) Days in Receivables (based on 3Q sales activity) = 39
3) Average Inventory Turns (based on 3Q CGS) = 3.6
4) Year-to-Date ROE = 20% (prior to dividend payments)
= 13% (after accrual of shareholder dividends)
UTMD's dilution from unexercised option shares added to actual weighted average outstanding shares for purposes of calculating EPS was 46,347 in 3Q 2013 compared to 36,483 in 3Q 2012, and 46,966 in 9M 2013 compared to 33,917 in 9M 2012. The actual number of outstanding shares at the end of 3Q 2013 was 3,737,700 which included additional shares from 3Q 2013 employee option exercises of 9,470 shares. The total number of outstanding unexercised options at September 30, 2013 was 98,100 shares at an average exercise price of $27.36/ share, including shares awarded but not vested. This compares to 169,000 option shares outstanding at the end of 3Q 2012 at an average exercise price of $25.84/ share. No option shares have been awarded to date in 2013.
Risk factors that could cause results to differ materially in future quarters include clinical acceptance of products, timing of regulatory approvals of new products and of distributing existing products in new geographical areas, increased government intervention in the health care marketplace, distribution restrictions by anticompetitive hospital administrative agreements, foreign currency exchange rates, the Company's ability to efficiently manufacture, market, and sell its products globally, among other factors that have been outlined in UTMD's public disclosure filings with the SEC. The SEC Form 10-Q for 3Q 2013 will be filed with the SEC by November 12.
Utah Medical Products, Inc., with particular interest in health care for women and their babies, develops, manufactures and markets a broad range of disposable and reusable specialty medical devices recognized by clinicians in hundreds of countries around the world as the standard for obtaining optimal long term outcomes for their patients. For more information about Utah Medical Products, Inc., visit UTMD's website at www.utahmed.com.
Utah Medical Products, Inc.
INCOME STATEMENT, Third Quarter (3 months ended September 30)
(in thousands except earnings per share):
3Q 2013 3Q 2012 Percent Change
Net Sales $10,032 $10,489 (4.4%)
Gross Profit 5,949 6,477 (8.1%)
Operating Income 3,665 3,960 (7.4%)
Income Before Tax 3,577 3,849 (7.1%)
Net Income 2,571 2,721 (5.5%)
Earnings Per Share $0.68 $0.73 (6.9%)
Shares Outstanding (diluted) 3,781 3,726
INCOME STATEMENT, Nine Months (9 months ended September 30)
(in thousands except earnings per share):
9M 2013 9M 2012 Percent Change
Net Sales $30,408 $31,719 (4.1%)
Gross Profit 18,279 19,286 (5.2%)
Operating Income 11,269 11,627 (3.1%)
Income Before Tax 10,991 11,215 (2.0%)
Net Income 7,938 7,910 +0.4%
Earnings Per Share $2.11 $2.13 (1.4%)
Shares Outstanding (diluted) 3,771 3,706
BALANCE SHEET
(in thousands) (unaudited) (unaudited) (audited) (unaudited)
SEP 30, 2013 JUN 30, 2013 DEC 31, 2012 SEP 30, 2012
Assets
Cash & Investments $13,922 $11,437 $8,913 $9,369
Accounts & Other Receivables, Net 4,963 5,673 4,341 5,037
Inventories 4,660 4,367 4,353 4,707
Other Current Assets 986 812 928 944
Total Current Assets 24,531 22,289 18,535 20,057
Property & Equipment, Net 8,279 8,155 8,428 8,449
Intangible Assets, Net 47,789 45,985 49,972 50,297
Total Assets $80,599 $76,429 $76,935 $78,803
Liabilities & Shareholders' Equity
A/P & Accrued Liabilities $5,240 $4,773 $3,821 $5,965
Current Portion of Notes Payable 3,989 3,834 4,002 5,450
Total Current Liabilities 9,229 8,607 7,823 11,415
Notes Payable (excluding current portion) 5,983 6,709 9,003 9,415
Other LT Liabilities -- -- 363 450
Deferred Tax Liability -- Intangible 7,433 7,583 7,890 8,053
Deferred Income Taxes 878 889 884 760
Shareholders' Equity 57,076 52,641 50,972 48,710
Total Liabilities & Shareholders' Equity $80,599 $76,429 $76,935 $78,803
.
.
Contact:.
.
Paul Richins
(801) 566-1200
Wynn Resorts, Limited Reports Third Quarter 2013 Results
Business WirePress Release: Wynn Resorts, Limited – 5 hours ago..
Wynn Resorts, Limited (WYNN) today reported financial results for the third quarter ended September 30, 2013.
Net revenues for the third quarter of 2013 were $1,390.1 million, compared to $1,298.5 million in the third quarter of 2012. The increase was driven by a 9.6% revenue increase from our Macau operations and 1.1% higher revenues from our Las Vegas operations. Adjusted property EBITDA (1) was $435.6 million for the third quarter of 2013, an 8.2% increase from $402.6 million in the third quarter of 2012.
On a US GAAP basis, net income attributable to Wynn Resorts for the third quarter of 2013 was $182.0 million, or $1.79 per diluted share, compared to a net income attributable to Wynn Resorts of $112.0 million, or $1.11 per diluted share in the third quarter of 2012.
Adjusted net income attributable to Wynn Resorts (2) in the third quarter of 2013 was $187.0 million, or $1.84 per diluted share (adjusted EPS), compared to an adjusted net income attributable to Wynn Resorts of $149.2 million, or $1.48 per diluted share in the third quarter of 2012.
Wynn Resorts also announced today that the Company has approved a cash dividend for the quarter of $1.00 per common share. This dividend will be payable on November 21, 2013, to stockholders of record on November 7, 2013.
Macau Operations
In the third quarter of 2013, net revenues were $997.6 million, a 9.6% increase from the $910.5 million generated in the third quarter of 2012. Adjusted property EBITDA in the third quarter of 2013 was $329.1 million, up 12.6% from $292.2 million in the third quarter of 2012.
Table games results in Macau are segregated into two distinct reporting categories, the VIP segment and the mass market segment.
Table games turnover in the VIP segment was $30.3 billion for the third quarter of 2013, a 9.8% increase from $27.6 billion in the third quarter of 2012. VIP table games win as a percentage of turnover (calculated before commissions) for the quarter was 3.04%, modestly above the expected range of 2.7% to 3.0% and below the 3.08% experienced in the third quarter of 2012.
Table games win in the mass market segment increased by 13.5% in the third quarter to $239.8 million. Mass market table games win per unit per day increased by 12.7% to $12,872 from $11,423 in the third quarter of 2012. Drop in the mass market segment was $630.7 million in the third quarter of 2013, down 8.1% from the September 2012 quarter, while the segment’s win percentage of 38.0% compares to 30.8% in last year’s third quarter and sequentially to 34.6% in the second quarter of 2013. Note that customers purchase mass market gaming chips at either the gaming tables or the casino cage. Chips purchased at the casino cage are excluded from table games drop and will increase the expected win percentage. With the increased purchases at the casino cage, we believe the relevant indicator of volumes in the mass market segment should be table games win.
Slot machine handle of $1.2 billion for the third quarter of 2013 was 18.5% above the prior-year quarter, and slot win increased 2.4% compared to the prior-year period. Win per unit per day was 11.2% higher at $689, compared to $620 in the third quarter of 2012. The average number of slots in the 2013 third quarter declined by 75 machines versus the 2012 period due to various changes designed to enhance the comfort of the casino floor.
During the first half of 2013, we began a renovation of the approximately 600 guestrooms in the original Wynn Macau tower, resulting in an approximate 7% reduction in the number of available room-nights in the 2013 third quarter versus the prior-year period. We expect to complete the guestroom renovation by the end of 2013.
We achieved an average daily rate (ADR) of $310 for the third quarter of 2013, modestly above the $307 reported in the 2012 quarter. Occupancy at Wynn Macau improved to 95.8% from 94.2% in the prior-year period, and revenue per available room (REVPAR) rose 2.7% to $297 in the 2013 quarter from $289 in last year’s third quarter. Gross non-casino revenues increased 0.6% during the quarter to $97.8 million.
We currently have 501 tables (273 VIP tables, 218 mass market tables and 10 poker tables) and 884 slot machines at Wynn Macau.
Wynn Palace Project in Macau
The Company is currently constructing Wynn Palace, a full-scale integrated resort containing a 1,700-room hotel, performance lake, meeting space, casino, spa, retail offerings, and food and beverage outlets on Cotai in Macau. In February 2013, we started pre-foundation work and continue to remain on pace with the construction schedule. Additionally, in July 2013, we signed a $2.6 billion guaranteed maximum price (GMP) contract for the project’s construction. The total project budget, including construction costs, capitalized interest, land, and pre-opening expenses, is $4.0 billion. We expect to open our resort on Cotai in the first half of 2016.
During the third quarter of 2013, we invested approximately $109.9 million in our Cotai project, taking the total investment to date to $519 million.
Las Vegas Operations
For the quarter ended September 30, 2013, net revenues were $392.5 million, a 1.1% increase from $388.0 million in the third quarter of 2012. Adjusted property EBITDA was $106.5 million, down 3.5% from the $110.4 million generated in the comparable period in 2012. EBITDA margin on net revenues was 27.1% in the third quarter of 2013 compared to 28.4% in the third quarter of 2012.
Net casino revenues in the third quarter of 2013 were $161.6 million, a 3.9% increase from the third quarter of 2012. Table games drop of $676.3 million was down 0.9% compared to $682.3 million in the 2012 quarter. Table games win percentage was 22.6%, within the property’s expected range of 21% to 24% and above the 21.9% reported in the 2012 quarter. Slot machine handle of $733.5 million was 1.4% above the $723.5 million in the comparable period of 2012, while net slot win was down 1.0% due to lower hold in the 2013 quarter.
Gross non-casino revenues for the quarter were $282.7 million, 0.9% higher than in the third quarter of 2012 due to increases in the hotel and retail segments, and partially offset by lower food and beverage and entertainment revenues.
Room revenues were up 5.1% to $95.7 million during the quarter, versus $91.0 million in the third quarter of 2012. Average daily rate (ADR) was up 2.4% to $250, and occupancy improved to 87.9% from 85.7% in the third quarter of 2012. Revenue per available room (REVPAR) was $220 in the 2013 quarter, 5.0% above the $209 reported in the prior-year quarter.
Food and beverage revenues in the third quarter of 2013 were $129.0 million. Retail revenues improved 19.9% from last year’s quarter to $25.7 million, a result of reconfigurations to our retail area in the first half of 2013. Entertainment revenues declined to $17.5 million in the 2013 third quarter from $21.6 million due to a show that ended its run at the Encore Theater in November 2012.
Balance Sheet and Other
Our total cash and investments balance at September 30, 2013 was $2.7 billion. Total debt outstanding at the end of the quarter was $6.2 billion, including $3.4 billion of Wynn Las Vegas debt, $947.8 million of Wynn Macau debt and $1.9 billion at the parent company. Subsequent to the end of the 2013 third quarter, Wynn Macau, Limited issued $600.0 million of new 5.25% senior notes due in 2021.
Conference Call Information
The Company will hold a conference call to discuss its results on October 24, 2013 at 1:30 p.m. PT (4:30 p.m. ET). Interested parties are invited to join the call by accessing a live audio webcast at http://www.wynnresorts.com.
Forward-looking Statements
This release contains forward-looking statements regarding operating trends and future results of operations. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those we express in these forward-looking statements, including, but not limited to, our dependence on existing management, results of regulatory or enforcement actions and probity investigations, pending or future legal proceedings, uncertainties over the development and success of new gaming and resort properties, adverse tourism trends, general global macroeconomic conditions, changes in gaming laws or regulations, volatility and weakness in world-wide credit and financial markets, and our substantial indebtedness and leverage. Additional information concerning potential factors that could affect the Company's financial results is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and the Company's other periodic reports filed with the Securities and Exchange Commission. The Company is under no obligation to (and expressly disclaims any such obligation to) update or revise its forward-looking statements as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
(1) “Adjusted property EBITDA” is earnings before interest, taxes, depreciation, amortization, pre-opening costs, property charges and other, corporate expenses, intercompany golf course and water rights leases, stock-based compensation, and other non-operating income and expenses, and includes equity in income from unconsolidated affiliates. Adjusted property EBITDA is presented exclusively as a supplemental disclosure because management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses adjusted property EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its properties with those of its competitors. The Company also presents adjusted property EBITDA because it is used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDA as a supplement to financial measures in accordance with U.S. generally accepted accounting principles (“GAAP”). In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including Wynn Resorts, Limited, have historically excluded from their EBITDA calculations pre-opening expenses, property charges, corporate expenses and stock-based compensation, that do not relate to the management of specific casino properties. However, adjusted property EBITDA should not be considered as an alternative to operating income as an indicator of the Company’s performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income, adjusted property EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in adjusted property EBITDA. Also, Wynn Resorts’ calculation of adjusted property EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
(2) Adjusted net income attributable to Wynn Resorts is net income before pre-opening costs, property charges and other, and certain other non-operating income and expenses. Adjusted net income attributable to Wynn Resorts and adjusted net income per share attributable to Wynn Resorts (“EPS”) are presented as supplemental disclosures because management believes that these financial measures are widely used to measure the performance, and as a principal basis for valuation, of gaming companies. These measures are used by management and/or evaluated by some investors, in addition to income and EPS computed in accordance with GAAP, as an additional basis for assessing period-to-period results of our business. Adjusted net income attributable to Wynn Resorts and adjusted net income attributable to Wynn Resorts per share may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
The Company has included schedules in the tables that accompany this release that reconcile (i) net income attributable to Wynn Resorts to adjusted net income attributable to Wynn Resorts, and (ii) operating income to adjusted property EBITDA and adjusted property EBITDA to net income attributable to Wynn Resorts.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Operating revenues:
Casino $ 1,105,595 $ 1,012,841 $ 3,228,246 $ 3,015,510
Rooms 123,078 119,635 372,931 362,018
Food and beverage 152,218 156,568 461,474 452,845
Entertainment, retail and other 105,144 101,087 309,738 308,398
Gross revenues 1,486,035 1,390,131 4,372,389 4,138,771
Less: promotional allowances (95,923 ) (91,636 ) (271,350 ) (273,571 )
Net revenues 1,390,112 1,298,495 4,101,039 3,865,200
Operating costs and expenses:
Casino 699,897 653,863 2,062,507 1,974,207
Rooms 33,646 31,944 101,020 95,193
Food and beverage 84,118 80,652 253,458 235,570
Entertainment, retail and other 45,478 46,881 128,760 144,647
General and administrative 105,026 115,785 332,316 321,512
Provision for doubtful accounts 11,325 5,283 7,104 6,068
Pre-opening costs 706 - 1,592 -
Depreciation and amortization 93,325 94,274 279,061 280,142
Property charges and other 2,613 22,721 13,571 36,547
Total operating costs and expenses 1,076,134 1,051,403 3,179,389 3,093,886
Operating income 313,978 247,092 921,650 771,314
Other income (expense):
Interest income 3,215 3,759 11,595 7,807
Interest expense, net of capitalized interest (73,549 ) (75,082 ) (222,690 ) (211,017 )
(Decrease) increase in swap fair value (3,525 ) - 13,131 4,930
Loss on extinguishment of debt - (19,663 ) (26,578 ) (24,491 )
Equity in income from unconsolidated affiliates 288 190 879 911
Other 1,123 1,249 4,385 936
Other income (expense), net (72,448 ) (89,547 ) (219,278 ) (220,924 )
Income before income taxes 241,530 157,545 702,372 550,390
Benefit for income taxes 7,281 7,626 11,299 12,483
Net income 248,811 165,171 713,671 562,873
Less: Net income attributable to noncontrolling interest (66,791 ) (53,136 ) (198,903 ) (172,210 )
Net income attributable to Wynn Resorts, Limited $ 182,020 $ 112,035 $ 514,768 $ 390,663
Basic and diluted income per common share:
Net income attributable to Wynn Resorts, Limited:
Basic $ 1.81 $ 1.12 $ 5.12 $ 3.75
Diluted $ 1.79 $ 1.11 $ 5.07 $ 3.71
Weighted average common shares outstanding:
Basic 100,685 99,871 100,470 104,104
Diluted 101,547 100,892 101,526 105,291
Dividends declared per common share: $ 1.00 $ 0.50 $ 3.00 $ 1.50
WYNN RESORTS, LIMITED AND SUBSIDIARIES
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO WYNN RESORTS, LIMITED
TO ADJUSTED NET INCOME ATTRIBUTABLE TO WYNN RESORTS, LIMITED
(amounts in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30,
September 30,
2013 2012 2013 2012
Net income attributable to Wynn Resorts, Limited $ 182,020 $ 112,035 $ 514,768 $ 390,663
Pre-opening costs 706 - 1,592 -
Property charges and other 2,613 22,721 13,571 36,547
Decrease (increase) in swap fair value 3,525 - (13,131 ) (4,930 )
Loss on extinguishment of debt - 19,663 26,578 24,491
Adjustment for noncontrolling interest (1,820 ) (5,179 ) 2,227 (6,638 )
Adjusted net income attributable to Wynn Resorts, Limited (2) $ 187,044 $ 149,240 $ 545,605 $ 440,133
Adjusted net income attributable to Wynn Resorts, Limited per diluted share $ 1.84 $ 1.48 $ 5.37 $ 4.18
WYNN RESORTS, LIMITED AND SUBSIDIARIES
RECONCILIATION OF OPERATING INCOME TO ADJUSTED PROPERTY EBITDA
AND ADJUSTED PROPERTY EBITDA TO NET INCOME ATTRIBUTABLE TO WYNN RESORTS, LIMITED
(amounts in thousands)
(unaudited)
Three Months Ended September 30, 2013
Macau Las Vegas Corporate
Operations Operations and Other Total
Operating income $ 249,146 $ 29,099 $ 35,733 $ 313,978
Pre-opening costs 706 - - 706
Depreciation and amortization 30,012 61,720 1,593 93,325
Property charges and other 2,337 276 - 2,613
Management and royalty fees 39,602 5,892 (45,494 ) -
Corporate expenses and other 6,188 7,343 5,976 19,507
Stock-based compensation 1,115 2,149 1,940 5,204
Equity in income from
unconsolidated affiliates - 36 252 288
Adjusted Property EBITDA (1) $ 329,106 $ 106,515 $ - $ 435,621
Three Months Ended September 30, 2012
Macau Las Vegas Corporate
Operations Operations and Other Total
Operating income $ 214,486 $ 12,314 $ 20,292 $ 247,092
Depreciation and amortization 31,099 62,419 756 94,274
Property charges and other 990 21,698 33 22,721
Management and royalty fees 36,574 5,822 (42,396 ) -
Corporate expenses and other 7,276 6,451 18,697 32,424
Stock-based compensation 1,736 1,548 2,566 5,850
Equity in income from
unconsolidated affiliates - 138 52 190
Adjusted Property EBITDA (1) $ 292,161 $ 110,390 $ - $ 402,551
Three Months Ended
September 30,
2013 2012
Adjusted Property EBITDA (1) $ 435,621 $ 402,551
Pre-opening costs (706 ) -
Depreciation and amortization (93,325 ) (94,274 )
Property charges and other (2,613 ) (22,721 )
Corporate expenses and other (19,507 ) (32,424 )
Stock-based compensation (5,204 ) (5,850 )
Interest income 3,215 3,759
Interest expense, net of capitalized interest (73,549 ) (75,082 )
Decrease in swap fair value (3,525 ) -
Loss on extinguishment of debt - (19,663 )
Other 1,123 1,249
Benefit for income taxes 7,281 7,626
Net income 248,811 165,171
Less: Net income attributable to noncontrolling interest (66,791 ) (53,136 )
Net income attributable to Wynn Resorts, Limited $ 182,020 $ 112,035
WYNN RESORTS, LIMITED AND SUBSIDIARIES
RECONCILIATION OF OPERATING INCOME TO ADJUSTED PROPERTY EBITDA
AND ADJUSTED PROPERTY EBITDA TO NET INCOME ATTRIBUTABLE TO WYNN RESORTS, LIMITED
(amounts in thousands)
(unaudited)
Nine Months Ended September 30, 2013
Macau Las Vegas Corporate
Operations Operations and Other Total
Operating income $ 716,908 $ 119,069 $ 85,673 $ 921,650
Pre-opening costs 1,592 - - 1,592
Depreciation and amortization 88,835 185,425 4,801 279,061
Property charges and other 3,503 10,095 (27 ) 13,571
Management and royalty fees 116,478 17,720 (134,198 ) -
Corporate expenses and other 19,334 23,373 17,902 60,609
Stock-based compensation 3,255 6,629 25,188 35,072
Equity in income from
unconsolidated affiliates - 218 661 879
Adjusted Property EBITDA (1) $ 949,905 $ 362,529 $ - $ 1,312,434
Nine Months Ended September 30, 2012
Macau Las Vegas Corporate
Operations Operations and Other Total
Operating income $ 651,757 $ 36,278 $ 83,279 $ 771,314
Depreciation and amortization 89,372 188,613 2,157 280,142
Property charges and other 8,924 27,590 33 36,547
Management and royalty fees 111,007 16,462 (127,469 ) -
Corporate expenses and other 21,664 19,647 33,408 74,719
Stock-based compensation 1,420 4,247 8,037 13,704
Equity in income from
unconsolidated affiliates - 356 555 911
Adjusted Property EBITDA (1) $ 884,144 $ 293,193 $ - $ 1,177,337
Nine Months Ended
September 30,
2013 2012
Adjusted Property EBITDA (1) $ 1,312,434 $ 1,177,337
Pre-opening costs (1,592 ) -
Depreciation and amortization (279,061 ) (280,142 )
Property charges and other (13,571 ) (36,547 )
Corporate expenses and other (60,609 ) (74,719 )
Stock-based compensation (35,072 ) (13,704 )
Interest income 11,595 7,807
Interest expense, net of capitalized interest (222,690 ) (211,017 )
Increase in swap fair value 13,131 4,930
Loss on extinguishment of debt (26,578 ) (24,491 )
Other 4,385 936
Benefit for income taxes 11,299 12,483
Net income 713,671 562,873
Less: Net income attributable to noncontrolling interest (198,903 ) (172,210 )
Net income attributable to Wynn Resorts, Limited $ 514,768 $ 390,663
WYNN RESORTS, LIMITED AND SUBSIDIARIES
SUPPLEMENTAL DATA SCHEDULE
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Room Statistics for Macau operations:
Occupancy % 95.8 % 94.2 % 95.0 % 91.8 %
Average Daily Rate (ADR)(a) $ 310 $ 307 $ 313 $ 316
Revenue per available room (REVPAR) (b) $ 297 $ 289 $ 297 $ 290
Other information for Macau operations:
Table games win per unit per day(c) $ 25,927 $ 23,594 $ 25,351 $ 23,803
Slot machine win per unit per day(d) $ 689 $ 620 $ 742 $ 746
Average number of table games 487 490 490 490
Average number of slot machines 879 954 864 936
Room Statistics for Las Vegas operations:
Occupancy % 87.9 % 85.7 % 85.9 % 84.2 %
Average Daily Rate (ADR) (a) $ 250 $ 244 $ 259 $ 251
Revenue per available room (REVPAR) (b) $ 220 $ 209 $ 222 $ 211
Other information for Las Vegas operations:
Table games win per unit per day(c) $ 7,031 $ 7,323 $ 7,027 $ 6,397
Table Win % 22.6 % 21.9 % 23.7 % 20.1 %
Slot machine win per unit per day(d) $ 258 $ 215 $ 234 $ 199
Average number of table games 236 221 234 220
Average number of slot machines 1,935 2,347 2,082 2,378
(a) ADR is Average Daily Rate and is calculated by dividing total room revenue including the retail value of promotional allowances (less service charges, if any) by total rooms occupied including complimentary rooms.
(b) REVPAR is Revenue per Available Room and is calculated by dividing total room revenue including the retail value of promotional allowances (less service charges, if any) by total rooms available.
(c) Table games win per unit per day is shown before discounts and commissions, as applicable.
(d) Slot machine win per unit per day is calculated as gross slot win minus progressive accruals and free play.
.
.
Contact:.
.
Wynn Resorts, Limited
Lewis Fanger, Vice President
702-770-7555
investorrelations@wynnresorts.com
KKR & Co. L.P. Announces Third Quarter 2013 Results
Strong Investment Performance Drives Meaningful Economic Net Income
GAAP net income (loss) attributable to KKR & Co. L.P. was $204.7 million for the quarter ended September 30, 2013, up from $127.4 million in the comparable period of 2012. GAAP net income (loss) attributable to KKR & Co. L.P. was $413.3 million for the nine months ended September 30, 2013, down from $464.1 million in the comparable period of 2012.
Assets under management (“AUM”) totaled $90.2 billion as of September 30, 2013, up from $83.5 billion as of June 30, 2013.
Fee related earnings (“FRE”) were $106.0 million and $292.2 million for the quarter and nine months ended September 30, 2013, respectively, up from $90.7 million and $233.8 million in the comparable periods of 2012.
Total distributable earnings were $251.1 million for the quarter ended September 30, 2013, down from $332.9 million for the quarter ended September 30, 2012. Total distributable earnings were $945.5 million for the nine months ended September 30, 2013, up from $903.1 million in the comparable period of 2012.
Economic net income (“ENI”) was $613.7 million for the quarter ended September 30, 2013, up from $509.9 million in the comparable period of 2012. ENI was $1.4 billion for the nine months ended September 30, 2013, down from $1.8 billion in the comparable period of 2012.
After-tax ENI was $0.84 per adjusted unit for the quarter ended September 30, 2013, up from $0.69 per adjusted unit in the comparable period of 2012. After-tax ENI was $1.90 per adjusted unit for the nine months ended September 30, 2013, down from $2.42 per adjusted unit in the comparable period of 2012.
Book value was $7.2 billion on a total reportable segment basis as of September 30, 2013 or $10.07 per adjusted unit.
KKR & Co. L.P. declares a third quarter distribution of $0.23 per common unit.
KKR & Co. L.P. announced a transaction to acquire Avoca Capital.
Business WirePress Release: Kohlberg Kravis Roberts & Co. L.P. – 1 hour 48 minutes ago..
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NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported its third quarter 2013 results.
For the quarter and nine months ended September 30, 2013, the carrying value of our private equity investment portfolio appreciated 5.9% and 12.5%, respectively.
ENI was $613.7 million for the quarter ended September 30, 2013, up from $509.9 million for the quarter ended September 30, 2012. The increase was principally attributable to higher investment income earned from our principal investments and to a lesser extent a higher level of net carried interest earned from our private equity funds.
ENI was $1.4 billion for the nine months ended September 30, 2013, down from $1.8 billion for the nine months ended September 30, 2012. The decrease was primarily due to lower investment income earned from our principal investments as well as a lower level of net carried interest earned from our private equity funds. While the fair value of our principal investments and private equity portfolio increased during the nine months ended September 30, 2013, the level of appreciation was lower than in the comparable period of 2012.
AUM and fee paying assets under management (“FPAUM”) were $90.2 billion and $73.6 billion, respectively, as of September 30, 2013, both up from June 30, 2013. The increases in both AUM and FPAUM were primarily attributable to new capital raised across our various investment platforms, partially offset by distributions to fund limited partners. In September 2013, our Energy Income and Growth Fund had its first close with commitments totaling $1.4 billion (includes general partner commitment).
For the quarter and nine months ended September 30, 2013, FRE was $106.0 million and $292.2 million, respectively, up from $90.7 million and $233.8 million in the comparable periods of 2012. The increases in both comparable periods were primarily driven by (i) management fees attributable to new capital raised; (ii) higher transaction fees; and (iii) the acquisition of Prisma.
On October 18, 2013, KKR announced a transaction to acquire Avoca Capital (Unlimited) and its affiliates (“Avoca”), a European credit investment manager with approximately $8 billion in assets under management as of September 30, 2013. The transaction, which is subject to customary regulatory approvals, is expected to close in the first quarter of 2014.
“Our investment portfolio and balance sheet continue to perform, resulting in an unannualized 20% return on equity in the first nine months of this year,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR.
___________________________________________________________________________________________________
Note: Certain financial measures, including FRE, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP.
GAAP RESULTS
GAAP results for the quarter and nine months ended September 30, 2013 included net income attributable to KKR & Co. L.P. of $204.7 million and $413.3 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.66 and $1.40, respectively, on a diluted basis. For the quarter and nine months ended September 30, 2012, net income attributable to KKR & Co. L.P. was $127.4 million and $464.1 million, respectively, and net income attributable to KKR & Co. L.P. per common unit were $0.49 and $1.86, respectively, on a diluted basis. The increase quarter over quarter was primarily due to (i) an increase in management fees attributable to new capital raised and the acquisition of Prisma; (ii) higher transaction fees; and (iii) a higher level of total investment income. The year over year decrease was primarily due to a lower level of total investment income. The decrease in total investment income was partially offset by increases in fees primarily attributable to the acquisition of Prisma and higher transaction fees. The decrease in compensation and benefits expense was primarily attributable to lower carry pool allocations as a result of the recognition of lower carried interest during the nine months ended September 30, 2013 compared to the comparable period in 2012.
SEGMENT RESULTS
Private Markets
AUM was $59.7 billion as of September 30, 2013, an increase of $5.2 billion, or 9.5%, compared to AUM of $54.5 billion as of June 30, 2013. The increase was primarily attributable to new capital raised from fund investors and to a lesser extent appreciation in the fair value of our private equity portfolio. The increase was partially offset by distributions to the limited partners of our private equity funds arising from realizations.
FPAUM was $49.9 billion as of September 30, 2013, an increase of $4.0 billion, or 8.7%, compared to FPAUM of $45.9 billion as of June 30, 2013. The increase was primarily attributable to new capital raised from fund investors partially offset by distributions to the limited partners of our private equity funds arising from realizations.
FRE was $44.4 million for the quarter ended September 30, 2013, a decrease of $0.3 million compared to FRE of $44.7 million for the quarter ended September 30, 2012. The decrease was primarily driven by higher compensation expense due to additional headcount, partially offset by higher management fees resulting from new capital raised and higher transaction fees.
FRE was $127.8 million for the nine months ended September 30, 2013, an increase of $9.2 million, or 7.8%, compared to FRE of $118.6 million for the nine months ended September 30, 2012. The increase was primarily driven by higher management fees resulting from new capital raised and higher transaction fees. The increase was partially offset by higher compensation expense due to additional headcount.
ENI was $245.2 million for the quarter ended September 30, 2013, an increase of $31.3 million, or 14.6%, compared to ENI of $213.9 million for the quarter ended September 30, 2012. The increase was primarily attributable to higher net carried interest resulting from a higher level of appreciation in our private equity portfolio.
ENI was $583.9 million for the nine months ended September 30, 2013, a decrease of $70.0 million, or 10.7%, compared to ENI of $653.9 million for the nine months ended September 30, 2012. The decrease was primarily attributable to lower net carried interest resulting from a lower level of appreciation in our private equity portfolio, partially offset by the increase in FRE discussed above.
Public Markets
AUM was $30.5 billion as of September 30, 2013, an increase of $1.5 billion, or 5.2%, compared to AUM of $29.0 billion as of June 30, 2013. FPAUM was $23.7 billion as of September 30, 2013, an increase of $1.7 billion, or 7.7%, compared to FPAUM of $22.0 billion as of June 30, 2013. For both AUM and FPAUM, the increases were primarily attributable to net new capital raised from fund investors.
FRE was $20.2 million for the quarter ended September 30, 2013, a decrease of $3.1 million, or 13.3%, compared to FRE of $23.3 million for the quarter ended September 30, 2012. The decrease was principally attributable to lower incentive fees earned and higher expenses related to one-time expenses in connection with the launch of a closed-end fund in the quarter ended September 30, 2013. The decrease was partially offset by higher management fees related to new capital raised from fund investors and the acquisition of Prisma.
FRE was $91.8 million for the nine months ended September 30, 2013, an increase of $40.7 million, or 79.6%, compared to FRE of $51.1 million for the nine months ended September 30, 2012. The increase was primarily attributable to higher management fees related to new capital raised from fund investors and the acquisition of Prisma.
ENI was $28.4 million for the quarter ended September 30, 2013, a decrease of $6.5 million, or 18.6%, compared to ENI of $34.9 million for the quarter ended September 30, 2012. The decrease was primarily driven by the decrease in FRE discussed above and lower net carried interest resulting from a lower level of appreciation of certain carry-earning credit investment vehicles.
ENI was $118.0 million for the nine months ended September 30, 2013, an increase of $52.4 million, or 79.9%, compared to ENI of $65.6 million for the nine months ended September 30, 2012. The increase was primarily driven by the increase in FRE discussed above and to a lesser extent higher net carried interest due to certain credit investment vehicles beginning to earn carry in 2013.
Capital Markets and Principal Activities
FRE was $41.4 million for the quarter ended September 30, 2013, an increase of $18.7 million, or 82.4%, compared to FRE of $22.7 million for the quarter ended September 30, 2012. FRE was $72.7 million for the nine months ended September 30, 2013, an increase of $8.5 million, or 13.2%, compared to FRE of $64.2 million for the nine months ended September 30, 2012. The increases in both comparable periods were primarily driven by a higher level of overall capital markets transaction activity.
ENI was $340.1 million for the quarter ended September 30, 2013, an increase of $79.0 million, or 30.3%, compared to ENI of $261.1 million for the quarter ended September 30, 2012. The increase was primarily attributable to a higher level of investment income from our principal investments and to a lesser extent the increase in FRE discussed above.
ENI was $704.0 million for the nine months ended September 30, 2013, a decrease of $359.7 million, or 33.8%, compared to ENI of $1,063.7 million for the nine months ended September 30, 2012. The decrease was primarily due to a lower level of investment income from our principal investments. While the fair value of our principal investments increased during the nine months ended September 30, 2013, the level of appreciation was lower than in the comparable period of 2012.
CAPITAL AND LIQUIDITY
As of September 30, 2013, KKR had $1.9 billion of cash and short-term investments on a total reportable segment basis and $1.0 billion of outstanding debt obligations. KKR’s availability for borrowings was $750.0 million (which is reduced by an outstanding letter of credit), which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of September 30, 2013.
As of September 30, 2013, KKR’s portion of total uncalled commitments to its investment funds was $1,164.5 million, consisting of the following (amounts in thousands):
Uncalled
Commitments
Private Markets
Energy Income and Growth Fund $ 252,500
North America Fund XI 191,300
Real Estate Fund 155,600
European Fund III 113,300
Asian Fund II 75,000
2006 Fund 62,900
Infrastructure 24,400
Natural Resources 10,900
E2 Investors (Annex Fund) 10,200
Asian Fund 9,300
China Growth Fund 6,500
Co-Investment Vehicles 45,600
Total Private Markets Commitments 957,500
Public Markets
Special Situations Vehicles 162,000
Mezzanine Fund 25,700
Direct Lending Vehicles 19,300
Total Public Markets Commitments 207,000
Total Uncalled Commitments $ 1,164,500
DISTRIBUTION
A distribution of $0.23 per common unit has been declared, comprised of (i) $0.10 per common unit from after-tax FRE, (ii) $0.07 per common unit from realized cash carry, and (iii) $0.06 per common unit from net realized principal investment income. The distribution will be paid on November 19, 2013 to unitholders of record as of the close of business on November 4, 2013. Please refer to the distribution policy presented later in this release.
CONFERENCE CALL
A conference call to discuss KKR’s financial results will be held on Thursday, October 24, 2013 at 11:00 a.m. EDT. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Public Investors section of KKR’s website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR’s website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 76308413 beginning approximately two hours after the broadcast.
From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Investor Center for KKR & Co. L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the “Email Alerts” area of the Investor Center on the website.
ABOUT KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $90.2 billion in assets under management as of September 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (KKR) and “KKR”, as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information, please visit KKR’s website at www.kkr.com.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, committed dollars invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized principal investment income and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships such as Prisma, Nephila or Avoca; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR’s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the SEC on February 22, 2013, and other filings with the SEC, which are available at www.sec.gov.
KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended Nine Months Ended
September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Revenues
Fees $ 220,028 $ 162,154 $ 537,644 $ 390,821
Expenses
Compensation and Benefits 329,182 366,350 860,905 1,019,400
Occupancy and Related Charges 17,637 14,344 46,036 43,636
General, Administrative and Other 108,676 65,825 279,906 177,480
Total Expenses 455,495 446,519 1,186,847 1,240,516
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 2,230,401 2,308,613 4,598,755 6,997,166
Dividend Income 121,059 10,440 370,014 263,298
Interest Income 114,861 95,578 352,250 259,669
Interest Expense (25,056 ) (17,868 ) (72,693 ) (52,757 )
Total Investment Income (Loss) 2,441,265 2,396,763 5,248,326 7,467,376
Income (Loss) Before Taxes 2,205,798 2,112,398 4,599,123 6,617,681
Income Taxes 7,644 9,612 25,525 37,777
Net Income (Loss) 2,198,154 2,102,786 4,573,598 6,579,904
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests 9,169 9,994 25,992 18,551
Net Income (Loss) Attributable to
Noncontrolling Interests 1,984,245 1,965,381 4,134,293 6,097,245
Net Income (Loss) Attributable to KKR & Co. L.P. $ 204,740 $ 127,411 $ 413,313 $ 464,108
Distributions Declared per KKR & Co. L.P. Common Unit $ 0.23 $ 0.24 $ 0.92 $ 0.52
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.73 $ 0.53 $ 1.53 $ 1.98
Diluted (a) $ 0.66 $ 0.49 $ 1.40 $ 1.86
Weighted Average Common Units Outstanding
Basic 282,148,802 239,696,358 270,484,224 234,876,879
Diluted (a) 308,135,191 257,646,622 296,181,070 249,359,200
(a) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in KKR’s business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 173,245 $ 164,176 $ 126,483 $ 490,384 $ 384,752
Incentive fees 1,225 15,590 17,768 35,664 31,495
Management and incentive fees 174,470 179,766 144,251 526,048 416,247
Monitoring and transaction fees:
Monitoring fees 33,010 28,907 29,969 93,985 83,577
Transaction fees 129,127 62,785 75,264 232,211 163,268
Fee credits (61,782 ) (34,751 ) (31,707 ) (119,598 ) (67,739 )
Net monitoring and transaction fees 100,355 56,941 73,526 206,598 179,106
Total fees 274,825 236,707 217,777 732,646 595,353
Expenses
Compensation and benefits 92,229 80,436 71,340 247,827 196,810
Occupancy and related charges 15,674 13,067 13,605 42,063 41,305
Other operating expenses (a) 60,884 45,027 42,128 150,541 123,406
Total expenses 168,787 138,530 127,073 440,431 361,521
Fee Related Earnings (a) 106,038 98,177 90,704 292,215 233,832
Investment income (loss)
Realized carried interest 81,532 269,828 166,908 439,527 307,387
Unrealized carried interest 278,004 (202,018 ) 243,828 407,184 855,587
Gross carried interest 359,536 67,810 410,736 846,711 1,162,974
Less: allocation to KKR carry pool (145,512 ) (26,536 ) (169,633 ) (341,552 ) (473,692 )
Less: management fee refunds (b) (7,767 ) (4,735 ) (61,499 ) (21,718 ) (135,011 )
Net carried interest 206,257 36,539 179,604 483,441 554,271
Other investment income (loss) 303,472 11,050 240,876 634,720 1,000,886
Total investment income (loss) 509,729 47,589 420,480 1,118,161 1,555,157
Income (Loss) before noncontrolling interests
in Income of consolidated entities 615,767 145,766 511,184 1,410,376 1,788,989
Income (Loss) attributable to
noncontrolling interests 2,020 1,323 1,310 4,444 5,798
Economic Net Income (Loss) $ 613,747 $ 144,443 $ 509,874 $ 1,405,932 $ 1,783,191
Provision for Income Taxes 11,950 13,486 22,548 45,553 91,788
Economic Net Income (Loss), After Taxes (c) $ 601,797 $ 130,957 $ 487,326 $ 1,360,379 $ 1,691,403
Economic Net Income (Loss), After Taxes per Adjusted Unit (c) $ 0.84 $ 0.18 $ 0.69 $ 1.90 $ 2.42
Assets Under Management $ 90,169,200 $ 83,500,900 $ 66,278,700 $ 90,169,200 $ 66,278,700
Fee Paying Assets Under Management $ 73,611,900 $ 67,956,400 $ 50,266,000 $ 73,611,900 $ 50,266,000
Committed Dollars Invested and Syndicated Capital $ 2,848,700 $ 1,889,400 $ 926,000 $ 5,562,500 $ 2,639,200
Uncalled Commitments $ 22,718,400 $ 21,364,400 $ 15,845,900 $ 22,718,400 $ 15,845,900
Other Information
Fee Related Earnings $ 106,038 $ 98,177 $ 90,704 $ 292,215 $ 233,832
Plus: depreciation and amortization 3,601 3,708 3,273 10,990 8,919
Fee Related EBITDA $ 109,639 $ 101,885 $ 93,977 $ 303,205 $ 242,751
Distributed Earnings $ 189,477 $ 313,559 $ 187,174 $ 701,756 $ 403,208
Plus: Undistributed net realized principal investment income 61,660 90,217 145,700 243,771 499,898
Total Distributable Earnings (c) $ 251,137 $ 403,776 $ 332,874 $ 945,527 $ 903,106
GAAP interest expense $ 25,056 $ 24,614 $ 17,868 $ 72,693 $ 52,757
Less: interest expense related to debt obligations
from investment financing arrangements 8,841 8,404 8,502 24,035 24,036
Core Interest Expense (c) $ 16,215 $ 16,210 $ 9,366 $ 48,658 $ 28,721
Economic Net Income (Loss), After Taxes and Equity-based Charges (c) $ 570,570 $ 105,021 $ 469,961 $ 1,275,798 $ 1,643,724
(a) For the quarter ended September 30, 2013, other operating expenses include $9.7 million of one-time expenses incurred in connection with the launch of a closed-end fund.
(b) As of September 30, 2013, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods.
(c) See definitions for economic net income (loss), after taxes, adjusted units, total distributable earnings, core interest expense and economic net income (loss), after taxes and equity-based charges under “Notes to Reportable Segments.”
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 119,410 $ 114,700 $ 105,035 $ 340,715 $ 319,117
Incentive fees - - - - -
Management and incentive fees 119,410 114,700 105,035 340,715 319,117
Monitoring and transaction fees:
Monitoring fees 33,010 28,907 29,969 93,985 83,577
Transaction fees 54,968 25,231 32,788 96,611 55,223
Fee credits (46,597 ) (29,547 ) (26,293 ) (97,153 ) (59,641 )
Net monitoring and transaction fees 41,381 24,591 36,464 93,443 79,159
Total fees 160,791 139,291 141,499 434,158 398,276
Expenses
Compensation and benefits 65,400 51,516 48,905 164,917 139,382
Occupancy and related charges 13,367 11,143 12,049 35,935 36,487
Other operating expenses 37,586 33,988 35,885 105,516 103,790
Total expenses 116,353 96,647 96,839 306,368 279,659
Fee Related Earnings 44,438 42,644 44,660 127,790 118,617
Investment income (loss)
Realized carried interest 81,532 269,828 166,908 439,527 307,387
Unrealized carried interest 263,982 (212,809 ) 224,260 361,972 830,072
Gross carried interest 345,514 57,019 391,168 801,499 1,137,459
Less: allocation to KKR carry pool (139,903 ) (22,220 ) (161,805 ) (323,467 ) (463,485 )
Less: management fee refunds (7,767 ) (4,735 ) (61,499 ) (21,718 ) (135,011 )
Net carried interest 197,844 30,064 167,864 456,314 538,963
Other investment income (loss) 3,357 (249 ) 1,779 1,073 (559 )
Total investment income (loss) 201,201 29,815 169,643 457,387 538,404
Income (Loss) before noncontrolling interests
in Income of consolidated entities 245,639 72,459 214,303 585,177 657,021
Income (Loss) attributable to
noncontrolling interests 433 411 444 1,242 3,098
Economic Net Income (Loss) $ 245,206 $ 72,048 $ 213,859 $ 583,935 $ 653,923
Assets Under Management $ 59,678,300 $ 54,452,400 $ 49,771,000 $ 59,678,300 $ 49,771,000
Fee Paying Assets Under Management $ 49,889,500 $ 45,907,500 $ 40,354,200 $ 49,889,500 $ 40,354,200
Committed Dollars Invested $ 1,805,800 $ 1,314,000 $ 623,000 $ 3,718,300 $ 1,805,500
Uncalled Commitments $ 21,103,800 $ 19,972,800 $ 14,594,700 $ 21,103,800 $ 14,594,700
...
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 53,835 $ 49,476 $ 21,448 $ 149,669 $ 65,635
Incentive fees 1,225 15,590 17,768 35,664 31,495
Management and incentive fees 55,060 65,066 39,216 185,333 97,130
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 20,534 7,243 8,780 30,883 12,521
Fee credits (15,185 ) (5,204 ) (5,414 ) (22,445 ) (8,098 )
Net monitoring and transaction fees 5,349 2,039 3,366 8,438 4,423
Total fees 60,409 67,105 42,582 193,771 101,553
Expenses
Compensation and benefits 18,606 21,990 13,997 60,296 34,608
Occupancy and related charges 1,906 1,615 1,343 5,063 4,127
Other operating expenses (a) 19,670 9,147 3,897 36,643 11,754
Total expenses 40,182 32,752 19,237 102,002 50,489
Fee Related Earnings (a) 20,227 34,353 23,345 91,769 51,064
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest 14,022 10,791 19,568 45,212 25,515
Gross carried interest 14,022 10,791 19,568 45,212 25,515
Less: allocation to KKR carry pool (5,609 ) (4,316 ) (7,828 ) (18,085 ) (10,207 )
Less: management fee refunds - - - - -
Net carried interest 8,413 6,475 11,740 27,127 15,308
Other investment income (loss) (4 ) 22 25 80 (10 )
Total investment income (loss) 8,409 6,497 11,765 27,207 15,298
Income (Loss) before noncontrolling interests
in Income of consolidated entities 28,636 40,850 35,110 118,976 66,362
Income (Loss) attributable to
noncontrolling interests 202 378 233 935 787
Economic Net Income (Loss) $ 28,434 $ 40,472 $ 34,877 $ 118,041 $ 65,575
Assets Under Management $ 30,490,900 $ 29,048,500 $ 16,507,700 $ 30,490,900 $ 16,507,700
Fee Paying Assets Under Management $ 23,722,400 $ 22,048,900 $ 9,911,800 $ 23,722,400 $ 9,911,800
Committed Dollars Invested $ 326,400 $ 370,800 $ 278,300 $ 862,100 $ 558,400
Uncalled Commitments $ 1,614,600 $ 1,391,600 $ 1,251,200 $ 1,614,600 $ 1,251,200
(a) For the quarter ended September 30, 2013, other operating expenses include $9.7 million of one-time expenses incurred in connection with the launch of a closed-end fund.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ - $ - $ - $ - $ -
Incentive fees - - - - -
Management and incentive fees - - - - -
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 53,625 30,311 33,696 104,717 95,524
Fee credits - - - - -
Net monitoring and transaction fees 53,625 30,311 33,696 104,717 95,524
Total fees 53,625 30,311 33,696 104,717 95,524
Expenses
Compensation and benefits 8,223 6,930 8,438 22,614 22,820
Occupancy and related charges 401 309 213 1,065 691
Other operating expenses 3,628 1,892 2,346 8,382 7,862
Total expenses 12,252 9,131 10,997 32,061 31,373
Fee Related Earnings 41,373 21,180 22,699 72,656 64,151
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest - - - - -
Gross carried interest - - - - -
Less: allocation to KKR carry pool - - - - -
Less: management fee refunds - - - - -
Net carried interest - - - - -
Other investment income (loss) (a) 300,119 11,277 239,072 633,567 1,001,455
Total investment income (loss) 300,119 11,277 239,072 633,567 1,001,455
Income (Loss) before noncontrolling interests
in Income of consolidated entities 341,492 32,457 261,771 706,223 1,065,606
Income (Loss) attributable to
noncontrolling interests 1,385 534 633 2,267 1,913
Economic Net Income (Loss) $ 340,107 $ 31,923 $ 261,138 $ 703,956 $ 1,063,693
Syndicated Capital $ 716,500 $ 204,600 $ 24,700 $ 982,100 $ 275,300
(a) Amount is net of (i) interest expense and (ii) certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income that is not included in “Compensation and benefits” and “Other operating expenses” above and on page 6.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 119,410 $ 53,835 $ - $ 173,245
Incentive fees - 1,225 - 1,225
Management and incentive fees 119,410 55,060 - 174,470
Monitoring and transaction fees:
Monitoring fees 33,010 - - 33,010
Transaction fees 54,968 20,534 53,625 129,127
Fee credits (46,597 ) (15,185 ) - (61,782 )
Net monitoring and transaction fees 41,381 5,349 53,625 100,355
Total fees 160,791 60,409 53,625 274,825
Expenses
Compensation and benefits 65,400 18,606 8,223 92,229
Occupancy and related charges 13,367 1,906 401 15,674
Other operating expenses 37,586 19,670 3,628 60,884
Total expenses 116,353 40,182 12,252 168,787
Fee Related Earnings 44,438 20,227 41,373 106,038
Investment income (loss)
Realized carried interest 81,532 - - 81,532
Unrealized carried interest 263,982 14,022 - 278,004
Gross carried interest 345,514 14,022 - 359,536
Less: allocation to KKR carry pool (139,903 ) (5,609 ) - (145,512 )
Less: management fee refunds (7,767 ) - - (7,767 )
Net carried interest 197,844 8,413 - 206,257
Other investment income (loss) 3,357 (4 ) 300,119 303,472
Total investment income (loss) 201,201 8,409 300,119 509,729
Income (Loss) before noncontrolling interests
in Income of consolidated entities 245,639 28,636 341,492 615,767
Income (Loss) attributable to
noncontrolling interests 433 202 1,385 2,020
Economic Net Income (Loss) $ 245,206 $ 28,434 $ 340,107 $ 613,747
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended June 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 114,700 $ 49,476 $ - $ 164,176
Incentive fees - 15,590 - 15,590
Management and incentive fees 114,700 65,066 - 179,766
Monitoring and transaction fees:
Monitoring fees 28,907 - - 28,907
Transaction fees 25,231 7,243 30,311 62,785
Fee credits (29,547 ) (5,204 ) - (34,751 )
Net monitoring and transaction fees 24,591 2,039 30,311 56,941
Total fees 139,291 67,105 30,311 236,707
Expenses
Compensation and benefits 51,516 21,990 6,930 80,436
Occupancy and related charges 11,143 1,615 309 13,067
Other operating expenses 33,988 9,147 1,892 45,027
Total expenses 96,647 32,752 9,131 138,530
Fee Related Earnings 42,644 34,353 21,180 98,177
Investment income (loss)
Realized carried interest 269,828 - - 269,828
Unrealized carried interest (212,809 ) 10,791 - (202,018 )
Gross carried interest 57,019 10,791 - 67,810
Less: allocation to KKR carry pool (22,220 ) (4,316 ) - (26,536 )
Less: management fee refunds (4,735 ) - - (4,735 )
Net carried interest 30,064 6,475 - 36,539
Other investment income (loss) (249 ) 22 11,277 11,050
Total investment income (loss) 29,815 6,497 11,277 47,589
Income (Loss) before noncontrolling interests
in Income of consolidated entities 72,459 40,850 32,457 145,766
Income (Loss) attributable to
noncontrolling interests 411 378 534 1,323
Economic Net Income (Loss) $ 72,048 $ 40,472 $ 31,923 $ 144,443
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 105,035 $ 21,448 $ - $ 126,483
Incentive fees - 17,768 - 17,768
Management and incentive fees 105,035 39,216 - 144,251
Monitoring and transaction fees:
Monitoring fees 29,969 - - 29,969
Transaction fees 32,788 8,780 33,696 75,264
Fee credits (26,293 ) (5,414 ) - (31,707 )
Net monitoring and transaction fees 36,464 3,366 33,696 73,526
Total fees 141,499 42,582 33,696 217,777
Expenses
Compensation and benefits 48,905 13,997 8,438 71,340
Occupancy and related charges 12,049 1,343 213 13,605
Other operating expenses 35,885 3,897 2,346 42,128
Total expenses 96,839 19,237 10,997 127,073
Fee Related Earnings 44,660 23,345 22,699 90,704
Investment income (loss)
Realized carried interest 166,908 - - 166,908
Unrealized carried interest 224,260 19,568 - 243,828
Gross carried interest 391,168 19,568 - 410,736
Less: allocation to KKR carry pool (161,805 ) (7,828 ) - (169,633 )
Less: management fee refunds (61,499 ) - - (61,499 )
Net carried interest 167,864 11,740 - 179,604
Other investment income (loss) 1,779 25 239,072 240,876
Total investment income (loss) 169,643 11,765 239,072 420,480
Income (Loss) before noncontrolling interests
in Income of consolidated entities 214,303 35,110 261,771 511,184
Income (Loss) attributable to
noncontrolling interests 444 233 633 1,310
Economic Net Income (Loss) $ 213,859 $ 34,877 $ 261,138 $ 509,874
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 340,715 $ 149,669 $ - $ 490,384
Incentive fees - 35,664 - 35,664
Management and incentive fees 340,715 185,333 - 526,048
Monitoring and transaction fees:
Monitoring fees 93,985 - - 93,985
Transaction fees 96,611 30,883 104,717 232,211
Fee credits (97,153 ) (22,445 ) - (119,598 )
Net monitoring and transaction fees 93,443 8,438 104,717 206,598
Total fees 434,158 193,771 104,717 732,646
Expenses
Compensation and benefits 164,917 60,296 22,614 247,827
Occupancy and related charges 35,935 5,063 1,065 42,063
Other operating expenses 105,516 36,643 8,382 150,541
Total expenses 306,368 102,002 32,061 440,431
Fee Related Earnings 127,790 91,769 72,656 292,215
Investment income (loss)
Realized carried interest 439,527 - - 439,527
Unrealized carried interest 361,972 45,212 - 407,184
Gross carried interest 801,499 45,212 - 846,711
Less: allocation to KKR carry pool (323,467 ) (18,085 ) - (341,552 )
Less: management fee refunds (21,718 ) - - (21,718 )
Net carried interest 456,314 27,127 - 483,441
Other investment income (loss) 1,073 80 633,567 634,720
Total investment income (loss) 457,387 27,207 633,567 1,118,161
Income (Loss) before noncontrolling interests
in Income of consolidated entities 585,177 118,976 706,223 1,410,376
Income (Loss) attributable to
noncontrolling interests 1,242 935 2,267 4,444
Economic Net Income (Loss) $ 583,935 $ 118,041 $ 703,956 $ 1,405,932
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 319,117 $ 65,635 $ - $ 384,752
Incentive fees - 31,495 - 31,495
Management and incentive fees 319,117 97,130 - 416,247
Monitoring and transaction fees:
Monitoring fees 83,577 - - 83,577
Transaction fees 55,223 12,521 95,524 163,268
Fee credits (59,641 ) (8,098 ) - (67,739 )
Net monitoring and transaction fees 79,159 4,423 95,524 179,106
Total fees 398,276 101,553 95,524 595,353
Expenses
Compensation and benefits 139,382 34,608 22,820 196,810
Occupancy and related charges 36,487 4,127 691 41,305
Other operating expenses 103,790 11,754 7,862 123,406
Total expenses 279,659 50,489 31,373 361,521
Fee Related Earnings 118,617 51,064 64,151 233,832
Investment income (loss)
Realized carried interest 307,387 - - 307,387
Unrealized carried interest 830,072 25,515 - 855,587
Gross carried interest 1,137,459 25,515 - 1,162,974
Less: allocation to KKR carry pool (463,485 ) (10,207 ) - (473,692 )
Less: management fee refunds (135,011 ) - - (135,011 )
Net carried interest 538,963 15,308 - 554,271
Other investment income (loss) (559 ) (10 ) 1,001,455 1,000,886
Total investment income (loss) 538,404 15,298 1,001,455 1,555,157
Income (Loss) before noncontrolling interests
in Income of consolidated entities 657,021 66,362 1,065,606 1,788,989
Income (Loss) attributable to
noncontrolling interests 3,098 787 1,913 5,798
Economic Net Income (Loss) $ 653,923 $ 65,575 $ 1,063,693 $ 1,783,191
KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of September 30, 2013
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment Segment Segment Segments
Cash and short-term investments $ 173,453 $ 47,074 $ 1,680,428 $ 1,900,955
Investments - - 4,937,849
(a)
4,937,849
Unrealized carry 918,574 52,066 - 970,640
Other assets 363,981 283,283 58,336 705,600
Total assets $ 1,456,008 $ 382,423 $ 6,676,613 $ 8,515,044
Debt obligations $ - $ - $ 1,000,000 $ 1,000,000
Other liabilities 143,016 51,701 40,964 235,681
Total liabilities 143,016 51,701 1,040,964 1,235,681
Noncontrolling interests 1,479 649 69,487 71,615
Book value $ 1,311,513 $ 330,073 $ 5,566,162 $ 7,207,748
Book value per adjusted unit $ 1.83 $ 0.46 $ 7.78 $ 10.07
As of December 31, 2012
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment Segment Segment Segments
Cash and short-term investments $ 358,237 $ 28,690 $ 1,147,360 $ 1,534,287
Investments - - 4,758,157 4,758,157
Unrealized carry 730,292 24,939 - 755,231
Other assets 207,047 280,472 62,119 549,638
Total assets $ 1,295,576 $ 334,101 $ 5,967,636 $ 7,597,313
Debt obligations $ - $ - $ 500,000 $ 500,000
Other liabilities 78,724 16,433 24,275 119,432
Total liabilities 78,724 16,433 524,275 619,432
Noncontrolling interests 1,339 739 18,619 20,697
Book value $ 1,215,513 $ 316,929 $ 5,424,742 $ 6,957,184
Book value per adjusted unit $ 1.72 $ 0.45 $ 7.70 $ 9.87
(a) See Capital Markets and Principal Activities segment schedule of investments that follows.
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of September 30, 2013
Fair Value as
Fair a Percentage of
Investment
Cost
Value Total Investments
Co-Investments in Portfolio Companies of
Private Equity Investment Vehicles:
Alliance Boots GmbH 195,640 491,801 10.0 %
HCA Inc. 96,289 363,611 7.4 %
ProSiebenSat.1 Media AG 226,913 279,201 5.7 %
The Nielsen Company B.V. 87,657 214,492 4.3 %
Samson Resources Corporation 237,514 190,012 3.8 %
KION Group 128,058 189,391 3.8 %
NXP B.V. 122,059 172,084 3.5 %
US Foods, Inc. 100,000 130,000 2.6 %
Biomet, Inc. 151,444 121,155 2.5 %
First Data Corporation 135,258 94,681 1.9 %
Dollar General Corporation 2,893 18,171 0.4 %
Energy Future Holdings Corp. 200,000 10,000 0.2 %
1,683,725 2,274,599 46.1 %
Private Equity Investment Vehicles
KKR 2006 Fund L.P. 340,655 389,950 7.9 %
KKR European Fund III L.P. 243,973 286,953 5.8 %
KKR Asian Fund L.P. 84,152 95,665 1.9 %
KKR North America Fund XI L.P. 61,565 64,106 1.3 %
KKR European Fund II L.P. 46,966 49,205 1.0 %
KKR Millennium Fund L.P. 50,470 42,693 0.9 %
KKR E2 Investors, L.P. 14,210 26,037 0.5 %
Co-Investments 7,598 7,730 0.2 %
KKR European Fund L.P. 47,664 4,290 0.1 %
KKR China Growth Fund L.P. 3,286 4,207 0.1 %
900,539 970,836 19.7 %
Private Equity Total 2,584,264 3,245,435 65.8 %
Real Assets
Royalties and Drilling 281,968 294,670 6.0 %
Real Estate Fund 45,135 57,065 1.2 %
Infrastructure Fund 30,324 32,668 0.7 %
Co-Investments 10,835 12,888 0.3 %
Natural Resources 12,917 8,159 0.2 %
Real Assets Total 381,179 405,450 8.4 %
Private Markets Total 2,965,443 3,650,885 74.2 %
Public Markets Investment Strategies
Liquid Credit 187,263 196,972 4.0 %
Long/Short Equities 100,000 110,899 2.2 %
Credit Relative Value 82,000 91,550 1.9 %
Direct Lending 49,796 55,323 1.1 %
Special Situations 30,205 34,600 0.7 %
Mezzanine Fund 15,865 19,331 0.4 %
Public Markets Total 465,129 508,675 10.3 %
Other 762,234 778,289 15.5 %
Total Investments $ 4,192,806 $ 4,937,849 100.0 %
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of September 30, 2013
Fair Value as
a Percentage
Investment
Cost
Fair
Value
of Total
Investments
Significant Aggregate Investments: (a)
Alliance Boots GmbH $ 228,769 $ 565,811 11.5 %
HCA Inc. 117,624 432,333 8.7 %
ProSieben.Sat 1 Media AG 242,643 297,299 6.0 %
589,036 1,295,443 26.2 %
Other investments 3,603,770 3,642,406 73.8 %
Total Investments $ 4,192,806 $ 4,937,849 100.0 %
(a) The significant aggregate investments include investments in portfolio companies with individual fair values of 5% or more of the Capital Markets and Principal Activities segment investments balance as of September 30, 2013. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.
KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private Public Total
Markets Markets Reportable
Segment Segment Segments
Quarter Ended September 30, 2013
June 30, 2013 $ 54,452,400 $ 29,048,500 $ 83,500,900
New Capital Raised 4,670,800 1,821,700 6,492,500
Distributions (1,591,600 ) (552,300 )
(c)
(2,143,900 )
Foreign Exchange 33,100 - 33,100
Change in Value 2,113,600 173,000 2,286,600
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
Nine Months Ended September 30, 2013
December 31, 2012 $ 49,127,600 $ 26,399,900 $ 75,527,500
New Capital Raised 12,319,000 5,056,500 17,375,500
Distributions (6,109,000 ) (1,952,500 )
(d)
(8,061,500 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange 22,100 - 22,100
Change in Value 4,590,900 987,000 5,577,900
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
Trailing Twelve Months Ended September 30, 2013
September 30, 2012 $ 49,771,000 $ 16,507,700 $ 66,278,700
New Capital Raised 13,253,100 6,850,500 20,103,600
Acquisitions (b) - 8,086,900 8,086,900
Distributions (9,206,100 ) (2,438,100 )
(e)
(11,644,200 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange 39,500 - 39,500
Change in Value 6,093,100 1,483,900 7,577,000
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
* Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents AUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised from fund investors and distributions since the acquisition.
(c) Includes $155.3 million of redemptions by fund investors.
(d) Includes $694.5 million of redemptions by fund investors.
(e) Includes $864.4 million of redemptions by fund investors.
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private Public Total
Markets Markets Reportable
Segment Segment Segments
Quarter Ended September 30, 2013
June 30, 2013 $ 45,907,500 $ 22,048,900 $ 67,956,400
New Capital Raised 4,366,900 1,719,500 6,086,400
Distributions (582,800 ) (311,100 )
(c)
(893,900 )
Foreign Exchange 162,800 - 162,800
Change in Value 35,100 265,100 300,200
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
Nine Months Ended September 30, 2013
December 31, 2012 $ 41,173,000 $ 19,673,000 $ 60,846,000
New Capital Raised 11,730,800 4,453,800 16,184,600
Distributions (2,533,800 ) (1,284,800 )
(d)
(3,818,600 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange 107,400 - 107,400
Change in Value 66,800 880,400 947,200
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
Trailing Twelve Months Ended September 30, 2013
September 30, 2012 $ 40,354,200 $ 9,911,800 $ 50,266,000
New Capital Raised 13,002,800 6,012,900 19,015,700
Acquisitions (b) - 8,078,400 8,078,400
Distributions (3,084,900 ) (1,542,000 )
(e)
(4,626,900 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange 191,000 - 191,000
Change in Value 81,100 1,261,300 1,342,400
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
* Fee Paying Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents FPAUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised from fund investors and distributions since the acquisition.
(c) Includes $155.3 million of redemptions by fund investors.
(d) Includes $694.5 million of redemptions by fund investors.
(e) Includes $864.4 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of September 30, 2013
(Amounts in millions, except percentages)
Investment Period Amount
Percentage
Committed by
Commencement Uncalled
General
Remaining
Remaining Fair
Date End Date Commitment Commitments Partner Invested Realized Cost
Value
Private Markets
Private Equity Funds
Asian Fund II 4/2013 4/2019 $ 5,825.0 $ 5,825.0 1.3 % $ - $ - $ - $ -
North America Fund XI 9/2012 9/2018 8,030.4 6,316.2 3.1 % 1,714.2 3.9 1,714.2 1,774.5
China Growth Fund 11/2010 11/2016 1,010.0 692.4 1.0 % 317.6 32.6 300.1 388.8
E2 Investors (Annex Fund) 8/2009 11/2013 347.9 152.1 4.3 % 195.8 - 195.8 395.1
European Fund III 3/2008 3/2014 6,108.1 1,599.4 4.6 % 4,508.7 653.5 4,151.3 5,154.1
Asian Fund 7/2007 4/2013 3,983.2 243.3 2.5 % 3,739.9 1,663.1 2,869.9 4,763.2
2006 Fund 9/2006 9/2012 17,642.2 1,255.5 2.1 % 16,386.7 10,874.8 9,914.7 14,627.2
European Fund II 11/2005 10/2008 5,750.8 - 2.1 % 5,750.8 3,245.1 3,120.4 4,636.4
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5 % 6,000.0 9,502.7 2,084.1 3,500.4
European Fund 12/1999 12/2005 3,085.4 - 3.2 % 3,085.4 8,720.0 - 51.8
Total Private Equity Funds 57,783.0 16,083.9 41,699.1 34,695.7 24,350.5 35,291.5
Co-Investment Vehicles Various Various 3,137.9 1,083.1 Various 2,054.8 2,436.9 1,413.3 1,837.7
Total Private Equity 60,920.9 17,167.0 43,753.9 37,132.6 25,763.8 37,129.2
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,413.5 1,413.5 17.9 % - - - -
Natural Resources Fund Various Various 1,072.3 499.4 Various 572.9 67.3 525.5 329.6
Global Energy Opportunities Various Various 861.0 734.4 Various 126.6 - 126.6 121.9
Infrastructure Fund Various Various 1,042.0 498.0 4.8 % 544.0 9.0
544.0 583.2
Infrastructure Co-Investments Various Various 1,356.2 251.7 Various 1,104.5 208.7
1,104.5 1,337.6
Real Estate Partners Americas 5/2013 (b) 694.0 539.8 29 % 154.2 - 154.2 196.0
Real Assets 6,439.0 3,936.8 2,502.2 285.0 2,454.8 2,568.3
Private Markets Total 67,359.9 21,103.8 46,256.1 37,417.6 28,218.6 39,697.5
Public Markets
Special Situations Vehicles Various Various 2,635.5 822.4 Various 1,813.1 530.4 1,567.3 1,934.1
Mezzanine Fund 3/2010 8/2015 987.0 564.1 4.6 % 422.9 129.3 364.9 426.9
Direct Lending Vehicles Various Various 681.0 228.1 Various 452.9 19.5 452.9 484.7
Public Markets Total 4,303.5 1,614.6 2,688.9 679.2 2,385.1 2,845.7
Grand Total $ 71,663.4 $ 22,718.4 $ 48,945.0 $ 38,096.8 $ 30,603.7 $ 42,543.2
(a) Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b) Third anniversary of final close.
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
FRE (a) $ 106,038 $ 98,177 $ 90,704 $ 292,215 $ 233,832
Realized cash carry 48,919 161,897 100,145 263,716 184,432
Net realized principal investment income 102,766 150,361 145,700 406,283 499,898
Less: local income taxes (4,566 ) (5,336 ) (2,365 ) (12,243 ) (9,258 )
Less: noncontrolling interests (2,020 ) (1,323 ) (1,310 ) (4,444 ) (5,798 )
Total Distributable Earnings 251,137 403,776 332,874 945,527 903,106
Less: Undistributed net realized principal investment income (61,660 ) (90,217 ) (145,700 ) (243,771 ) (499,898 )
Distributed Earnings 189,477 313,559 187,174 701,756 403,208
Distributed Earnings to KKR & Co. L.P. (b) 78,300 126,295 66,015 280,344 140,216
Less: estimated current corporate income taxes (12,455 ) (10,125 ) (6,890 ) (28,956 ) (15,180 )
Distributed Earnings to KKR & Co. L.P., After Taxes 65,845 116,170 59,125 251,388 125,036
Distribution per KKR & Co. L.P. common unit $ 0.23 $ 0.42 $ 0.24 $ 0.92 $ 0.52
Components of Distribution per KKR & Co. L.P. common unit
After-tax FRE $ 0.10 $ 0.10 $ 0.09 $ 0.30 $ 0.24
Realized Cash Carry $ 0.07 $ 0.23 $ 0.15 $ 0.38 $ 0.28
Distributed Net Realized Principal Investment Income $ 0.06 $ 0.09 $ - $ 0.24 $ -
Outstanding KKR & Co. L.P. common units 285,051,256 277,834,343 241,407,805
(a) See Exhibit A for a reconciliation of such measure to financial results prepared in accordance with GAAP.
(b) Represents the amount of distributed earnings allocable to KKR & Co. L.P. based on its ownership in the KKR business.
DISTRIBUTION POLICY
KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of its investment management business and 40% of the net cash income from realized principal investments, in each case in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other obligations. For purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) a percentage of net realized principal investment income. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.
The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P., which may change the distribution policy at any time, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships.
KKR
Notes to Reportable Segments (Unaudited)
The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR’s reportable business segments. The reportable segments for KKR’s business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.
KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.
Fee related earnings (“FRE”) is comprised of segment operating revenues less segment operating expenses, excluding certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income. This measure is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.
Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR’s businesses inclusive of investment income and carried interest. ENI is comprised of: (i) FRE plus (ii) segment investment income (loss), which is reduced for carry pool allocations, management fee refunds, interest expense and certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income; less (iii) certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the exclusion of the items referred to in FRE above; (ii) the exclusion of investment income (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes.
Economic net income (loss), after taxes is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Economic net income (loss), after taxes and equity-based charges is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes and Equity-based Charges is calculated by deducting from ENI: (i) equity-based charges associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan; and (ii) the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Net realized principal investment income refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses from principal investments during the second quarter of 2013 to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income and (iii) interest income net of interest expense less certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income in each case generated by KKR’s principal investments held on or through KKR’s balance sheet in our Capital Markets and Principal Activities segment. This is a term to describe a portion of KKR’s quarterly distribution.
Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) net realized principal investment income; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and also assess amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR’s current distribution policy.
Assets under management (“AUM”) represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR’s capital raising activities and the overall activity in its investment funds and vehicles. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR’s investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR’s co-investment vehicles; (iii) the net asset value of certain of KKR's fixed income products; (iv) the value of outstanding structured finance vehicles; and (v) the fair value of other assets managed by KKR. KKR’s definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.
Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR’s capital raising activities and the overall activity in its investment funds and vehicles, for only those funds and vehicles where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR’s fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.
Committed dollars invested is the aggregate amount of capital commitments that have been invested by KKR’s investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR’s investment of committed capital. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a fee or carried interest and (ii) capital invested by KKR’s investment funds and vehicles.
Syndicated capital is the aggregate amount of debt or equity capital in transactions originated by KKR investment funds and vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital committed to such transactions by carry-yielding co-investment vehicles, which is instead reported in committed dollars invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds and vehicles. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR’s Capital Markets and Principal Activities segment and across its investment platform.
Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds and vehicles to make future investments.
Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. and KKR Holdings and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P.
Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s private equity funds, investment vehicles and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds and vehicles and other noncontrolling interest holders. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations.
Book value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of our investment portfolio, including carried interest, as well as our overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from the equivalent GAAP amounts on a consolidated basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings L.P.
Fee related EBITDA is comprised of FRE before the impact of depreciation of fixed assets and amortization of intangible assets and is used by management as a measure of the cash earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the amount of cash earnings generated by KKR’s management companies and capital markets businesses.
Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR’s liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR’s available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.
KKR
EXHIBIT A
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (GAAP BASIS)
TO ENI AFTER TAXES PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended
September 30, 2013 June 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 0.73 $ 0.06 $ 0.53
Weighted Average Common Units Outstanding 282,148,802 271,983,811 239,696,358
Net income (loss) attributable to KKR & Co. L.P. 204,740 15,134 127,411
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
300,169 28,106 249,460
Plus: Non-cash equity based charges 85,215 80,318 122,157
Plus: Amortization of intangibles and other, net 15,979 12,360 1,234
Plus: Income taxes 7,644 8,525 9,612
Economic net income (loss) 613,747 144,443 509,874
Less: Provision for income taxes 11,950 13,486 22,548
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 31,227 25,936 17,365
Economic net income (loss) after taxes and equity-based charges 570,570 105,021 469,961
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 31,227 25,936 17,365
Economic net income (loss) after taxes 601,797 130,957 487,326
Weighted Average Adjusted Units 715,781,663 715,453,358 702,252,548
Economic net income (loss) after taxes per adjusted unit $ 0.84 $ 0.18 $ 0.69
Nine Months Ended
September 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 1.53 $ 1.98
Weighted Average Common Units Outstanding 270,484,224 234,876,879
Net income (loss) attributable to KKR & Co. L.P. 413,313 464,108
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
662,387 946,484
Plus: Non-cash equity based charges 247,183 330,037
Plus: Amortization of intangibles and other, net 57,524 4,785
Plus: Income taxes 25,525 37,777
Economic net income (loss) 1,405,932 1,783,191
Less: Provision for income taxes 45,553 91,788
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 84,581 47,678
Economic net income (loss) after taxes and equity-based charges 1,275,798 1,643,725
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 84,581 47,678
Economic net income (loss) after taxes 1,360,379 1,691,403
Weighted Average Adjusted Units 714,171,641 698,371,025
Economic net income (loss) after taxes per adjusted unit $ 1.90 $ 2.42
KKR
EXHIBIT A (CONTINUED)
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE RELATED EBITDA, AND TOTAL DISTRIBUTABLE EARNINGS (UNAUDITED)
(Amounts in thousands)
Quarter Ended
September 30, 2013 June 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 204,740 $ 15,134 $ 127,411
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
300,169 28,106 249,460
Plus: Non-cash equity based charges 85,215 80,318 122,157
Plus: Amortization of intangibles and other, net 15,979 12,360 1,234
Plus: Income taxes 7,644 8,525 9,612
Economic net income (loss) 613,747 144,443 509,874
Plus: Income attributable to segment noncontrolling interests 2,020 1,323 1,310
Less: Investment income (loss) 509,729 47,589 420,480
Fee related earnings 106,038 98,177 90,704
Plus: Depreciation and amortization 3,601 3,708 3,273
Fee related EBITDA $ 109,639 $ 101,885 $ 93,977
Less: Depreciation and amortization 3,601 3,708 3,273
Plus: Realized cash carry 48,919 161,897 100,145
Plus: Net realized principal investment income 102,766 150,361 145,700
Less: Local income taxes and noncontrolling interests 6,586 6,659 3,675
Total distributable earnings $ 251,137 $ 403,776 $ 332,874
Nine Months Ended
September 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 413,313 $ 464,108
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
662,387 946,484
Plus: Non-cash equity based charges 247,183 330,037
Plus: Amortization of intangibles and other, net 57,524 4,785
Plus: Income taxes 25,525 37,777
Economic net income (loss) 1,405,932 1,783,191
Plus: Income attributable to segment noncontrolling interests 4,444 5,798
Less: Investment income (loss) 1,118,161 1,555,157
Fee related earnings 292,215 233,832
Plus: Depreciation and amortization 10,990 8,919
Fee related EBITDA $ 303,205 $ 242,751
Less: Depreciation and amortization 10,990 8,919
Plus: Realized cash carry 263,716 184,432
Plus: Net realized principal investment income 406,283 499,898
Less: Local income taxes and noncontrolling interests 16,687 15,056
Total distributable earnings $ 945,527 $ 903,106
KKR
EXHIBIT A (CONTINUED)
RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
As of As of
September 30, 2013 December 31, 2012
KKR & Co. L.P. partners’ capital $ 2,495,093 $ 2,004,359
Noncontrolling interests held by KKR Holdings L.P. 4,796,218 4,981,864
Equity impact of KKR Management Holdings Corp. and other (83,563 ) (29,039 )
Book value 7,207,748 6,957,184
Adjusted units 715,755,721 704,780,484
Book value per adjusted unit $ 10.07 $ 9.87
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS) (UNAUDITED)
(Amounts in thousands)
As of As of
September 30, 2013 December 31, 2012
Cash and cash equivalents $ 1,112,316 $ 1,230,464
Liquid short-term investments 788,639 303,823
Cash and short-term investments $ 1,900,955 $ 1,534,287
KKR
EXHIBIT B
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING TO WEIGHTED AVERAGE ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
Quarter Ended
September 30, 2013 June 30, 2013 September 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 282,148,802 271,983,811 239,696,358
Weighted Average Unvested Common Units(a) 25,986,389 26,094,953 17,950,264
Weighted Average GAAP Common Units Outstanding - Diluted 308,135,191 298,078,764 257,646,622
Adjustments:
Weighted Average KKR Holdings Units(b) 407,646,472 417,374,594 444,605,926
Weighted Average Adjusted Units 715,781,663 715,453,358 702,252,548
Nine Months Ended
September 30, 2013 September 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 270,484,224 234,876,879
Weighted Average Unvested Common Units(a) 25,696,846 14,482,321
Weighted Average GAAP Common Units Outstanding - Diluted 296,181,070 249,359,200
Adjustments:
Weighted Average KKR Holdings Units(b) 417,990,571 449,011,825
Weighted Average Adjusted Units 714,171,641 698,371,025
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING TO ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units.
As of As of
September 30, 2013 December 31, 2012
GAAP Common Units Outstanding - Basic 285,051,256 253,363,691
Unvested Common Units(a) 25,960,447 18,863,517
GAAP Common Units Outstanding - Diluted 311,011,703 272,227,208
Adjustments:
KKR Holdings Units(b) 404,744,018 432,553,276
Adjusted Units 715,755,721 704,780,484
(a) Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. The issuance of common units of KKR & Co. L.P. pursuant to awards under its equity incentive plan dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.
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Investor Relations:
Kohlberg Kravis Roberts & Co. L.P.
Craig Larson
+1-877-610-4910 (U.S.) / +1-212-230-9410
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Media:
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media@kkr.com
KKR & Co. L.P. Announces Third Quarter 2013 Results
Strong Investment Performance Drives Meaningful Economic Net Income
GAAP net income (loss) attributable to KKR & Co. L.P. was $204.7 million for the quarter ended September 30, 2013, up from $127.4 million in the comparable period of 2012. GAAP net income (loss) attributable to KKR & Co. L.P. was $413.3 million for the nine months ended September 30, 2013, down from $464.1 million in the comparable period of 2012.
Assets under management (“AUM”) totaled $90.2 billion as of September 30, 2013, up from $83.5 billion as of June 30, 2013.
Fee related earnings (“FRE”) were $106.0 million and $292.2 million for the quarter and nine months ended September 30, 2013, respectively, up from $90.7 million and $233.8 million in the comparable periods of 2012.
Total distributable earnings were $251.1 million for the quarter ended September 30, 2013, down from $332.9 million for the quarter ended September 30, 2012. Total distributable earnings were $945.5 million for the nine months ended September 30, 2013, up from $903.1 million in the comparable period of 2012.
Economic net income (“ENI”) was $613.7 million for the quarter ended September 30, 2013, up from $509.9 million in the comparable period of 2012. ENI was $1.4 billion for the nine months ended September 30, 2013, down from $1.8 billion in the comparable period of 2012.
After-tax ENI was $0.84 per adjusted unit for the quarter ended September 30, 2013, up from $0.69 per adjusted unit in the comparable period of 2012. After-tax ENI was $1.90 per adjusted unit for the nine months ended September 30, 2013, down from $2.42 per adjusted unit in the comparable period of 2012.
Book value was $7.2 billion on a total reportable segment basis as of September 30, 2013 or $10.07 per adjusted unit.
KKR & Co. L.P. declares a third quarter distribution of $0.23 per common unit.
KKR & Co. L.P. announced a transaction to acquire Avoca Capital.
Business WirePress Release: Kohlberg Kravis Roberts & Co. L.P. – 1 hour 48 minutes ago..
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NEW YORK--(BUSINESS WIRE)--
KKR & Co. L.P. (KKR) today reported its third quarter 2013 results.
For the quarter and nine months ended September 30, 2013, the carrying value of our private equity investment portfolio appreciated 5.9% and 12.5%, respectively.
ENI was $613.7 million for the quarter ended September 30, 2013, up from $509.9 million for the quarter ended September 30, 2012. The increase was principally attributable to higher investment income earned from our principal investments and to a lesser extent a higher level of net carried interest earned from our private equity funds.
ENI was $1.4 billion for the nine months ended September 30, 2013, down from $1.8 billion for the nine months ended September 30, 2012. The decrease was primarily due to lower investment income earned from our principal investments as well as a lower level of net carried interest earned from our private equity funds. While the fair value of our principal investments and private equity portfolio increased during the nine months ended September 30, 2013, the level of appreciation was lower than in the comparable period of 2012.
AUM and fee paying assets under management (“FPAUM”) were $90.2 billion and $73.6 billion, respectively, as of September 30, 2013, both up from June 30, 2013. The increases in both AUM and FPAUM were primarily attributable to new capital raised across our various investment platforms, partially offset by distributions to fund limited partners. In September 2013, our Energy Income and Growth Fund had its first close with commitments totaling $1.4 billion (includes general partner commitment).
For the quarter and nine months ended September 30, 2013, FRE was $106.0 million and $292.2 million, respectively, up from $90.7 million and $233.8 million in the comparable periods of 2012. The increases in both comparable periods were primarily driven by (i) management fees attributable to new capital raised; (ii) higher transaction fees; and (iii) the acquisition of Prisma.
On October 18, 2013, KKR announced a transaction to acquire Avoca Capital (Unlimited) and its affiliates (“Avoca”), a European credit investment manager with approximately $8 billion in assets under management as of September 30, 2013. The transaction, which is subject to customary regulatory approvals, is expected to close in the first quarter of 2014.
“Our investment portfolio and balance sheet continue to perform, resulting in an unannualized 20% return on equity in the first nine months of this year,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR.
___________________________________________________________________________________________________
Note: Certain financial measures, including FRE, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP.
GAAP RESULTS
GAAP results for the quarter and nine months ended September 30, 2013 included net income attributable to KKR & Co. L.P. of $204.7 million and $413.3 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.66 and $1.40, respectively, on a diluted basis. For the quarter and nine months ended September 30, 2012, net income attributable to KKR & Co. L.P. was $127.4 million and $464.1 million, respectively, and net income attributable to KKR & Co. L.P. per common unit were $0.49 and $1.86, respectively, on a diluted basis. The increase quarter over quarter was primarily due to (i) an increase in management fees attributable to new capital raised and the acquisition of Prisma; (ii) higher transaction fees; and (iii) a higher level of total investment income. The year over year decrease was primarily due to a lower level of total investment income. The decrease in total investment income was partially offset by increases in fees primarily attributable to the acquisition of Prisma and higher transaction fees. The decrease in compensation and benefits expense was primarily attributable to lower carry pool allocations as a result of the recognition of lower carried interest during the nine months ended September 30, 2013 compared to the comparable period in 2012.
SEGMENT RESULTS
Private Markets
AUM was $59.7 billion as of September 30, 2013, an increase of $5.2 billion, or 9.5%, compared to AUM of $54.5 billion as of June 30, 2013. The increase was primarily attributable to new capital raised from fund investors and to a lesser extent appreciation in the fair value of our private equity portfolio. The increase was partially offset by distributions to the limited partners of our private equity funds arising from realizations.
FPAUM was $49.9 billion as of September 30, 2013, an increase of $4.0 billion, or 8.7%, compared to FPAUM of $45.9 billion as of June 30, 2013. The increase was primarily attributable to new capital raised from fund investors partially offset by distributions to the limited partners of our private equity funds arising from realizations.
FRE was $44.4 million for the quarter ended September 30, 2013, a decrease of $0.3 million compared to FRE of $44.7 million for the quarter ended September 30, 2012. The decrease was primarily driven by higher compensation expense due to additional headcount, partially offset by higher management fees resulting from new capital raised and higher transaction fees.
FRE was $127.8 million for the nine months ended September 30, 2013, an increase of $9.2 million, or 7.8%, compared to FRE of $118.6 million for the nine months ended September 30, 2012. The increase was primarily driven by higher management fees resulting from new capital raised and higher transaction fees. The increase was partially offset by higher compensation expense due to additional headcount.
ENI was $245.2 million for the quarter ended September 30, 2013, an increase of $31.3 million, or 14.6%, compared to ENI of $213.9 million for the quarter ended September 30, 2012. The increase was primarily attributable to higher net carried interest resulting from a higher level of appreciation in our private equity portfolio.
ENI was $583.9 million for the nine months ended September 30, 2013, a decrease of $70.0 million, or 10.7%, compared to ENI of $653.9 million for the nine months ended September 30, 2012. The decrease was primarily attributable to lower net carried interest resulting from a lower level of appreciation in our private equity portfolio, partially offset by the increase in FRE discussed above.
Public Markets
AUM was $30.5 billion as of September 30, 2013, an increase of $1.5 billion, or 5.2%, compared to AUM of $29.0 billion as of June 30, 2013. FPAUM was $23.7 billion as of September 30, 2013, an increase of $1.7 billion, or 7.7%, compared to FPAUM of $22.0 billion as of June 30, 2013. For both AUM and FPAUM, the increases were primarily attributable to net new capital raised from fund investors.
FRE was $20.2 million for the quarter ended September 30, 2013, a decrease of $3.1 million, or 13.3%, compared to FRE of $23.3 million for the quarter ended September 30, 2012. The decrease was principally attributable to lower incentive fees earned and higher expenses related to one-time expenses in connection with the launch of a closed-end fund in the quarter ended September 30, 2013. The decrease was partially offset by higher management fees related to new capital raised from fund investors and the acquisition of Prisma.
FRE was $91.8 million for the nine months ended September 30, 2013, an increase of $40.7 million, or 79.6%, compared to FRE of $51.1 million for the nine months ended September 30, 2012. The increase was primarily attributable to higher management fees related to new capital raised from fund investors and the acquisition of Prisma.
ENI was $28.4 million for the quarter ended September 30, 2013, a decrease of $6.5 million, or 18.6%, compared to ENI of $34.9 million for the quarter ended September 30, 2012. The decrease was primarily driven by the decrease in FRE discussed above and lower net carried interest resulting from a lower level of appreciation of certain carry-earning credit investment vehicles.
ENI was $118.0 million for the nine months ended September 30, 2013, an increase of $52.4 million, or 79.9%, compared to ENI of $65.6 million for the nine months ended September 30, 2012. The increase was primarily driven by the increase in FRE discussed above and to a lesser extent higher net carried interest due to certain credit investment vehicles beginning to earn carry in 2013.
Capital Markets and Principal Activities
FRE was $41.4 million for the quarter ended September 30, 2013, an increase of $18.7 million, or 82.4%, compared to FRE of $22.7 million for the quarter ended September 30, 2012. FRE was $72.7 million for the nine months ended September 30, 2013, an increase of $8.5 million, or 13.2%, compared to FRE of $64.2 million for the nine months ended September 30, 2012. The increases in both comparable periods were primarily driven by a higher level of overall capital markets transaction activity.
ENI was $340.1 million for the quarter ended September 30, 2013, an increase of $79.0 million, or 30.3%, compared to ENI of $261.1 million for the quarter ended September 30, 2012. The increase was primarily attributable to a higher level of investment income from our principal investments and to a lesser extent the increase in FRE discussed above.
ENI was $704.0 million for the nine months ended September 30, 2013, a decrease of $359.7 million, or 33.8%, compared to ENI of $1,063.7 million for the nine months ended September 30, 2012. The decrease was primarily due to a lower level of investment income from our principal investments. While the fair value of our principal investments increased during the nine months ended September 30, 2013, the level of appreciation was lower than in the comparable period of 2012.
CAPITAL AND LIQUIDITY
As of September 30, 2013, KKR had $1.9 billion of cash and short-term investments on a total reportable segment basis and $1.0 billion of outstanding debt obligations. KKR’s availability for borrowings was $750.0 million (which is reduced by an outstanding letter of credit), which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of September 30, 2013.
As of September 30, 2013, KKR’s portion of total uncalled commitments to its investment funds was $1,164.5 million, consisting of the following (amounts in thousands):
Uncalled
Commitments
Private Markets
Energy Income and Growth Fund $ 252,500
North America Fund XI 191,300
Real Estate Fund 155,600
European Fund III 113,300
Asian Fund II 75,000
2006 Fund 62,900
Infrastructure 24,400
Natural Resources 10,900
E2 Investors (Annex Fund) 10,200
Asian Fund 9,300
China Growth Fund 6,500
Co-Investment Vehicles 45,600
Total Private Markets Commitments 957,500
Public Markets
Special Situations Vehicles 162,000
Mezzanine Fund 25,700
Direct Lending Vehicles 19,300
Total Public Markets Commitments 207,000
Total Uncalled Commitments $ 1,164,500
DISTRIBUTION
A distribution of $0.23 per common unit has been declared, comprised of (i) $0.10 per common unit from after-tax FRE, (ii) $0.07 per common unit from realized cash carry, and (iii) $0.06 per common unit from net realized principal investment income. The distribution will be paid on November 19, 2013 to unitholders of record as of the close of business on November 4, 2013. Please refer to the distribution policy presented later in this release.
CONFERENCE CALL
A conference call to discuss KKR’s financial results will be held on Thursday, October 24, 2013 at 11:00 a.m. EDT. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Public Investors section of KKR’s website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR’s website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 76308413 beginning approximately two hours after the broadcast.
From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Investor Center for KKR & Co. L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the “Email Alerts” area of the Investor Center on the website.
ABOUT KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $90.2 billion in assets under management as of September 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (KKR) and “KKR”, as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information, please visit KKR’s website at www.kkr.com.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee related EBITDA, committed dollars invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized principal investment income and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships such as Prisma, Nephila or Avoca; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR’s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the SEC on February 22, 2013, and other filings with the SEC, which are available at www.sec.gov.
KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended Nine Months Ended
September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Revenues
Fees $ 220,028 $ 162,154 $ 537,644 $ 390,821
Expenses
Compensation and Benefits 329,182 366,350 860,905 1,019,400
Occupancy and Related Charges 17,637 14,344 46,036 43,636
General, Administrative and Other 108,676 65,825 279,906 177,480
Total Expenses 455,495 446,519 1,186,847 1,240,516
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 2,230,401 2,308,613 4,598,755 6,997,166
Dividend Income 121,059 10,440 370,014 263,298
Interest Income 114,861 95,578 352,250 259,669
Interest Expense (25,056 ) (17,868 ) (72,693 ) (52,757 )
Total Investment Income (Loss) 2,441,265 2,396,763 5,248,326 7,467,376
Income (Loss) Before Taxes 2,205,798 2,112,398 4,599,123 6,617,681
Income Taxes 7,644 9,612 25,525 37,777
Net Income (Loss) 2,198,154 2,102,786 4,573,598 6,579,904
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests 9,169 9,994 25,992 18,551
Net Income (Loss) Attributable to
Noncontrolling Interests 1,984,245 1,965,381 4,134,293 6,097,245
Net Income (Loss) Attributable to KKR & Co. L.P. $ 204,740 $ 127,411 $ 413,313 $ 464,108
Distributions Declared per KKR & Co. L.P. Common Unit $ 0.23 $ 0.24 $ 0.92 $ 0.52
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.73 $ 0.53 $ 1.53 $ 1.98
Diluted (a) $ 0.66 $ 0.49 $ 1.40 $ 1.86
Weighted Average Common Units Outstanding
Basic 282,148,802 239,696,358 270,484,224 234,876,879
Diluted (a) 308,135,191 257,646,622 296,181,070 249,359,200
(a) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in KKR’s business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 173,245 $ 164,176 $ 126,483 $ 490,384 $ 384,752
Incentive fees 1,225 15,590 17,768 35,664 31,495
Management and incentive fees 174,470 179,766 144,251 526,048 416,247
Monitoring and transaction fees:
Monitoring fees 33,010 28,907 29,969 93,985 83,577
Transaction fees 129,127 62,785 75,264 232,211 163,268
Fee credits (61,782 ) (34,751 ) (31,707 ) (119,598 ) (67,739 )
Net monitoring and transaction fees 100,355 56,941 73,526 206,598 179,106
Total fees 274,825 236,707 217,777 732,646 595,353
Expenses
Compensation and benefits 92,229 80,436 71,340 247,827 196,810
Occupancy and related charges 15,674 13,067 13,605 42,063 41,305
Other operating expenses (a) 60,884 45,027 42,128 150,541 123,406
Total expenses 168,787 138,530 127,073 440,431 361,521
Fee Related Earnings (a) 106,038 98,177 90,704 292,215 233,832
Investment income (loss)
Realized carried interest 81,532 269,828 166,908 439,527 307,387
Unrealized carried interest 278,004 (202,018 ) 243,828 407,184 855,587
Gross carried interest 359,536 67,810 410,736 846,711 1,162,974
Less: allocation to KKR carry pool (145,512 ) (26,536 ) (169,633 ) (341,552 ) (473,692 )
Less: management fee refunds (b) (7,767 ) (4,735 ) (61,499 ) (21,718 ) (135,011 )
Net carried interest 206,257 36,539 179,604 483,441 554,271
Other investment income (loss) 303,472 11,050 240,876 634,720 1,000,886
Total investment income (loss) 509,729 47,589 420,480 1,118,161 1,555,157
Income (Loss) before noncontrolling interests
in Income of consolidated entities 615,767 145,766 511,184 1,410,376 1,788,989
Income (Loss) attributable to
noncontrolling interests 2,020 1,323 1,310 4,444 5,798
Economic Net Income (Loss) $ 613,747 $ 144,443 $ 509,874 $ 1,405,932 $ 1,783,191
Provision for Income Taxes 11,950 13,486 22,548 45,553 91,788
Economic Net Income (Loss), After Taxes (c) $ 601,797 $ 130,957 $ 487,326 $ 1,360,379 $ 1,691,403
Economic Net Income (Loss), After Taxes per Adjusted Unit (c) $ 0.84 $ 0.18 $ 0.69 $ 1.90 $ 2.42
Assets Under Management $ 90,169,200 $ 83,500,900 $ 66,278,700 $ 90,169,200 $ 66,278,700
Fee Paying Assets Under Management $ 73,611,900 $ 67,956,400 $ 50,266,000 $ 73,611,900 $ 50,266,000
Committed Dollars Invested and Syndicated Capital $ 2,848,700 $ 1,889,400 $ 926,000 $ 5,562,500 $ 2,639,200
Uncalled Commitments $ 22,718,400 $ 21,364,400 $ 15,845,900 $ 22,718,400 $ 15,845,900
Other Information
Fee Related Earnings $ 106,038 $ 98,177 $ 90,704 $ 292,215 $ 233,832
Plus: depreciation and amortization 3,601 3,708 3,273 10,990 8,919
Fee Related EBITDA $ 109,639 $ 101,885 $ 93,977 $ 303,205 $ 242,751
Distributed Earnings $ 189,477 $ 313,559 $ 187,174 $ 701,756 $ 403,208
Plus: Undistributed net realized principal investment income 61,660 90,217 145,700 243,771 499,898
Total Distributable Earnings (c) $ 251,137 $ 403,776 $ 332,874 $ 945,527 $ 903,106
GAAP interest expense $ 25,056 $ 24,614 $ 17,868 $ 72,693 $ 52,757
Less: interest expense related to debt obligations
from investment financing arrangements 8,841 8,404 8,502 24,035 24,036
Core Interest Expense (c) $ 16,215 $ 16,210 $ 9,366 $ 48,658 $ 28,721
Economic Net Income (Loss), After Taxes and Equity-based Charges (c) $ 570,570 $ 105,021 $ 469,961 $ 1,275,798 $ 1,643,724
(a) For the quarter ended September 30, 2013, other operating expenses include $9.7 million of one-time expenses incurred in connection with the launch of a closed-end fund.
(b) As of September 30, 2013, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods.
(c) See definitions for economic net income (loss), after taxes, adjusted units, total distributable earnings, core interest expense and economic net income (loss), after taxes and equity-based charges under “Notes to Reportable Segments.”
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 119,410 $ 114,700 $ 105,035 $ 340,715 $ 319,117
Incentive fees - - - - -
Management and incentive fees 119,410 114,700 105,035 340,715 319,117
Monitoring and transaction fees:
Monitoring fees 33,010 28,907 29,969 93,985 83,577
Transaction fees 54,968 25,231 32,788 96,611 55,223
Fee credits (46,597 ) (29,547 ) (26,293 ) (97,153 ) (59,641 )
Net monitoring and transaction fees 41,381 24,591 36,464 93,443 79,159
Total fees 160,791 139,291 141,499 434,158 398,276
Expenses
Compensation and benefits 65,400 51,516 48,905 164,917 139,382
Occupancy and related charges 13,367 11,143 12,049 35,935 36,487
Other operating expenses 37,586 33,988 35,885 105,516 103,790
Total expenses 116,353 96,647 96,839 306,368 279,659
Fee Related Earnings 44,438 42,644 44,660 127,790 118,617
Investment income (loss)
Realized carried interest 81,532 269,828 166,908 439,527 307,387
Unrealized carried interest 263,982 (212,809 ) 224,260 361,972 830,072
Gross carried interest 345,514 57,019 391,168 801,499 1,137,459
Less: allocation to KKR carry pool (139,903 ) (22,220 ) (161,805 ) (323,467 ) (463,485 )
Less: management fee refunds (7,767 ) (4,735 ) (61,499 ) (21,718 ) (135,011 )
Net carried interest 197,844 30,064 167,864 456,314 538,963
Other investment income (loss) 3,357 (249 ) 1,779 1,073 (559 )
Total investment income (loss) 201,201 29,815 169,643 457,387 538,404
Income (Loss) before noncontrolling interests
in Income of consolidated entities 245,639 72,459 214,303 585,177 657,021
Income (Loss) attributable to
noncontrolling interests 433 411 444 1,242 3,098
Economic Net Income (Loss) $ 245,206 $ 72,048 $ 213,859 $ 583,935 $ 653,923
Assets Under Management $ 59,678,300 $ 54,452,400 $ 49,771,000 $ 59,678,300 $ 49,771,000
Fee Paying Assets Under Management $ 49,889,500 $ 45,907,500 $ 40,354,200 $ 49,889,500 $ 40,354,200
Committed Dollars Invested $ 1,805,800 $ 1,314,000 $ 623,000 $ 3,718,300 $ 1,805,500
Uncalled Commitments $ 21,103,800 $ 19,972,800 $ 14,594,700 $ 21,103,800 $ 14,594,700
...
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ 53,835 $ 49,476 $ 21,448 $ 149,669 $ 65,635
Incentive fees 1,225 15,590 17,768 35,664 31,495
Management and incentive fees 55,060 65,066 39,216 185,333 97,130
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 20,534 7,243 8,780 30,883 12,521
Fee credits (15,185 ) (5,204 ) (5,414 ) (22,445 ) (8,098 )
Net monitoring and transaction fees 5,349 2,039 3,366 8,438 4,423
Total fees 60,409 67,105 42,582 193,771 101,553
Expenses
Compensation and benefits 18,606 21,990 13,997 60,296 34,608
Occupancy and related charges 1,906 1,615 1,343 5,063 4,127
Other operating expenses (a) 19,670 9,147 3,897 36,643 11,754
Total expenses 40,182 32,752 19,237 102,002 50,489
Fee Related Earnings (a) 20,227 34,353 23,345 91,769 51,064
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest 14,022 10,791 19,568 45,212 25,515
Gross carried interest 14,022 10,791 19,568 45,212 25,515
Less: allocation to KKR carry pool (5,609 ) (4,316 ) (7,828 ) (18,085 ) (10,207 )
Less: management fee refunds - - - - -
Net carried interest 8,413 6,475 11,740 27,127 15,308
Other investment income (loss) (4 ) 22 25 80 (10 )
Total investment income (loss) 8,409 6,497 11,765 27,207 15,298
Income (Loss) before noncontrolling interests
in Income of consolidated entities 28,636 40,850 35,110 118,976 66,362
Income (Loss) attributable to
noncontrolling interests 202 378 233 935 787
Economic Net Income (Loss) $ 28,434 $ 40,472 $ 34,877 $ 118,041 $ 65,575
Assets Under Management $ 30,490,900 $ 29,048,500 $ 16,507,700 $ 30,490,900 $ 16,507,700
Fee Paying Assets Under Management $ 23,722,400 $ 22,048,900 $ 9,911,800 $ 23,722,400 $ 9,911,800
Committed Dollars Invested $ 326,400 $ 370,800 $ 278,300 $ 862,100 $ 558,400
Uncalled Commitments $ 1,614,600 $ 1,391,600 $ 1,251,200 $ 1,614,600 $ 1,251,200
(a) For the quarter ended September 30, 2013, other operating expenses include $9.7 million of one-time expenses incurred in connection with the launch of a closed-end fund.
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENTS (UNAUDITED)
(Amounts in thousands)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Fees
Management and incentive fees:
Management fees $ - $ - $ - $ - $ -
Incentive fees - - - - -
Management and incentive fees - - - - -
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 53,625 30,311 33,696 104,717 95,524
Fee credits - - - - -
Net monitoring and transaction fees 53,625 30,311 33,696 104,717 95,524
Total fees 53,625 30,311 33,696 104,717 95,524
Expenses
Compensation and benefits 8,223 6,930 8,438 22,614 22,820
Occupancy and related charges 401 309 213 1,065 691
Other operating expenses 3,628 1,892 2,346 8,382 7,862
Total expenses 12,252 9,131 10,997 32,061 31,373
Fee Related Earnings 41,373 21,180 22,699 72,656 64,151
Investment income (loss)
Realized carried interest - - - - -
Unrealized carried interest - - - - -
Gross carried interest - - - - -
Less: allocation to KKR carry pool - - - - -
Less: management fee refunds - - - - -
Net carried interest - - - - -
Other investment income (loss) (a) 300,119 11,277 239,072 633,567 1,001,455
Total investment income (loss) 300,119 11,277 239,072 633,567 1,001,455
Income (Loss) before noncontrolling interests
in Income of consolidated entities 341,492 32,457 261,771 706,223 1,065,606
Income (Loss) attributable to
noncontrolling interests 1,385 534 633 2,267 1,913
Economic Net Income (Loss) $ 340,107 $ 31,923 $ 261,138 $ 703,956 $ 1,063,693
Syndicated Capital $ 716,500 $ 204,600 $ 24,700 $ 982,100 $ 275,300
(a) Amount is net of (i) interest expense and (ii) certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income that is not included in “Compensation and benefits” and “Other operating expenses” above and on page 6.
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 119,410 $ 53,835 $ - $ 173,245
Incentive fees - 1,225 - 1,225
Management and incentive fees 119,410 55,060 - 174,470
Monitoring and transaction fees:
Monitoring fees 33,010 - - 33,010
Transaction fees 54,968 20,534 53,625 129,127
Fee credits (46,597 ) (15,185 ) - (61,782 )
Net monitoring and transaction fees 41,381 5,349 53,625 100,355
Total fees 160,791 60,409 53,625 274,825
Expenses
Compensation and benefits 65,400 18,606 8,223 92,229
Occupancy and related charges 13,367 1,906 401 15,674
Other operating expenses 37,586 19,670 3,628 60,884
Total expenses 116,353 40,182 12,252 168,787
Fee Related Earnings 44,438 20,227 41,373 106,038
Investment income (loss)
Realized carried interest 81,532 - - 81,532
Unrealized carried interest 263,982 14,022 - 278,004
Gross carried interest 345,514 14,022 - 359,536
Less: allocation to KKR carry pool (139,903 ) (5,609 ) - (145,512 )
Less: management fee refunds (7,767 ) - - (7,767 )
Net carried interest 197,844 8,413 - 206,257
Other investment income (loss) 3,357 (4 ) 300,119 303,472
Total investment income (loss) 201,201 8,409 300,119 509,729
Income (Loss) before noncontrolling interests
in Income of consolidated entities 245,639 28,636 341,492 615,767
Income (Loss) attributable to
noncontrolling interests 433 202 1,385 2,020
Economic Net Income (Loss) $ 245,206 $ 28,434 $ 340,107 $ 613,747
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended June 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 114,700 $ 49,476 $ - $ 164,176
Incentive fees - 15,590 - 15,590
Management and incentive fees 114,700 65,066 - 179,766
Monitoring and transaction fees:
Monitoring fees 28,907 - - 28,907
Transaction fees 25,231 7,243 30,311 62,785
Fee credits (29,547 ) (5,204 ) - (34,751 )
Net monitoring and transaction fees 24,591 2,039 30,311 56,941
Total fees 139,291 67,105 30,311 236,707
Expenses
Compensation and benefits 51,516 21,990 6,930 80,436
Occupancy and related charges 11,143 1,615 309 13,067
Other operating expenses 33,988 9,147 1,892 45,027
Total expenses 96,647 32,752 9,131 138,530
Fee Related Earnings 42,644 34,353 21,180 98,177
Investment income (loss)
Realized carried interest 269,828 - - 269,828
Unrealized carried interest (212,809 ) 10,791 - (202,018 )
Gross carried interest 57,019 10,791 - 67,810
Less: allocation to KKR carry pool (22,220 ) (4,316 ) - (26,536 )
Less: management fee refunds (4,735 ) - - (4,735 )
Net carried interest 30,064 6,475 - 36,539
Other investment income (loss) (249 ) 22 11,277 11,050
Total investment income (loss) 29,815 6,497 11,277 47,589
Income (Loss) before noncontrolling interests
in Income of consolidated entities 72,459 40,850 32,457 145,766
Income (Loss) attributable to
noncontrolling interests 411 378 534 1,323
Economic Net Income (Loss) $ 72,048 $ 40,472 $ 31,923 $ 144,443
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 105,035 $ 21,448 $ - $ 126,483
Incentive fees - 17,768 - 17,768
Management and incentive fees 105,035 39,216 - 144,251
Monitoring and transaction fees:
Monitoring fees 29,969 - - 29,969
Transaction fees 32,788 8,780 33,696 75,264
Fee credits (26,293 ) (5,414 ) - (31,707 )
Net monitoring and transaction fees 36,464 3,366 33,696 73,526
Total fees 141,499 42,582 33,696 217,777
Expenses
Compensation and benefits 48,905 13,997 8,438 71,340
Occupancy and related charges 12,049 1,343 213 13,605
Other operating expenses 35,885 3,897 2,346 42,128
Total expenses 96,839 19,237 10,997 127,073
Fee Related Earnings 44,660 23,345 22,699 90,704
Investment income (loss)
Realized carried interest 166,908 - - 166,908
Unrealized carried interest 224,260 19,568 - 243,828
Gross carried interest 391,168 19,568 - 410,736
Less: allocation to KKR carry pool (161,805 ) (7,828 ) - (169,633 )
Less: management fee refunds (61,499 ) - - (61,499 )
Net carried interest 167,864 11,740 - 179,604
Other investment income (loss) 1,779 25 239,072 240,876
Total investment income (loss) 169,643 11,765 239,072 420,480
Income (Loss) before noncontrolling interests
in Income of consolidated entities 214,303 35,110 261,771 511,184
Income (Loss) attributable to
noncontrolling interests 444 233 633 1,310
Economic Net Income (Loss) $ 213,859 $ 34,877 $ 261,138 $ 509,874
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2013
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 340,715 $ 149,669 $ - $ 490,384
Incentive fees - 35,664 - 35,664
Management and incentive fees 340,715 185,333 - 526,048
Monitoring and transaction fees:
Monitoring fees 93,985 - - 93,985
Transaction fees 96,611 30,883 104,717 232,211
Fee credits (97,153 ) (22,445 ) - (119,598 )
Net monitoring and transaction fees 93,443 8,438 104,717 206,598
Total fees 434,158 193,771 104,717 732,646
Expenses
Compensation and benefits 164,917 60,296 22,614 247,827
Occupancy and related charges 35,935 5,063 1,065 42,063
Other operating expenses 105,516 36,643 8,382 150,541
Total expenses 306,368 102,002 32,061 440,431
Fee Related Earnings 127,790 91,769 72,656 292,215
Investment income (loss)
Realized carried interest 439,527 - - 439,527
Unrealized carried interest 361,972 45,212 - 407,184
Gross carried interest 801,499 45,212 - 846,711
Less: allocation to KKR carry pool (323,467 ) (18,085 ) - (341,552 )
Less: management fee refunds (21,718 ) - - (21,718 )
Net carried interest 456,314 27,127 - 483,441
Other investment income (loss) 1,073 80 633,567 634,720
Total investment income (loss) 457,387 27,207 633,567 1,118,161
Income (Loss) before noncontrolling interests
in Income of consolidated entities 585,177 118,976 706,223 1,410,376
Income (Loss) attributable to
noncontrolling interests 1,242 935 2,267 4,444
Economic Net Income (Loss) $ 583,935 $ 118,041 $ 703,956 $ 1,405,932
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2012
(Amounts in thousands)
Capital Markets Total
Private Markets Public Markets and Principal Reportable
Segment Segment Activities Segment Segments
Fees
Management and incentive fees:
Management fees $ 319,117 $ 65,635 $ - $ 384,752
Incentive fees - 31,495 - 31,495
Management and incentive fees 319,117 97,130 - 416,247
Monitoring and transaction fees:
Monitoring fees 83,577 - - 83,577
Transaction fees 55,223 12,521 95,524 163,268
Fee credits (59,641 ) (8,098 ) - (67,739 )
Net monitoring and transaction fees 79,159 4,423 95,524 179,106
Total fees 398,276 101,553 95,524 595,353
Expenses
Compensation and benefits 139,382 34,608 22,820 196,810
Occupancy and related charges 36,487 4,127 691 41,305
Other operating expenses 103,790 11,754 7,862 123,406
Total expenses 279,659 50,489 31,373 361,521
Fee Related Earnings 118,617 51,064 64,151 233,832
Investment income (loss)
Realized carried interest 307,387 - - 307,387
Unrealized carried interest 830,072 25,515 - 855,587
Gross carried interest 1,137,459 25,515 - 1,162,974
Less: allocation to KKR carry pool (463,485 ) (10,207 ) - (473,692 )
Less: management fee refunds (135,011 ) - - (135,011 )
Net carried interest 538,963 15,308 - 554,271
Other investment income (loss) (559 ) (10 ) 1,001,455 1,000,886
Total investment income (loss) 538,404 15,298 1,001,455 1,555,157
Income (Loss) before noncontrolling interests
in Income of consolidated entities 657,021 66,362 1,065,606 1,788,989
Income (Loss) attributable to
noncontrolling interests 3,098 787 1,913 5,798
Economic Net Income (Loss) $ 653,923 $ 65,575 $ 1,063,693 $ 1,783,191
KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of September 30, 2013
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment Segment Segment Segments
Cash and short-term investments $ 173,453 $ 47,074 $ 1,680,428 $ 1,900,955
Investments - - 4,937,849
(a)
4,937,849
Unrealized carry 918,574 52,066 - 970,640
Other assets 363,981 283,283 58,336 705,600
Total assets $ 1,456,008 $ 382,423 $ 6,676,613 $ 8,515,044
Debt obligations $ - $ - $ 1,000,000 $ 1,000,000
Other liabilities 143,016 51,701 40,964 235,681
Total liabilities 143,016 51,701 1,040,964 1,235,681
Noncontrolling interests 1,479 649 69,487 71,615
Book value $ 1,311,513 $ 330,073 $ 5,566,162 $ 7,207,748
Book value per adjusted unit $ 1.83 $ 0.46 $ 7.78 $ 10.07
As of December 31, 2012
Capital
Markets and
Private Public Principal Total
Markets Markets Activities Reportable
Segment Segment Segment Segments
Cash and short-term investments $ 358,237 $ 28,690 $ 1,147,360 $ 1,534,287
Investments - - 4,758,157 4,758,157
Unrealized carry 730,292 24,939 - 755,231
Other assets 207,047 280,472 62,119 549,638
Total assets $ 1,295,576 $ 334,101 $ 5,967,636 $ 7,597,313
Debt obligations $ - $ - $ 500,000 $ 500,000
Other liabilities 78,724 16,433 24,275 119,432
Total liabilities 78,724 16,433 524,275 619,432
Noncontrolling interests 1,339 739 18,619 20,697
Book value $ 1,215,513 $ 316,929 $ 5,424,742 $ 6,957,184
Book value per adjusted unit $ 1.72 $ 0.45 $ 7.70 $ 9.87
(a) See Capital Markets and Principal Activities segment schedule of investments that follows.
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of September 30, 2013
Fair Value as
Fair a Percentage of
Investment
Cost
Value Total Investments
Co-Investments in Portfolio Companies of
Private Equity Investment Vehicles:
Alliance Boots GmbH 195,640 491,801 10.0 %
HCA Inc. 96,289 363,611 7.4 %
ProSiebenSat.1 Media AG 226,913 279,201 5.7 %
The Nielsen Company B.V. 87,657 214,492 4.3 %
Samson Resources Corporation 237,514 190,012 3.8 %
KION Group 128,058 189,391 3.8 %
NXP B.V. 122,059 172,084 3.5 %
US Foods, Inc. 100,000 130,000 2.6 %
Biomet, Inc. 151,444 121,155 2.5 %
First Data Corporation 135,258 94,681 1.9 %
Dollar General Corporation 2,893 18,171 0.4 %
Energy Future Holdings Corp. 200,000 10,000 0.2 %
1,683,725 2,274,599 46.1 %
Private Equity Investment Vehicles
KKR 2006 Fund L.P. 340,655 389,950 7.9 %
KKR European Fund III L.P. 243,973 286,953 5.8 %
KKR Asian Fund L.P. 84,152 95,665 1.9 %
KKR North America Fund XI L.P. 61,565 64,106 1.3 %
KKR European Fund II L.P. 46,966 49,205 1.0 %
KKR Millennium Fund L.P. 50,470 42,693 0.9 %
KKR E2 Investors, L.P. 14,210 26,037 0.5 %
Co-Investments 7,598 7,730 0.2 %
KKR European Fund L.P. 47,664 4,290 0.1 %
KKR China Growth Fund L.P. 3,286 4,207 0.1 %
900,539 970,836 19.7 %
Private Equity Total 2,584,264 3,245,435 65.8 %
Real Assets
Royalties and Drilling 281,968 294,670 6.0 %
Real Estate Fund 45,135 57,065 1.2 %
Infrastructure Fund 30,324 32,668 0.7 %
Co-Investments 10,835 12,888 0.3 %
Natural Resources 12,917 8,159 0.2 %
Real Assets Total 381,179 405,450 8.4 %
Private Markets Total 2,965,443 3,650,885 74.2 %
Public Markets Investment Strategies
Liquid Credit 187,263 196,972 4.0 %
Long/Short Equities 100,000 110,899 2.2 %
Credit Relative Value 82,000 91,550 1.9 %
Direct Lending 49,796 55,323 1.1 %
Special Situations 30,205 34,600 0.7 %
Mezzanine Fund 15,865 19,331 0.4 %
Public Markets Total 465,129 508,675 10.3 %
Other 762,234 778,289 15.5 %
Total Investments $ 4,192,806 $ 4,937,849 100.0 %
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED (UNAUDITED)
(Amounts in thousands, except percentage amounts)
As of September 30, 2013
Fair Value as
a Percentage
Investment
Cost
Fair
Value
of Total
Investments
Significant Aggregate Investments: (a)
Alliance Boots GmbH $ 228,769 $ 565,811 11.5 %
HCA Inc. 117,624 432,333 8.7 %
ProSieben.Sat 1 Media AG 242,643 297,299 6.0 %
589,036 1,295,443 26.2 %
Other investments 3,603,770 3,642,406 73.8 %
Total Investments $ 4,192,806 $ 4,937,849 100.0 %
(a) The significant aggregate investments include investments in portfolio companies with individual fair values of 5% or more of the Capital Markets and Principal Activities segment investments balance as of September 30, 2013. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.
KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private Public Total
Markets Markets Reportable
Segment Segment Segments
Quarter Ended September 30, 2013
June 30, 2013 $ 54,452,400 $ 29,048,500 $ 83,500,900
New Capital Raised 4,670,800 1,821,700 6,492,500
Distributions (1,591,600 ) (552,300 )
(c)
(2,143,900 )
Foreign Exchange 33,100 - 33,100
Change in Value 2,113,600 173,000 2,286,600
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
Nine Months Ended September 30, 2013
December 31, 2012 $ 49,127,600 $ 26,399,900 $ 75,527,500
New Capital Raised 12,319,000 5,056,500 17,375,500
Distributions (6,109,000 ) (1,952,500 )
(d)
(8,061,500 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange 22,100 - 22,100
Change in Value 4,590,900 987,000 5,577,900
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
Trailing Twelve Months Ended September 30, 2013
September 30, 2012 $ 49,771,000 $ 16,507,700 $ 66,278,700
New Capital Raised 13,253,100 6,850,500 20,103,600
Acquisitions (b) - 8,086,900 8,086,900
Distributions (9,206,100 ) (2,438,100 )
(e)
(11,644,200 )
Net Changes in Fee Base of Certain Funds (a) (272,300 ) - (272,300 )
Foreign Exchange 39,500 - 39,500
Change in Value 6,093,100 1,483,900 7,577,000
September 30, 2013 $ 59,678,300 $ 30,490,900 $ 90,169,200
* Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents AUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised from fund investors and distributions since the acquisition.
(c) Includes $155.3 million of redemptions by fund investors.
(d) Includes $694.5 million of redemptions by fund investors.
(e) Includes $864.4 million of redemptions by fund investors.
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
Private Public Total
Markets Markets Reportable
Segment Segment Segments
Quarter Ended September 30, 2013
June 30, 2013 $ 45,907,500 $ 22,048,900 $ 67,956,400
New Capital Raised 4,366,900 1,719,500 6,086,400
Distributions (582,800 ) (311,100 )
(c)
(893,900 )
Foreign Exchange 162,800 - 162,800
Change in Value 35,100 265,100 300,200
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
Nine Months Ended September 30, 2013
December 31, 2012 $ 41,173,000 $ 19,673,000 $ 60,846,000
New Capital Raised 11,730,800 4,453,800 16,184,600
Distributions (2,533,800 ) (1,284,800 )
(d)
(3,818,600 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange 107,400 - 107,400
Change in Value 66,800 880,400 947,200
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
Trailing Twelve Months Ended September 30, 2013
September 30, 2012 $ 40,354,200 $ 9,911,800 $ 50,266,000
New Capital Raised 13,002,800 6,012,900 19,015,700
Acquisitions (b) - 8,078,400 8,078,400
Distributions (3,084,900 ) (1,542,000 )
(e)
(4,626,900 )
Net Changes in Fee Base of Certain Funds (a) (654,700 ) - (654,700 )
Foreign Exchange 191,000 - 191,000
Change in Value 81,100 1,261,300 1,342,400
September 30, 2013 $ 49,889,500 $ 23,722,400 $ 73,611,900
* Fee Paying Assets Under Management exclude those assets managed by entities where KKR holds less than a 50% ownership interest.
(a) Represents the impact of including certain funds entering the post-investment period.
(b) Represents FPAUM of Prisma as of October 1, 2012, the date of acquisition. This figure excludes new capital raised from fund investors and distributions since the acquisition.
(c) Includes $155.3 million of redemptions by fund investors.
(d) Includes $694.5 million of redemptions by fund investors.
(e) Includes $864.4 million of redemptions by fund investors.
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of September 30, 2013
(Amounts in millions, except percentages)
Investment Period Amount
Percentage
Committed by
Commencement Uncalled
General
Remaining
Remaining Fair
Date End Date Commitment Commitments Partner Invested Realized Cost
Value
Private Markets
Private Equity Funds
Asian Fund II 4/2013 4/2019 $ 5,825.0 $ 5,825.0 1.3 % $ - $ - $ - $ -
North America Fund XI 9/2012 9/2018 8,030.4 6,316.2 3.1 % 1,714.2 3.9 1,714.2 1,774.5
China Growth Fund 11/2010 11/2016 1,010.0 692.4 1.0 % 317.6 32.6 300.1 388.8
E2 Investors (Annex Fund) 8/2009 11/2013 347.9 152.1 4.3 % 195.8 - 195.8 395.1
European Fund III 3/2008 3/2014 6,108.1 1,599.4 4.6 % 4,508.7 653.5 4,151.3 5,154.1
Asian Fund 7/2007 4/2013 3,983.2 243.3 2.5 % 3,739.9 1,663.1 2,869.9 4,763.2
2006 Fund 9/2006 9/2012 17,642.2 1,255.5 2.1 % 16,386.7 10,874.8 9,914.7 14,627.2
European Fund II 11/2005 10/2008 5,750.8 - 2.1 % 5,750.8 3,245.1 3,120.4 4,636.4
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5 % 6,000.0 9,502.7 2,084.1 3,500.4
European Fund 12/1999 12/2005 3,085.4 - 3.2 % 3,085.4 8,720.0 - 51.8
Total Private Equity Funds 57,783.0 16,083.9 41,699.1 34,695.7 24,350.5 35,291.5
Co-Investment Vehicles Various Various 3,137.9 1,083.1 Various 2,054.8 2,436.9 1,413.3 1,837.7
Total Private Equity 60,920.9 17,167.0 43,753.9 37,132.6 25,763.8 37,129.2
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,413.5 1,413.5 17.9 % - - - -
Natural Resources Fund Various Various 1,072.3 499.4 Various 572.9 67.3 525.5 329.6
Global Energy Opportunities Various Various 861.0 734.4 Various 126.6 - 126.6 121.9
Infrastructure Fund Various Various 1,042.0 498.0 4.8 % 544.0 9.0
544.0 583.2
Infrastructure Co-Investments Various Various 1,356.2 251.7 Various 1,104.5 208.7
1,104.5 1,337.6
Real Estate Partners Americas 5/2013 (b) 694.0 539.8 29 % 154.2 - 154.2 196.0
Real Assets 6,439.0 3,936.8 2,502.2 285.0 2,454.8 2,568.3
Private Markets Total 67,359.9 21,103.8 46,256.1 37,417.6 28,218.6 39,697.5
Public Markets
Special Situations Vehicles Various Various 2,635.5 822.4 Various 1,813.1 530.4 1,567.3 1,934.1
Mezzanine Fund 3/2010 8/2015 987.0 564.1 4.6 % 422.9 129.3 364.9 426.9
Direct Lending Vehicles Various Various 681.0 228.1 Various 452.9 19.5 452.9 484.7
Public Markets Total 4,303.5 1,614.6 2,688.9 679.2 2,385.1 2,845.7
Grand Total $ 71,663.4 $ 22,718.4 $ 48,945.0 $ 38,096.8 $ 30,603.7 $ 42,543.2
(a) Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b) Third anniversary of final close.
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
Quarter Ended Nine Months Ended
September 30, 2013 June 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
FRE (a) $ 106,038 $ 98,177 $ 90,704 $ 292,215 $ 233,832
Realized cash carry 48,919 161,897 100,145 263,716 184,432
Net realized principal investment income 102,766 150,361 145,700 406,283 499,898
Less: local income taxes (4,566 ) (5,336 ) (2,365 ) (12,243 ) (9,258 )
Less: noncontrolling interests (2,020 ) (1,323 ) (1,310 ) (4,444 ) (5,798 )
Total Distributable Earnings 251,137 403,776 332,874 945,527 903,106
Less: Undistributed net realized principal investment income (61,660 ) (90,217 ) (145,700 ) (243,771 ) (499,898 )
Distributed Earnings 189,477 313,559 187,174 701,756 403,208
Distributed Earnings to KKR & Co. L.P. (b) 78,300 126,295 66,015 280,344 140,216
Less: estimated current corporate income taxes (12,455 ) (10,125 ) (6,890 ) (28,956 ) (15,180 )
Distributed Earnings to KKR & Co. L.P., After Taxes 65,845 116,170 59,125 251,388 125,036
Distribution per KKR & Co. L.P. common unit $ 0.23 $ 0.42 $ 0.24 $ 0.92 $ 0.52
Components of Distribution per KKR & Co. L.P. common unit
After-tax FRE $ 0.10 $ 0.10 $ 0.09 $ 0.30 $ 0.24
Realized Cash Carry $ 0.07 $ 0.23 $ 0.15 $ 0.38 $ 0.28
Distributed Net Realized Principal Investment Income $ 0.06 $ 0.09 $ - $ 0.24 $ -
Outstanding KKR & Co. L.P. common units 285,051,256 277,834,343 241,407,805
(a) See Exhibit A for a reconciliation of such measure to financial results prepared in accordance with GAAP.
(b) Represents the amount of distributed earnings allocable to KKR & Co. L.P. based on its ownership in the KKR business.
DISTRIBUTION POLICY
KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of its investment management business and 40% of the net cash income from realized principal investments, in each case in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other obligations. For purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) a percentage of net realized principal investment income. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.
The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P., which may change the distribution policy at any time, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships.
KKR
Notes to Reportable Segments (Unaudited)
The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR’s reportable business segments. The reportable segments for KKR’s business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.
KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.
Fee related earnings (“FRE”) is comprised of segment operating revenues less segment operating expenses, excluding certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income. This measure is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.
Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR’s businesses inclusive of investment income and carried interest. ENI is comprised of: (i) FRE plus (ii) segment investment income (loss), which is reduced for carry pool allocations, management fee refunds, interest expense and certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income; less (iii) certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the exclusion of the items referred to in FRE above; (ii) the exclusion of investment income (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes.
Economic net income (loss), after taxes is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Economic net income (loss), after taxes and equity-based charges is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. Economic Net Income (Loss), After Taxes and Equity-based Charges is calculated by deducting from ENI: (i) equity-based charges associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan; and (ii) the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.
Net realized principal investment income refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses from principal investments during the second quarter of 2013 to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income and (iii) interest income net of interest expense less certain compensation and general and administrative expenses incurred in the generation of net realized principal investment income in each case generated by KKR’s principal investments held on or through KKR’s balance sheet in our Capital Markets and Principal Activities segment. This is a term to describe a portion of KKR’s quarterly distribution.
Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool and (iii) net realized principal investment income; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and also assess amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR’s current distribution policy.
Assets under management (“AUM”) represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR’s capital raising activities and the overall activity in its investment funds and vehicles. KKR calculates the amount of AUM as of any date as the sum of: (i) the fair value of the investments of KKR’s investment funds plus uncalled capital commitments from these funds; (ii) the fair value of investments in KKR’s co-investment vehicles; (iii) the net asset value of certain of KKR's fixed income products; (iv) the value of outstanding structured finance vehicles; and (v) the fair value of other assets managed by KKR. KKR’s definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.
Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR’s capital raising activities and the overall activity in its investment funds and vehicles, for only those funds and vehicles where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR’s fees and differs from AUM in the following respects: (i) assets from which KKR does not receive a fee are excluded (i.e., assets with respect to which it receives only carried interest) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.
Committed dollars invested is the aggregate amount of capital commitments that have been invested by KKR’s investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR’s investment of committed capital. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a fee or carried interest and (ii) capital invested by KKR’s investment funds and vehicles.
Syndicated capital is the aggregate amount of debt or equity capital in transactions originated by KKR investment funds and vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital committed to such transactions by carry-yielding co-investment vehicles, which is instead reported in committed dollars invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds and vehicles. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR’s Capital Markets and Principal Activities segment and across its investment platform.
Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds and vehicles to make future investments.
Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. and KKR Holdings and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P.
Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s private equity funds, investment vehicles and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds and vehicles and other noncontrolling interest holders. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations.
Book value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of our investment portfolio, including carried interest, as well as our overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from the equivalent GAAP amounts on a consolidated basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings L.P.
Fee related EBITDA is comprised of FRE before the impact of depreciation of fixed assets and amortization of intangible assets and is used by management as a measure of the cash earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the amount of cash earnings generated by KKR’s management companies and capital markets businesses.
Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR’s liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR’s available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.
KKR
EXHIBIT A
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (GAAP BASIS)
TO ENI AFTER TAXES PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
Quarter Ended
September 30, 2013 June 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 0.73 $ 0.06 $ 0.53
Weighted Average Common Units Outstanding 282,148,802 271,983,811 239,696,358
Net income (loss) attributable to KKR & Co. L.P. 204,740 15,134 127,411
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
300,169 28,106 249,460
Plus: Non-cash equity based charges 85,215 80,318 122,157
Plus: Amortization of intangibles and other, net 15,979 12,360 1,234
Plus: Income taxes 7,644 8,525 9,612
Economic net income (loss) 613,747 144,443 509,874
Less: Provision for income taxes 11,950 13,486 22,548
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 31,227 25,936 17,365
Economic net income (loss) after taxes and equity-based charges 570,570 105,021 469,961
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 31,227 25,936 17,365
Economic net income (loss) after taxes 601,797 130,957 487,326
Weighted Average Adjusted Units 715,781,663 715,453,358 702,252,548
Economic net income (loss) after taxes per adjusted unit $ 0.84 $ 0.18 $ 0.69
Nine Months Ended
September 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. per common unit $ 1.53 $ 1.98
Weighted Average Common Units Outstanding 270,484,224 234,876,879
Net income (loss) attributable to KKR & Co. L.P. 413,313 464,108
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
662,387 946,484
Plus: Non-cash equity based charges 247,183 330,037
Plus: Amortization of intangibles and other, net 57,524 4,785
Plus: Income taxes 25,525 37,777
Economic net income (loss) 1,405,932 1,783,191
Less: Provision for income taxes 45,553 91,788
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 84,581 47,678
Economic net income (loss) after taxes and equity-based charges 1,275,798 1,643,725
Plus: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 84,581 47,678
Economic net income (loss) after taxes 1,360,379 1,691,403
Weighted Average Adjusted Units 714,171,641 698,371,025
Economic net income (loss) after taxes per adjusted unit $ 1.90 $ 2.42
KKR
EXHIBIT A (CONTINUED)
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE RELATED EBITDA, AND TOTAL DISTRIBUTABLE EARNINGS (UNAUDITED)
(Amounts in thousands)
Quarter Ended
September 30, 2013 June 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 204,740 $ 15,134 $ 127,411
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
300,169 28,106 249,460
Plus: Non-cash equity based charges 85,215 80,318 122,157
Plus: Amortization of intangibles and other, net 15,979 12,360 1,234
Plus: Income taxes 7,644 8,525 9,612
Economic net income (loss) 613,747 144,443 509,874
Plus: Income attributable to segment noncontrolling interests 2,020 1,323 1,310
Less: Investment income (loss) 509,729 47,589 420,480
Fee related earnings 106,038 98,177 90,704
Plus: Depreciation and amortization 3,601 3,708 3,273
Fee related EBITDA $ 109,639 $ 101,885 $ 93,977
Less: Depreciation and amortization 3,601 3,708 3,273
Plus: Realized cash carry 48,919 161,897 100,145
Plus: Net realized principal investment income 102,766 150,361 145,700
Less: Local income taxes and noncontrolling interests 6,586 6,659 3,675
Total distributable earnings $ 251,137 $ 403,776 $ 332,874
Nine Months Ended
September 30, 2013 September 30, 2012
Net income (loss) attributable to KKR & Co. L.P. $ 413,313 $ 464,108
Plus: Net income (loss) attributable to noncontrolling
interests held by KKR Holdings L.P.
662,387 946,484
Plus: Non-cash equity based charges 247,183 330,037
Plus: Amortization of intangibles and other, net 57,524 4,785
Plus: Income taxes 25,525 37,777
Economic net income (loss) 1,405,932 1,783,191
Plus: Income attributable to segment noncontrolling interests 4,444 5,798
Less: Investment income (loss) 1,118,161 1,555,157
Fee related earnings 292,215 233,832
Plus: Depreciation and amortization 10,990 8,919
Fee related EBITDA $ 303,205 $ 242,751
Less: Depreciation and amortization 10,990 8,919
Plus: Realized cash carry 263,716 184,432
Plus: Net realized principal investment income 406,283 499,898
Less: Local income taxes and noncontrolling interests 16,687 15,056
Total distributable earnings $ 945,527 $ 903,106
KKR
EXHIBIT A (CONTINUED)
RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
As of As of
September 30, 2013 December 31, 2012
KKR & Co. L.P. partners’ capital $ 2,495,093 $ 2,004,359
Noncontrolling interests held by KKR Holdings L.P. 4,796,218 4,981,864
Equity impact of KKR Management Holdings Corp. and other (83,563 ) (29,039 )
Book value 7,207,748 6,957,184
Adjusted units 715,755,721 704,780,484
Book value per adjusted unit $ 10.07 $ 9.87
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS) (UNAUDITED)
(Amounts in thousands)
As of As of
September 30, 2013 December 31, 2012
Cash and cash equivalents $ 1,112,316 $ 1,230,464
Liquid short-term investments 788,639 303,823
Cash and short-term investments $ 1,900,955 $ 1,534,287
KKR
EXHIBIT B
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING TO WEIGHTED AVERAGE ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
Quarter Ended
September 30, 2013 June 30, 2013 September 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 282,148,802 271,983,811 239,696,358
Weighted Average Unvested Common Units(a) 25,986,389 26,094,953 17,950,264
Weighted Average GAAP Common Units Outstanding - Diluted 308,135,191 298,078,764 257,646,622
Adjustments:
Weighted Average KKR Holdings Units(b) 407,646,472 417,374,594 444,605,926
Weighted Average Adjusted Units 715,781,663 715,453,358 702,252,548
Nine Months Ended
September 30, 2013 September 30, 2012
Weighted Average GAAP Common Units Outstanding - Basic 270,484,224 234,876,879
Weighted Average Unvested Common Units(a) 25,696,846 14,482,321
Weighted Average GAAP Common Units Outstanding - Diluted 296,181,070 249,359,200
Adjustments:
Weighted Average KKR Holdings Units(b) 417,990,571 449,011,825
Weighted Average Adjusted Units 714,171,641 698,371,025
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING TO ADJUSTED UNITS (UNAUDITED)
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units.
As of As of
September 30, 2013 December 31, 2012
GAAP Common Units Outstanding - Basic 285,051,256 253,363,691
Unvested Common Units(a) 25,960,447 18,863,517
GAAP Common Units Outstanding - Diluted 311,011,703 272,227,208
Adjustments:
KKR Holdings Units(b) 404,744,018 432,553,276
Adjusted Units 715,755,721 704,780,484
(a) Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. The issuance of common units of KKR & Co. L.P. pursuant to awards under its equity incentive plan dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.
.
.
Contact:.
.
Investor Relations:
Kohlberg Kravis Roberts & Co. L.P.
Craig Larson
+1-877-610-4910 (U.S.) / +1-212-230-9410
investor-relations@kkr.com
or
Media:
Kohlberg Kravis Roberts & Co. L.P.
Kristi Huller
+1-212-750-8300
media@kkr.com
Sonic Corp. (SONC), the nation's largest chain of drive-in restaurants, today announced results for the fourth quarter and fiscal year ended August 31, 2013.
Key highlights of the company's fourth fiscal quarter included:
• The company's net income was $0.21 per diluted share compared with net income per diluted share of $0.25 in the fourth fiscal quarter of fiscal 2012;
• Excluding certain adjustments, which are detailed below, net income per diluted share increased 20% to $0.30 from $0.25 in the fourth fiscal quarter of 2012; and
• As previously announced, system-wide same-store sales increased 5.9% during the fourth fiscal quarter, constore sales increase at franchise drive-ins and an increase of 5.2% at company drive-ins.
Key highlights of the company's fiscal year 2013 included:
• The company's net income was $0.64 per diluted share compared with net income per diluted share of $0.60 in fiscal 2012;
• Excluding certain adjustments, which are detailed below, net income per diluted share increased 20% to $0.72 from $0.60 in fiscal 2012;
• System-wide same-store sales increased 2.3%, consisting of a 2.3% same-store sales increase at franchise drive-ins and an increase of 2.5% at company drive-ins;
• Company drive-in margins improved by 60 basis points; and
• The company purchased $35.5 million in stock representing 6% of the company’s outstanding shares.
“Strong same-store sales during our summer quarter highlighted the strength and momentum of our business,” said Cliff Hudson, Chairman, Chief Executive Officer and President. “We are very pleased with our sales and profit performance in our fourth quarter and for fiscal year 2013, which resulted in an earnings per share increase for each period of 20% on an adjusted basis. As we look to fiscal year 2014, we will continue to focus on key initiatives such as increased media effectiveness, our innovative product pipeline and layered day-part promotional strategy to continue to drive same-store sales growth and, in turn, margin improvement.”
In the fourth fiscal quarter, the company refinanced a portion of its fixed rate debt with the issuance of $155 million of 2013-1 Senior Secured Fixed Rate Notes in a private transaction at an interest rate of 3.75% per annum, resulting in annual interest savings of $2.5 million. The board also extended the existing share repurchase program through August 31, 2014 with a total authorization of $40 million. During fiscal year 2013, the company repurchased $35.5 million of stock representing approximately 6% of its outstanding shares. Hudson added, “In fiscal 2014, we will continue to utilize the strength and flexibility of our business model to grow operating income and use our free cash flow1 to invest in our brand, repurchase stock and pay down debt.
“Our success is the result of our long-standing initiatives to improve customer service, product quality and value perception, which in fiscal 2014 will include new technology investments to enhance the guest experience,” added Hudson. “All of these initiatives drive our multi-layered growth strategy which incorporates same-store sales growth, leverage from higher sales, deployment of free cash flow, increasing royalty revenues and new drive-in development over the next few years. This strategy is expected to result in solid double-digit earnings per share growth in the near and long term.”
Same-Store Sales
For the fourth quarter ended August 31, 2013, system-wide same-store sales increased 5.9%, which was comprised of a 6.0% same-store sales increase at franchise drive-ins and an increase of 5.2% at company drive-ins. For the 12 months ended August 31, 2013, system-wide same-store sales increased 2.3%, including a 2.3% same-store sales increase at franchise drive-ins and a 2.5% increase at company drive-ins.
Financial Overview
For the fourth fiscal quarter ended August 31, 2013, the company's net income totaled $12.2 million or $0.21 per diluted share compared with net income of $14.5 million or $0.25 per diluted share in the same period in the prior year. Excluding the adjustments noted below, net income and net income per diluted share for the fourth fiscal quarter increased 19% and 20%, respectively.
During the fourth fiscal quarter of fiscal 2013, the company recognized a $3.9 million ($2.5 million after-tax) debt extinguishment charge in connection with the partial debt refinancing described above, a $2.4 million ($1.5 million after-tax) write-down associated with the closure of 12 lower-performing company drive-ins and a $1.6 million ($1.0 million after-tax) impairment charge for the write-down of assets associated with a change in the vendor that is implementing the Sonic system’s new point-of-sale technology.
For fiscal 2013, net income totaled $36.7 million or $0.64 per diluted share compared with net income of $36.1 million or $0.60 per diluted share for fiscal 2012. Excluding the adjustments noted below, net income and net income per diluted share for fiscal 2013 increased 14% and 20%, respectively.
In fiscal 2013, the company recognized $4.4 million ($2.8 million after-tax) in debt extinguishment charges in connection with a prepayment of debt and partial debt refinancing, a $2.4 million ($1.5 million after-tax) write-down associated with the closure of 12 lower-performing company drive-ins and a $1.6 million ($1.0 million after-tax) impairment charge for the write-down of assets associated with the change in the vendor that is implementing the system’s new point-of-sale technology, offset by a $0.7 million tax benefit associated with the reinstatement of the Work Opportunity Tax Credit (“WOTC”) and the resolution of certain tax matters.
The following non-GAAP adjustments are intended to supplement the presentation of the company's financial results in accordance with GAAP. The company believes that the presentation of these items provides useful information to investors and management regarding the underlying business trends and the performance of the company's ongoing operations and is helpful for period-to-period and company-to-company comparisons, which management believes will assist investors in analyzing the financial results of the company and predicting future performance.
Three months ended Three months ended
August 31, 2013 August 31, 2012
Net Diluted Net Diluted Net Income Diluted EPS
Income EPS Income EPS
$ Change
% Change
$ Change
% Change
Reported – GAAP $ 12,198 $ 0.21 $ 14,502 $ 0.25 $ (2,304 ) (16 )% $ (0.04 ) (16 )%
After-tax loss from early extinguishment of debt 2,483 0.04 - -
After-tax loss on closure of Company Drive-Ins 1,510 0.03 - -
After-tax impairment charges for point-of-sale assets 1,013 0.02 - -
Adjusted - Non-GAAP $ 17,204 $ 0.30 $ 14,502 $ 0.25 $ 2,702 19 % $ 0.05 20 %
Fiscal year ended Fiscal year ended
August 31, 2013 August 31, 2012
Net Diluted Net Diluted Net Income Diluted EPS
Income EPS Income EPS
$ Change
% Change
$ Change
% Change
Reported – GAAP $ 36,701 $ 0.64 $ 36,085 $ 0.60 $ 616 2 % $ 0.04 7 %
After-tax loss from early extinguishment of debt 2,798 0.05 - -
Retroactive tax benefit of WOTC and resolution of tax matters (743 ) (0.02 ) - -
After-tax loss on closure of Company Drive-Ins 1,510 0.03 - -
After-tax impairment charge for point-of-sale assets 1,013 0.02 - -
Adjusted - Non-GAAP $ 41,279 $ 0.72 $ 36,085 $ 0.60 $ 5,194 14 % $ 0.12 20 %
For the fourth fiscal quarter ended August 31, 2013, company drive-in sales increased by $6.3 million, or 5.7% compared to the same period in the prior year. Company drive-in sales for fiscal 2013 decreased by $2.1 million compared to the same period in the prior year primarily as a result of the refranchising of 34 company drive-ins during the second fiscal quarter of 2012.
Development
For the fourth fiscal quarter ended August 31, 2013, 17 new drive-ins were opened, of which 16 were opened by franchisees, similar to drive-in openings during the fourth fiscal quarter of 2012. For fiscal 2013 there were 27 new drive-in openings including 25 new franchise drive-ins.
Fiscal Year 2014 Outlook
The company expects its initiatives to drive 14% to 15% earnings per share growth in fiscal 2014 as compared to the adjusted Non-GAAP earnings per share for fiscal 2013. The macroeconomic environment and its impact on consumer confidence, in addition to the pacing of capital investments, may impact results. The outlook for fiscal 2014 anticipates the following elements:
• Positive same-store sales in the low single digit range for the system;
• Company drive-ins are expected to perform above the system average in the back half of the fiscal year as new digital point-of-purchase technology and a new point-of-sale system are implemented;
• 40 to 50 new franchise drive-in openings and fewer drive-in closings than in fiscal 2013;
• Drive-in-level margins improving between 75 to 100 basis points, depending upon the degree of same-store sales growth at company drive-ins and the implementation of the new point-of-sale system in company drive-ins;
• Selling, general and administrative expenses of $69 million to $70 million;
• Depreciation and amortization expense of $42.5 million to $43 million;
• Net interest expense of approximately $25 million;
• An income tax rate of between 37% to 37.5%, which may vary depending upon the reinstatement of employment tax credit programs that are scheduled to expire on December 31, 2013 and pending resolution of certain tax matters;
• Capital expenditures of $65 million to $70 million, which assumes the implementation of a new point-of-sale system and digital point-of-purchase technology in company drive-ins during fiscal 2014;
• Free cash flow of approximately $15 million to $25 million; and
• The repurchase of $40 million of stock across the fiscal year utilizing existing cash and free cash flow.
Earnings Conference Call
The company will host a conference call and online web simulcast this afternoon beginning at 5:00 p.m. EDT. The conference call can be accessed live by dialing (888) 806-6221 or (913) 312-0830 for international callers. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 8270295. The replay will be available until Monday, October 28, 2013. An online replay of the conference call will be available approximately two hours after the conclusion of the live broadcast. A link to this event may be found on the company's investor relations website at http://ir.sonicdrivein.com/.
About Sonic
SONIC®, America's Drive-In®, is the nation's largest chain of drive-in restaurants with more than 3,500 drive-ins serving approximately 3 million customers every day. Over the past 60 years, SONIC has delighted guests with signature menu items, more than 1 million drink combinations, friendly service by iconic Carhops and ongoing support of education through its award-winning Limeades for Learning® program. SONIC received top honors as America's “#1 burger quick service restaurant” in the 2013 Temkin Experience Ratings report. For more information about Sonic Corp. (NASDAQ/NM: SONC) and its subsidiaries, please visit sonicdrivein.com. Customers can also connect with SONIC at facebook.com/sonicdrivein or on Twitter @sonicdrive_in.
This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from those expressed in, or underlying, these forward-looking statements are detailed in the company's annual and quarterly report filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.
The tables that follow provide information regarding the number of company drive-ins, franchise drive-ins and system drive-ins in operation as of the end of the periods indicated. In addition, these tables provide information regarding franchise sales, system growth in sales, and both franchise and system average drive-in sales and change in same-store sales. System information includes both company and franchise drive-in information, which we believe is useful in analyzing the growth of our brand. While we do not record franchise drive-in sales as revenues, we believe this information is important in understanding our financial performance since we calculate and record franchise royalties based on a percentage of franchise sales. This information also is indicative of the financial health of our franchisees.
1 Free cash flow is defined as net income plus depreciation, amortization and stock compensation expenses, less capital expenditures.
SONC-F
SONIC CORP.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Three months ended Fiscal year ended
August 31, August 31,
2013 2012 2013 2012
Revenues:
Company Drive-In sales $ 116,689 $ 110,406 $ 402,296 $ 404,443
Franchise Drive-Ins:
Franchise royalties and fees 38,988 37,182 130,737 128,013
Lease revenue 1,261 1,970 4,785 6,575
Other 1,864 1,382 4,767 4,699
Total revenues 158,802 150,940 542,585 543,730
Costs and expenses:
Company Drive-Ins:
Food and packaging 33,591 30,764 114,545 113,775
Payroll and other employee benefits 39,674 38,168 142,511 144,531
Other operating expenses, exclusive of
depreciation and amortization included below 24,010 23,265 86,153 89,164
Total cost of Company Drive-In sales 97,275 92,197 343,209 347,470
Selling, general and administrative 17,482 16,721 66,022 65,173
Depreciation and amortization 9,940 10,650 40,387 41,914
Provision for impairment of long-lived assets 1,776 388 1,776 764
Other operating (income) expense, net 2,296 82 1,943 (531 )
Total costs and expenses 128,769 120,038 453,337 454,790
Income from operations 30,033 30,902 89,248 88,940
Interest expense 6,805 7,801 29,098 31,608
Interest income (130 ) (153 ) (592 ) (630 )
Loss from early extinguishment of debt 3,951 - 4,443 -
Net interest expense 10,626 7,648 32,949 30,978
Income before income taxes 19,407 23,254 56,299 57,962
Provision for income taxes 7,209 8,752 19,598 21,877
Net income $ 12,198 $ 14,502 $ 36,701 $ 36,085
Basic income per share $ 0.22 $ 0.25 $ 0.65 $ 0.60
Diluted income per share $ 0.21 $ 0.25 $ 0.64 $ 0.60
Weighted average basic shares 56,061 58,103 56,384 60,078
Weighted average diluted shares 57,408 58,386 57,191 60,172
SONIC CORP.
Unaudited Supplemental Information
Three months ended Fiscal year ended
August 31, August 31,
2013 2012 2013 2012
Drive-Ins in Operation
Company:
Total at beginning of period 407 409 409 446
Opened 1 1 2 1
Acquired from (sold to) franchisees - - 1 (35 )
Closed (net of re-openings) (12 ) (1 ) (16 ) (3 )
Total at end of period 396 409 396 409
Franchise:
Total at beginning of period 3,119 3,141 3,147 3,115
Opened 16 17 25 36
Acquired from (sold to) the company - - (1 ) 35
Closed (net of re-openings) (9 ) (11 ) (45 ) (39 )
Total at end of period 3,126 3,147 3,126 3,147
System-wide:
Total at beginning of period 3,526 3,550 3,556 3,561
Opened 17 18 27 37
Closed (net of re-openings) (21 ) (12 ) (61 ) (42 )
Total at end of period 3,522 3,556 3,522 3,556
Three months ended Fiscal year ended
August 31, August 31,
2013 2012 2013 2012
($ in thousands) ($ in thousands)
Sales Analysis
Company Drive-Ins:
Total sales $ 116,689 $ 110,406 $ 402,296 $ 404,443
Average drive-in sales 286 270 990 958
Change in same-store sales 5.2 % 4.3 % 2.5 % 2.8 %
Franchised Drive-Ins:
Total sales $ 1,003,216 $ 946,330 $ 3,479,880 $ 3,386,218
Average drive-in sales 327 301 1,125 1,081
Change in same-store sales 6.0 % 2.1 % 2.3 % 2.2 %
System-wide:
Change in total sales 6.0 % 2.1 % 2.4 % 2.7 %
Average drive-in sales $ 322 $ 297 $ 1,109 $ 1,066
Change in same-store sales 5.9 % 2.3 % 2.3 % 2.2 %
Note: Change in same-store sales based on restaurants open for a minimum of 15 months.
SONIC CORP.
Unaudited Supplemental Information
Three months ended Fiscal year ended
August 31, August 31,
2013 2012 2013 2012
Revenues (in thousands)
Company Drive-In sales $ 116,689 $ 110,406 $ 402,296 $ 404,443
Franchise Drive-Ins:
Franchise royalties 38,518 36,009 130,009 125,989
Franchise fees 470 1,173 728 2,024
Lease revenue 1,261 1,970 4,785 6,575
Other 1,864 1,382 4,767 4,699
Total revenues $ 158,802 $ 150,940 $ 542,585 $ 543,730
Three months ended Fiscal year ended
August 31, August 31,
2013 2012 2013 2012
Margin Analysis (percentage of Company Drive-In sales)
Company Drive-Ins:
Food and packaging 28.8 % 27.9 % 28.5 % 28.1 %
Payroll and employee benefits 34.0 34.6 35.4 35.7
Other operating expenses 20.6 21.0 21.4 22.1
Cost of Company Drive-In sales 83.4 % 83.5 % 85.3 % 85.9 %
August 31, August 31,
2013 2012
Selected Balance Sheet Data (In thousands)
Cash and cash equivalents $ 77,896 $ 52,647
Current assets 140,722 107,151
Property, equipment and capital leases, net 399,661 443,008
Total assets $ 660,794 $ 680,760
Current liabilities, including capital lease obligations and
long-term debt due within one year $ 72,930 $ 80,516
Obligations under capital leases due after one year 22,458 27,377
Long-term debt due after one year 437,380 466,613
Total liabilities 583,330 621,513
Stockholders' equity $ 77,464 $ 59,247
.
.
Contact:.
.
Sonic Corp.
Claudia San Pedro, 405-225-4846
Vice President of Investor Relations, Communications and Treasurer
4:16PM Netflix beats by $0.03, reports revs in-line; guides Q4 EPS above consensus (NFLX) 354.99 +21.49 : Reports Q3 (Sep) earnings of $0.52 per share, $0.03 better than the Capital IQ Consensus Estimate of $0.49; revenues rose 22.2% year/year to $1.11 bln vs the $1.1 bln consensus. Co issues upside guidance for Q4, sees EPS of $0.47-0.73, excluding non-recurring items, vs. $0.44 Capital IQ Consensus Estimate.
4:16PM Netflix beats by $0.03, reports revs in-line; guides Q4 EPS above consensus (NFLX) 354.99 +21.49 : Reports Q3 (Sep) earnings of $0.52 per share, $0.03 better than the Capital IQ Consensus Estimate of $0.49; revenues rose 22.2% year/year to $1.11 bln vs the $1.1 bln consensus. Co issues upside guidance for Q4, sees EPS of $0.47-0.73, excluding non-recurring items, vs. $0.44 Capital IQ Consensus Estimate.
The "Street" has WYNN coming in at 1.67 for the quarter that should be reported on or about October 21, 2013! All post's welcome as The "Good Dr's In"!
Northern Trust Corporation Reports Third Quarter Net Income of $206.5 Million, Earnings Per Common Share of $0.84.
Business WirePress Release: Northern Trust Corporation – Wed, Oct 16, 2013 7:30 AM EDT..
Northern Trust Corporation today reported third quarter net income per diluted common share of $0.84, up from $0.73 in the third quarter of 2012 and $0.78 in the second quarter of 2013. Net income was $206.5 million in the current quarter, an increase of 15% from $178.8 million in the prior year third quarter, and up 8% from $191.1 million in the prior quarter. Return on average common equity was 10.6% in the current quarter, compared to 9.6% in the prior year quarter and 10.0% in the prior quarter.
The current quarter includes a $32.6 million pre-tax gain on the sale of an office building property. Excluding the current quarter gain, net income per diluted common share, net income and return on average common equity would have been $0.76, $186.2 million, and 9.6%, respectively.
Frederick H. Waddell, Chairman and Chief Executive Officer, commented, “Revenue growth in the third quarter reflects a solid increase in trust, investment and other servicing fees. Assets under custody and under management increased 10% and 13%, respectively, versus last year, reflecting our success in winning new clients and serving existing clients, as well as higher equity markets. Expenses increased as a result of the growth in our business, including recent office openings in Frankfurt, Germany and Riyadh, Saudi Arabia, and continued investment to support technology initiatives and a growing set of regulatory and compliance requirements for our clients.”
THIRD QUARTER 2013 PERFORMANCE VS. THIRD QUARTER 2012
Net income per common share in the third quarter of 2013 was $0.84 compared to $0.73 per common share in the third quarter of 2012. Net income for the current quarter was $206.5 million, up $27.7 million, or 15%, from $178.8 million in the prior year quarter.
Consolidated revenue of $1.05 billion in the current quarter was up $74.7 million, or 8%, from $972.5 million in the prior year quarter. Noninterest income, which represented 77% of revenue, increased $83.3 million, or 11%, to $810.2 million from the prior year quarter’s $726.9 million, primarily reflecting higher trust, investment and other servicing fees; other operating income; and foreign exchange trading income. Net interest income for the quarter on a fully taxable equivalent (FTE) basis decreased $12.1 million, or 5%, to $244.8 million compared to $256.9 million in the prior year quarter, primarily due to a decrease in the net interest margin.
Trust, investment and other servicing fees were $648.0 million in the current quarter, up $46.1 million, or 8%, from $601.9 million in the prior year quarter. The increase primarily reflects new business and the favorable impact of equity markets on fees, partially offset by higher waived fees on money market mutual funds.
Assets under custody and assets under management are the primary drivers of our trust, investment and other servicing fees. The following table provides the assets under custody and assets under management of Northern Trust’s Corporate & Institutional Services (C&IS) and Wealth Management business units.*
September 30, June 30, September 30, % Change % Change
($ In Billions) 2013 2013 2012 Q3-13/Q2-13 Q3-13/Q3-12
Assets Under Custody
Corporate & Institutional $ 4,766.5 $ 4,538.9 $ 4,331.9 5 % 10 %
Wealth Management 470.5 452.6 429.5 4 10
Total Assets Under Custody $ 5,237.0 $ 4,991.5 $ 4,761.4 5 % 10 %
Assets Under Management
Corporate & Institutional $ 634.6 $ 600.5 $ 565.6 6 % 12 %
Wealth Management 211.6 202.5 184.1 4 15
Total Assets Under Management $ 846.2 $ 803.0 $ 749.7 5 % 13 %
C&IS trust, investment and other servicing fees increased $25.4 million, or 8%, to $359.8 million in the current quarter from the prior year quarter’s $334.4 million.
Q3 Q3
Change Q3 2013
($ In Millions) 2013 2012
from Q3 2012
C&IS Trust, Investment and Other Servicing Fees
Custody and Fund Administration $ 239.4 $ 214.4 $ 25.0 12 %
Investment Management 71.3 73.2 (1.9 ) (3 )
Securities Lending 22.7 23.8 (1.1 ) (5 )
Other 26.4 23.0 3.4 15
Total $ 359.8 $ 334.4 $ 25.4 8 %
Custody and fund administration fees, the largest component of C&IS fees, increased 12%, primarily driven by favorable equity markets and new business. C&IS investment management fees decreased 3%, primarily due to higher waived fees in money market mutual funds, partially offset by favorable equity markets and new business. Money market mutual fund fee waivers in C&IS, attributable to persistent low short-term interest rates, totaled $15.3 million in the current quarter, compared to waived fees of $6.5 million in the prior year quarter. Securities lending revenue decreased 5%, primarily reflecting lower spreads in the current quarter, partially offset by higher volumes.
Trust, investment and other servicing fees in Wealth Management totaled $288.2 million in the current quarter, increasing $20.7 million, or 8%, from $267.5 million in the prior year quarter. The increased fees in the current quarter are primarily due to new business and the favorable impact of equity markets on fees, partially offset by higher waived fees in money market mutual funds. Money market mutual fund fee waivers in Wealth Management totaled $17.1 million in the current quarter compared with $10.3 million in the prior year quarter.
Foreign exchange trading income totaled $62.8 million, up $18.8 million, or 43%, compared with $44.0 million in the prior year quarter. The current quarter increase is attributable to higher currency market volatility and trading volumes compared to the prior year quarter.
Other operating income totaled $67.2 million in the current quarter, up $20.6 million, or 44%, from $46.6 million in the prior year quarter. The current quarter includes the $32.6 million pre-tax gain on the sale of an office building property. The prior year quarter included a $5.3 million gain on foreign exchange contracts related to hedges of certain investments in foreign currency denominated subsidiaries. Excluding these current and prior year quarter gains, other operating income decreased $6.7 million.
Net investment security losses totaled $2.2 million, resulting from realized losses on the sale of securities in the current quarter.
Net interest income for the quarter on an FTE basis totaled $244.8 million, down $12.1 million, or 5%, compared to $256.9 million in the prior year quarter. The decrease is primarily the result of a decline in the net interest margin to 1.14% from 1.21% in the prior year quarter, partially offset by higher levels of average earning assets. The decline in the net interest margin primarily reflects lower yields on earning assets, partially offset by a lower cost of interest-related funds due to lower short-term interest rates. Average earning assets for the quarter were $85.5 billion, up $1.0 billion, or 1%, from $84.5 billion in the prior year quarter.
The provision for credit losses was $5.0 million in the current quarter compared to $10.0 million in the prior year quarter. Net charge-offs totaled $8.3 million for the current quarter resulting from $11.6 million of charge-offs and $3.3 million of recoveries, compared to $11.9 million of net charge-offs in the prior year quarter resulting from $16.3 million of charge-offs and $4.4 million of recoveries. Nonperforming assets declined slightly from the prior year quarter. Residential real estate loans and commercial real estate loans accounted for 70% and 20%, respectively, of total nonperforming loans and leases at September 30, 2013.
The table below provides information regarding nonperforming assets, the allowance for credit losses, and associated ratios.
September 30, June 30, September 30,
($ In Millions) 2013 2013 2012
Nonperforming Assets
Nonperforming Loans and Leases $ 270.1 $ 266.7 $ 269.0
Other Real Estate Owned 13.9 14.5 20.6
Total Nonperforming Assets 284.0 281.2 289.6
Allowance for Credit Losses
Allowance for Credit Losses Assigned to:
Loans and Leases 287.2 290.4 298.6
Unfunded Loan Commitments and Standby Letters of Credit 30.3 30.3 29.4
Total Allowance for Credit Losses $ 317.5 $ 320.7 $ 328.0
Ratios
Nonperforming Loans and Leases to Total Loans and Leases
0.93 % 0.93 % 0.91 %
Allowance for Credit Losses Assigned to Loans and Leases to Total Loans and Leases
0.99 % 1.01 % 1.01 %
Allowance for Credit Losses Assigned to Loans and Leases to Nonperforming Loans and Leases
1.1x 1.1x 1.1x
Noninterest expense totaled $740.7 million in the current quarter, up $44.3 million, or 6%, from $696.4 million in the prior year quarter, primarily reflecting higher outside services, equipment and software, and compensation expense.
Compensation expense, the largest component of noninterest expense, equaled $324.6 million, up $8.9 million, or 3%, from $315.7 million in the prior year quarter, attributable to higher staff levels. Staff on a full-time equivalent basis at September 30, 2013 totaled approximately 14,600, up 3% from a year ago. Employee benefit expense equaled $63.5 million, up 4% from $61.3 million in the prior year quarter.
Expense associated with outside services totaled $145.9 million, up $19.3 million, or 15%, from $126.6 million in the prior year quarter. The current quarter increase is primarily due to higher consulting and technical services expense, including costs associated with a growing set of regulatory and compliance requirements.
Equipment and software expense totaled $95.5 million, up $9.5 million, or 11%, from $86.0 million in the prior year quarter. The current quarter includes higher software amortization associated with the continued investment in technology related assets.
Occupancy expense equaled $43.3 million, relatively unchanged from $43.8 million in the prior year quarter. Other operating expense totaled $67.9 million compared with $63.0 million in the prior year quarter, an increase of 8%, primarily reflecting increases in various miscellaneous expense categories.
Income tax expense was $95.0 million in the current quarter, representing an effective tax rate of 31.5%, and $87.3 million in the prior year quarter, representing an effective tax rate of 32.8%.
THIRD QUARTER 2013 PERFORMANCE VS. SECOND QUARTER 2013
Net income per common share was $0.84 in the current quarter, compared with $0.78 in the second quarter of 2013. Net income for the current quarter totaled $206.5 million, up $15.4 million, or 8%, from $191.1 million in the prior quarter.
Consolidated revenue of $1.05 billion for the current quarter was up $26.7 million, or 3%, from $1.02 billion in the prior quarter. Noninterest income increased $9.8 million, or 1%, to $810.2 million from the prior quarter’s $800.4 million, primarily attributable to higher other operating income, partially offset by lower trust, investment and other servicing fees and foreign exchange trading income. Net interest income for the current quarter on an FTE basis increased $16.8 million, or 7%, to $244.8 million from $228.0 million in the prior quarter, due to an increase in the net interest margin and higher levels of average earning assets.
Trust, investment and other servicing fees totaled $648.0 million in the current quarter, down $9.3 million, or 1%, from $657.3 million in the prior quarter.
C&IS trust, investment and other servicing fees totaled $359.8 million in the current quarter, down 1%, from $364.2 million in the prior quarter.
Q3 Q2
Change Q3 2013
($ In Millions) 2013 2013
from Q2 2013
C&IS Trust, Investment and Other Servicing Fees
Custody and Fund Administration $ 239.4 $ 234.4 $ 5.0 2 %
Investment Management 71.3 73.9 (2.6 ) (4 )
Securities Lending 22.7 31.1 (8.4 ) (27 )
Other 26.4 24.8 1.6 6
Total $ 359.8 $ 364.2 $ (4.4 ) (1 ) %
C&IS custody and fund administration fees increased 2%, primarily driven by new business. Investment management fees decreased 4%, primarily due to higher waived fees on money market mutual funds. Money market mutual fund fee waivers, attributable to the low short-term interest rates, totaled $15.3 million in C&IS in the current quarter, up from $9.8 million in the prior quarter. Securities lending revenue decreased 27%, reflecting lower spreads, primarily due to the international dividend season that occurred in the prior quarter.
Wealth Management trust, investment and other servicing fees were $288.2 million, down 2% from $293.1 million in the prior quarter, primarily due to higher waived fees on money market mutual funds. Money market mutual fund fee waivers in Wealth Management totaled $17.1 million in the current quarter, compared to $12.9 million in the prior quarter.
Foreign exchange trading income decreased $8.5 million, or 12%, to $62.8 million compared to $71.3 million in the prior quarter. The current quarter decrease reflects lower currency market volatility and trading volumes.
Other operating income in the current quarter totaled $67.2 million, up $30.9 million, or 85%, from $36.3 million in the prior quarter. The increase is primarily attributable to the current quarter $32.6 million pre-tax gain on the sale of an office building property.
Net interest income on an FTE basis in the current quarter totaled $244.8 million, up $16.8 million, or 7%, compared to $228.0 million in the prior quarter. The increase is primarily the result of an increase in the net interest margin as well as higher levels of average earning assets. The net interest margin increased to 1.14% in the current quarter from 1.10% in the prior quarter, reflecting higher yields on earning assets and a lower cost of interest-related funds. Average earning assets totaled $85.5 billion in the current quarter, up $2.4 billion compared to $83.1 billion in the prior quarter.
The provision for credit losses totaled $5.0 million in both the current quarter and the prior quarter. Net charge-offs totaled $8.3 million for the current quarter resulting from $11.6 million of charge-offs and $3.3 million of recoveries, compared to $8.1 million of net charge-offs in the prior quarter resulting from $15.6 million of charge-offs and $7.5 million of recoveries. Nonperforming assets increased slightly as compared to the prior quarter.
Noninterest expense totaled $740.7 million in the current quarter, up $11.0 million, or 2% from $729.7 million in the prior quarter.
Compensation expense totaled $324.6 million for the current quarter, down 1% from $326.9 million in the prior quarter. Employee benefit expense totaled $63.5 million for the current quarter, down 1% from $64.2 million in the prior quarter.
Expense for outside services totaled $145.9 million, an increase of $9.7 million, or 7%, compared to $136.2 million in the prior quarter. The current quarter increase is primarily due to higher consulting and technical services expense, including costs associated with a growing set of regulatory and compliance requirements.
Equipment and software expense totaled $95.5 million in the current quarter, up 4%, from $92.1 million in the prior quarter. The increase is primarily attributable to higher levels of software amortization and support costs associated with the continued investment in technology related assets.
Occupancy expense totaled $43.3 million, relatively unchanged from $43.5 million in the prior quarter. Other operating expense totaled $67.9 million, up 1% from $66.8 million in the prior quarter.
Total income tax expense was $95.0 million for the current quarter, representing an effective tax rate of 31.5%. Income tax expense was $94.7 million in the prior quarter, representing an effective tax rate of 33.1%.
STOCKHOLDERS’ EQUITY
Total stockholders’ equity averaged $7.7 billion, up 4% from the prior year quarter’s average of $7.4 billion. The increase is primarily attributable to earnings, partially offset by dividend declarations and the repurchase of common stock pursuant to the Corporation’s share buyback program. During the three and nine months ended September 30, 2013, the Corporation repurchased 1,715,921 shares at a cost of $97.3 million ($56.73 average price per share) and 3,400,613 shares at a cost of $187.1 million ($55.02 average price per share), respectively. The Corporation’s common stock repurchase authorization was replaced in April of 2013. The stock repurchase authorization remaining after September 30, 2013 is 10.0 million shares.
As reflected in the table below, the risk-based capital ratios of Northern Trust and its principal subsidiary bank, The Northern Trust Company, remained strong at September 30, 2013, with all ratios exceeding the U.S. regulatory requirements for classification as “well capitalized” institutions.
September 30, 2013 June 30, 2013 September 30, 2012
Tier 1 Total Leverage Tier 1 Total Leverage Tier 1 Total Leverage
Capital Capital Ratio Capital Capital Ratio Capital Capital Ratio
Northern Trust Corporation 13.6 % 14.9 % 8.3 % 13.1 % 14.4 % 8.4 % 12.8 % 14.3 % 8.1 %
The Northern Trust Company 11.7 % 13.3 % 7.2 % 11.3 % 13.0 % 7.3 % 11.8 % 13.8 % 7.5 %
Minimum to Qualify as Well Capitalized
6.0 % 10.0 % 5.0 % 6.0 % 10.0 % 5.0 % 6.0 % 10.0 % 5.0 %
The following table provides the Corporation’s ratios of tier 1 capital and of tier 1 common equity to risk-weighted assets, as well as a reconciliation of tier 1 capital calculated in accordance with applicable U.S. regulatory requirements and GAAP to tier 1 common equity.
September 30, June 30, September 30,
($ In Millions) 2013 2013 2012
Ratios
Tier 1 Capital 13.6 % 13.1 % 12.8 %
Tier 1 Common Equity 13.1 % 12.6 % 12.3 %
Tier 1 Capital $ 7,849.5 $ 7,776.1 $ 7,425.5
Less: Floating Rate Capital Securities 268.8 268.8 268.7
Tier 1 Common Equity $ 7,580.7 $ 7,507.3 $ 7,156.8
Northern Trust is providing the tier 1 common equity ratio, a non-GAAP financial measure, in addition to its capital ratios prepared in accordance with regulatory requirements and GAAP as it is a measure that Northern Trust and investors use to assess capital adequacy.
RECONCILIATION OF REPORTED NET INTEREST INCOME TO FULLY TAXABLE EQUIVALENT
Net interest income stated on an FTE basis is a non-GAAP financial measure that facilitates the analysis of asset yields. Management believes an FTE presentation provides a clearer indication of net interest margins for comparative purposes. When adjusted to an FTE basis, yields on taxable, nontaxable, and partially taxable assets are comparable; however, the adjustment to an FTE basis has no impact on net income. The tables below present a reconciliation of interest income and net interest income prepared in accordance with GAAP to interest income and net interest income on an FTE basis.
Three Months Ended
September 30, 2013 June 30, 2013 September 30, 2012
($ In Millions) Reported FTE Adj. FTE Reported FTE Adj. FTE Reported FTE Adj. FTE
Net Interest Income
Interest Income $ 291.1 $ 7.8
$
298.9
$ 275.3 $ 7.9 $ 283.2 $ 323.1 $ 11.3 $ 334.4
Interest Expense 54.1 – 54.1 55.2 – 55.2 77.5 – 77.5
Net Interest Income $ 237.0 $ 7.8
$
244.8
$ 220.1 $ 7.9 $ 228.0 $ 245.6 $ 11.3 $ 256.9
Net Interest Margin 1.10 % 1.14 % 1.06 % 1.10 % 1.16 % 1.21 %
FORWARD-LOOKING STATEMENTS
This news release may be deemed to include forward-looking statements, such as statements that relate to Northern Trust's financial goals, capital adequacy, dividend policy, expansion and business development plans, risk management policies, anticipated expense levels and projected profit improvements, business prospects and positioning with respect to market, demographic and pricing trends, strategic initiatives, re-engineering and outsourcing activities, new business results and outlook, changes in securities market prices, credit quality including allowance levels, planned capital expenditures and technology spending, anticipated tax benefits and expenses, and the effects of any extraordinary events and various other matters (including developments with respect to litigation, other contingent liabilities and obligations, and regulation involving Northern Trust and changes in accounting policies, standards and interpretations) on Northern Trust's business and results. Forward-looking statements are typically identified by words or phrases, such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may increase,” “may fluctuate,” “plan,” “goal,” “target,” “strategy,” and similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are Northern Trust’s current estimates or expectations of future events or future results. Actual results could differ materially from those indicated by these statements because the realization of those results is subject to many risks and uncertainties. Northern Trust Corporation’s 2012 Financial Annual Report to Shareholders, including the section of Management’s Discussion and Analysis captioned “Factors Affecting Future Results,” and periodic reports to the Securities and Exchange Commission, including the section captioned “Risk Factors,” contain additional information about factors that could affect actual results, including: economic, market, and monetary policy risks; operational risks; investment performance, fiduciary, and asset servicing risks; credit risks; liquidity risks; holding company risks; regulation risks; litigation risks; tax and accounting risks; strategic and competitive risks; and reputation risks. All forward-looking statements included in this news release are based on information available at the time of the release, and Northern Trust Corporation assumes no obligation to update any forward-looking statement.
WEBCAST OF THIRD QUARTER EARNINGS CONFERENCE CALL
Northern Trust’s third quarter earnings conference call will be webcast live on October 16, 2013. The Internet webcast opens the call to all investors, allowing them to listen to the Chief Financial Officer’s comments. The live call will be conducted at 11.00 a.m. CT and is accessible on Northern Trust’s web site at:
http://www.northerntrust.com/financialreleases
The only authorized rebroadcast of the live call will be available on Northern Trust’s web site from 2:00 p.m. CT on October 16, 2013, for approximately four weeks. Participants will need Windows Mediatm or Adobe Flash software, which can be downloaded free through Northern Trust’s web site. This earnings release can also be accessed at the above web address.
* In October 2013, Northern Trust changed the names of its Personal Financial Services and Northern Trust Global Investments business units to Wealth Management and Asset Management, respectively, in order to better reflect the nature of those businesses. There were no changes to the Corporate & Institutional Services or Operations and Technology business unit names, or to the way in which Northern Trust is organized to serve its clients.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME DATA
($ In Millions Except Per Share Data)
THIRD QUARTER
2013 2012 % Change (*)
Noninterest Income
Trust, Investment and Other Servicing Fees
$
648.0 $ 601.9 8 %
Foreign Exchange Trading Income 62.8 44.0 43
Treasury Management Fees 17.6 16.3 8
Security Commissions and Trading Income 16.8 17.9 (6 )
Other Operating Income 67.2 46.6 44
Investment Security Gains (Losses), net (2.2 ) 0.2 N/M
Total Noninterest Income 810.2 726.9 11
Net Interest Income
Interest Income 291.1 323.1 (10 )
Interest Expense 54.1 77.5 (30 )
Net Interest Income 237.0 245.6 (4 )
Total Revenue 1,047.2 972.5 8
Provision for Credit Losses 5.0 10.0 (50 )
Noninterest Expense
Compensation 324.6 315.7 3
Employee Benefits 63.5 61.3 4
Outside Services 145.9 126.6 15
Equipment and Software 95.5 86.0 11
Occupancy 43.3 43.8 (1 )
Other Operating Expense 67.9 63.0 8
Total Noninterest Expense 740.7 696.4 6
Income before Income Taxes 301.5 266.1 13
Provision for Income Taxes 95.0 87.3 9
NET INCOME $ 206.5 $ 178.8 15 %
Earnings Allocated to Participating Securities
$
3.5
$
2.8 25 %
Earnings Allocated to Common and Potential Common Shares 203.0 176.0 15
Per Common Share
Net Income
Basic $ 0.85 $ 0.73 16 %
Diluted 0.84 0.73 15
Average Common Equity $ 7,697.8 $ 7,241.9 6 %
Return on Average Common Equity 10.64 % 9.59 % 11
Return on Average Assets 0.86 % 0.77 % 12
Cash Dividends Declared per Common Share $ 0.31 $ 0.30 3 %
Average Common Shares Outstanding (000s)
Basic 239,930 240,237
Diluted 241,331 240,697
Common Shares Outstanding (EOP) (000s) 238,984 239,799
(*) Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME DATA
THIRD SECOND
($ In Millions Except Per Share Data)
QUARTER QUARTER
2013 2013 % Change (*)
Noninterest Income
Trust, Investment and Other Servicing Fees $ 648.0 $ 657.3 (1 ) %
Foreign Exchange Trading Income 62.8 71.3 (12 )
Treasury Management Fees 17.6 17.1 3
Security Commissions and Trading Income 16.8 18.3 (8 )
Other Operating Income 67.2 36.3 85
Investment Security Gains (Losses), net (2.2 ) 0.1 N/M
Total Noninterest Income 810.2 800.4 1
Net Interest Income
Interest Income 291.1 275.3 6
Interest Expense 54.1 55.2 (2 )
Net Interest Income 237.0 220.1 8
Total Revenue 1,047.2 1,020.5 3
Provision for Credit Losses 5.0 5.0 -
Noninterest Expense
Compensation 324.6 326.9 (1 )
Employee Benefits 63.5 64.2 (1 )
Outside Services 145.9 136.2 7
Equipment and Software 95.5 92.1 4
Occupancy 43.3 43.5 (1 )
Other Operating Expense 67.9 66.8 1
Total Noninterest Expense 740.7 729.7 2
Income before Income Taxes 301.5 285.8 5
Provision for Income Taxes 95.0 94.7 -
NET INCOME $ 206.5 $ 191.1 8 %
Earnings Allocated to Participating Securities
$
3.5
$
3.2 9 %
Earnings Allocated to Common and Potential Common Shares 203 187.9 8
Per Common Share
Net Income
Basic $ 0.85 $ 0.78 9 %
Diluted 0.84 0.78 8
Average Common Equity $ 7,697.8 $ 7,648.3 1 %
Return on Average Common Equity 10.64 % 10.02 % 6
Return on Average Assets 0.86 % 0.83 % 4
Cash Dividends Declared per Common Share $ 0.31 $ 0.31 - %
Average Common Shares Outstanding (000s)
Basic 239,930 239,739
Diluted 241,331 241,041
Common Shares Outstanding (EOP) (000s) 238,984 240,138
(*) Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
STATEMENT OF INCOME DATA
($ In Millions Except Per Share Data)
NINE MONTHS
2013 2012 % Change (*)
Noninterest Income
Trust, Investment and Other Servicing Fees $ 1,936.0 $ 1,782.9 9 %
Foreign Exchange Trading Income 193.6 165.3 17
Treasury Management Fees 51.5 51.0 1
Security Commissions and Trading Income 53.4 53.6 -
Other Operating Income 128.3 119.2 8
Investment Security Gains (Losses), net (1.9 ) (1.7 ) 10
Total Noninterest Income 2,360.9 2,170.3 9
Net Interest Income
Interest Income 853.1 985.6 (13 )
Interest Expense 169.9 229.5 (26 )
Net Interest Income 683.2 756.1 (10 )
Total Revenue 3,044.1 2,926.4 4
Provision for Credit Losses 15.0 20.0 (25 )
Noninterest Expense
Compensation 971.8 951.1 2
Employee Benefits 191.0 194.3 (2 )
Outside Services 412.0 388.5 6
Equipment and Software 279.0 276.2 1
Occupancy 130.0 128.2 1
Other Operating Expense 215.5 199.0 8
Total Noninterest Expense 2,199.3 2,137.3 3
Income before Income Taxes 829.8 769.1 8
Provision for Income Taxes 268.2 249.5 8
NET INCOME $ 561.6 $ 519.6 8 %
Earnings Allocated to Participating Securities
$
9.1
$
6.7 36 %
Earnings Allocated to Common and Potential Common Shares 552.5 512.9 8
Per Common Share
Net Income
Basic $ 2.31 $ 2.13 8 %
Diluted 2.29 2.12 8
Average Common Equity $ 7,630.3 $ 7,293.1 5 %
Return on Average Common Equity 9.84 % 9.52 % 3
Return on Average Assets 0.81 % 0.74 % 9
Cash Dividends Declared per Common Share $ 0.92 $ 0.88 5 %
Average Common Shares Outstanding (000s)
Basic 239,615 240,741
Diluted 240,858 241,205
Common Shares Outstanding (EOP) (000s) 238,984 239,799
(*) Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
BALANCE SHEET
($ In Millions) SEPTEMBER 30
2013 2012 % Change (*)
Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell
$ 534.6 $ 573.4 (7 ) %
Interest-Bearing Deposits with Banks 17,383.9 19,347.8 (10 )
Federal Reserve Deposits and Other Interest-Bearing 8,452.8 6,230.5 36
Securities
U.S. Government 1,524.5 1,787.8 (15 )
Obligations of States and Political Subdivisions 263.2 389.1 (32 )
Government Sponsored Agency 17,066.0 18,715.3 (9 )
Other (**) 12,123.6 8,790.0 38
Total Securities 30,977.3 29,682.2 4
Loans and Leases 29,064.8 29,542.7 (2 )
Total Earning Assets 86,413.4 85,376.6 1
Allowance for Credit Losses Assigned to Loans and Leases (287.2 ) (298.6 ) (4 )
Cash and Due from Banks 2,690.7 3,396.7 (21 )
Buildings and Equipment 444.3 453.7 (2 )
Client Security Settlement Receivables 1,630.2 1,078.2 51
Goodwill 537.7 538.0 -
Other Assets 4,540.4 3,087.9 47
Total Assets $ 95,969.5 $ 93,632.5 2 %
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings and Money Market $ 13,802.6 $ 13,481.6 2 %
Savings Certificates and Other Time 1,939.6 3,011.0 (36 )
Non-U.S. Offices - Interest-Bearing 45,017.2 39,076.1 15
Total Interest-Bearing Deposits 60,759.4 55,568.7 9
Short-Term Borrowings 3,327.3 1,399.0 138
Senior Notes 1,996.5 2,610.3 (24 )
Long-Term Debt 993.5 1,428.4 (30 )
Floating Rate Capital Debt 277.1 277.0 -
Total Interest-Related Funds 67,353.8 61,283.4 10
Demand and Other Noninterest-Bearing Deposits 17,402.3 21,362.9 (18 )
Other Liabilities 3,396.3 3,454.0 (2 )
Total Liabilities 88,152.4 86,100.3 2
Total Equity 7,817.1 7,532.2 4
Total Liabilities and Stockholders' Equity $ 95,969.5 $ 93,632.5 2 %
(*) Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
(**) Other securities include Federal Reserve and Federal Home Loan Bank stock and certain community development investments for purposes of presenting earning assets; such securities are classified in other assets on the consolidated balance sheet.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
BALANCE SHEET
($ In Millions) SEPTEMBER 30 JUNE 30
2013 2013 % Change (*)
Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell
$ 534.6 $ 531.2 1 %
Interest-Bearing Deposits with Banks 17,383.9 17,838.5 (3 )
Federal Reserve Deposits and Other Interest-Bearing 8,452.8 6,765.7 25
Securities
U.S. Government 1,524.5 1,775.1 (14 )
Obligations of States and Political Subdivisions 263.2 277.4 (5 )
Government Sponsored Agency 17,066.0 16,683.6 2
Other (**) 12,123.6 11,942.0 2
Total Securities 30,977.3 30,678.1 1
Loans and Leases 29,064.8 28,810.4 1
Total Earning Assets 86,413.4 84,623.9 2
Allowance for Credit Losses Assigned to Loans and Leases (287.2 ) (290.4 ) (1 )
Cash and Due from Banks 2,690.7 4,630.9 (42 )
Buildings and Equipment 444.3 454.5 (2 )
Client Security Settlement Receivables 1,630.2 1,486.2 10
Goodwill 537.7 530.4 1
Other Assets 4,540.4 5,800.5 (22 )
Total Assets $ 95,969.5 $ 97,236.0 (1 ) %
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings and Money Market $ 13,802.6 $ 14,113.0 (2 ) %
Savings Certificates and Other Time 1,939.6 2,001.5 (3 )
Non-U.S. Offices - Interest-Bearing 45,017.2 40,698.4 11
Total Interest-Bearing Deposits 60,759.4 56,812.9 7
Short-Term Borrowings 3,327.3 5,010.2 (34 )
Senior Notes 1,996.5 2,398.3 (17 )
Long-Term Debt 993.5 980.9 1
Floating Rate Capital Debt 277.1 277.1 -
Total Interest-Related Funds 67,353.8 65,479.4 3
Demand and Other Noninterest-Bearing Deposits 17,402.3 19,722.0 (12 )
Other Liabilities 3,396.3 4,310.0 (21 )
Total Liabilities 88,152.4 89,511.4 (2 )
Total Equity 7,817.1 7,724.6 1
Total Liabilities and Stockholders' Equity $ 95,969.5 $ 97,236.0 (1 ) %
(*) Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
(**) Other securities include Federal Reserve and Federal Home Loan Bank stock and certain community development investments for purposes of presenting earning assets; such securities are classified in other assets on the consolidated balance sheet.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
AVERAGE BALANCE SHEET
($ In Millions) THIRD QUARTER
2013 2012 % Change (*)
Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell
$ 548.2 $ 285.6 92 %
Interest-Bearing Deposits with Banks 17,767.6 19,215.4 (8 )
Federal Reserve Deposits and Other Interest-Bearing 7,987.5 6,113.7 31
Securities
U.S. Government 1,619.2 1,786.4 (9 )
Obligations of States and Political Subdivisions 268.8 398.4 (33 )
Government Sponsored Agency 17,082.6 18,694.1 (9 )
Other (**) 11,592.8 8,986.2 29
Total Securities 30,563.4 29,865.1 2
Loans and Leases 28,662.4 29,046.0 (1 )
Total Earning Assets 85,529.1 84,525.8 1
Allowance for Credit Losses Assigned to Loans and Leases (289.6 ) (297.8 ) (3 )
Cash and Due from Banks 2,776.8 3,446.6 (19 )
Buildings and Equipment 453.0 461.7 (2 )
Client Security Settlement Receivables 714.8 434.7 64
Goodwill 532.5 534.8 -
Other Assets 5,495.9 3,604.1 52
Total Assets $ 95,212.5 $ 92,709.9 3 %
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings and Money Market $ 14,286.5 $ 13,687.1 4 %
Savings Certificates and Other Time 1,969.0 3,083.6 (36 )
Non-U.S. Offices - Interest-Bearing 43,064.7 38,896.8 11
Total Interest-Bearing Deposits 59,320.2 55,667.5 7
Short-Term Borrowings 5,447.2 2,200.7 148
Senior Notes 2,192.5 2,439.6 (10 )
Long-Term Debt 978.5 1,452.9 (33 )
Floating Rate Capital Debt 277.1 277.0 -
Total Interest-Related Funds 68,215.5 62,037.7 10
Demand and Other Noninterest-Bearing Deposits 16,134.2 20,235.8 (20 )
Other Liabilities 3,165.0 3,014.5 5
Total Liabilities 87,514.7 85,288.0 3
Total Equity 7,697.8 7,421.9 4
Total Liabilities and Stockholders' Equity $ 95,212.5 $ 92,709.9 3 %
(*) Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
(**) Other securities include Federal Reserve and Federal Home Loan Bank stock and certain community development investments for purposes of presenting earning assets; such securities are classified in other assets on the consolidated balance sheet.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
AVERAGE BALANCE SHEET
THIRD SECOND
($ In Millions) QUARTER QUARTER
2013 2013 % Change (*)
Assets
Federal Funds Sold and Securities Purchased under Agreements to Resell
$ 548.2 $ 309.8 77 %
Interest-Bearing Deposits with Banks 17,767.6 18,192.6 (2 )
Federal Reserve Deposits and Other Interest-Bearing 7,987.5 5,275.5 51
Securities
U.S. Government 1,619.2 1,787.4 (9 )
Obligations of States and Political Subdivisions 268.8 287.0 (6 )
Government Sponsored Agency 17,082.6 17,270.4 (1 )
Other (**) 11,592.8 11,397.2 2
Total Securities 30,563.4 30,742.0 (1 )
Loans and Leases 28,662.4 28,601.8 -
Total Earning Assets 85,529.1 83,121.7 3
Allowance for Credit Losses Assigned to Loans and Leases (289.6 ) (290.2 ) -
Cash and Due from Banks 2,776.8 2,964.6 (6 )
Buildings and Equipment 453.0 461.6 (2 )
Client Security Settlement Receivables 714.8 822.2 (13 )
Goodwill 532.5 531.3 -
Other Assets 5,495.9 5,238.4 5
Total Assets $ 95,212.5 $ 92,849.6 3 %
Liabilities and Stockholders' Equity
Interest-Bearing Deposits
Savings and Money Market $ 14,286.5 $ 14,634.7 (2 ) %
Savings Certificates and Other Time 1,969.0 2,199.1 (10 )
Non-U.S. Offices - Interest-Bearing 43,064.7 39,043.3 10
Total Interest-Bearing Deposits 59,320.2 55,877.1 6
Short-Term Borrowings 5,447.2 4,750.0 15
Senior Notes 2,192.5 2,400.1 (9 )
Long-Term Debt 978.5 1,105.2 (11 )
Floating Rate Capital Debt 277.1 277.1 -
Total Interest-Related Funds 68,215.5 64,409.5 6
Demand and Other Noninterest-Bearing Deposits 16,134.2 17,468.1 (8 )
Other Liabilities 3,165.0 3,323.7 (5 )
Total Liabilities 87,514.7 85,201.3 3
Total Equity 7,697.8 7,648.3 1
Total Liabilities and Stockholders' Equity $ 95,212.5 $ 92,849.6 3 %
(*) Percentage calculations are based on actual balances rather than the rounded amounts presented in the Supplemental Consolidated Financial Information.
(**) Other securities include Federal Reserve and Federal Home Loan Bank stock and certain community development investments for purposes of presenting earning assets; such securities are classified in other assets on the consolidated balance sheet.
NORTHERN TRUST CORPORATION
(Supplemental Consolidated Financial Information)
QUARTERLY TREND DATA
2013 2012
($ In Millions Except Per Share Data)
QUARTERS QUARTERS
THIRD SECOND FIRST FOURTH THIRD
Net Income Summary
Trust, Investment and Other Servicing Fees $ 648.0 $ 657.3 $ 630.7 $ 622.6 $ 601.9
Other Noninterest Income 162.2 143.1 119.6 112.9 125.0
Net Interest Income 237.0 220.1 226.1 234.2 245.6
Total Revenue 1,047.2 1,020.5 976.4 969.7 972.5
Provision for Credit Losses 5.0 5.0 5.0 5.0 10.0
Noninterest Expense 740.7 729.7 728.9 741.5 696.4
Income before Income Taxes 301.5 285.8 242.5 223.2 266.1
Provision for Income Taxes 95.0 94.7 78.5 55.5 87.3
Net Income $ 206.5 $ 191.1 $ 164.0 $ 167.7 $ 178.8
Per Common Share
Net Income - Basic $ 0.85 $ 0.78 $ 0.68 $ 0.69 $ 0.73
- Diluted 0.84 0.78 0.67 0.69 0.73
Cash Dividends Declared per Common Share 0.31 0.31 0.30 0.30 0.30
Book Value (EOP) 32.71 32.17 31.82 31.51 31.41
Market Value (EOP) 54.38 57.90 54.56 50.16 46.42
Ratios
Return on Average Common Equity 10.64 % 10.02 % 8.82 % 8.83 % 9.59 %
Return on Average Assets 0.86 0.83 0.73 0.73 0.77
Net Interest Margin (GAAP) 1.10 1.06 1.12 1.12 1.16
Net Interest Margin (FTE) 1.14 1.10 1.15 1.17 1.21
Risk-based Capital Ratios
Tier 1 13.6 % 13.1 % 13.3 % 12.8 % 12.8 %
Total (Tier 1 + Tier 2) 14.9 14.4 14.7 14.3 14.3
Tier 1 Leverage 8.3 8.4 8.4 8.2 8.1
Tier 1 Common Equity (non-GAAP) 13.1 12.6 12.8 12.4 12.3
Assets Under Custody ($ In Billions) - EOP
Corporate $ 4,766.5 $ 4,538.9 $ 4,569.1 $ 4,358.6 $ 4,331.9
Wealth Management 470.5 452.6 455.3 446.3 429.5
Total Assets Under Custody $ 5,237.0 $ 4,991.5 $ 5,024.4 $ 4,804.9 $ 4,761.4
Assets Under Management ($ In Billions) - EOP $ 846.2 $ 803.0 $ 810.2 $ 758.9 $ 749.7
Asset Quality ($ In Millions) - EOP
Nonperforming Loans and Leases $ 270.1 $ 266.7 $ 251.7 $ 254.8 $ 269.0
Other Real Estate Owned (OREO) 13.9 14.5 10.5 20.3 20.6
Total Nonperforming Assets $ 284.0 $ 281.2 $ 262.2 $ 275.1 $ 289.6
Nonperforming Assets / Loans and Leases and OREO 0.98 % 0.98 % 0.91 % 0.93 % 0.98 %
Gross Charge-offs $ 11.6 $ 15.6 $ 12.6 $ 16.1 $ 16.3
Less: Gross Recoveries 3.3 7.5 3.9 10.7 4.4
Net Charge-offs $ 8.3 $ 8.1 $ 8.7 $ 5.4 $ 11.9
Net Charge-offs (Annualized) to Average Loans and Leases 0.12 % 0.11 % 0.12 % 0.07 % 0.16 %
Allowance for Credit Losses Assigned to Loans and Leases $ 287.2 $ 290.4 $ 294.1 $ 297.9 $ 298.6
Allowance to Nonperforming Loans and Leases 1.1x 1.1x 1.2x 1.2x 1.1x
Allowance for Other Credit-Related Exposures $ 30.3 $ 30.3 $ 29.7 $ 29.7 $ 29.4
.
.
Contact:.
.
Northern Trust Corporation
Investor Contact:
Bev Fleming, (312) 444-7811
Beverly_Fleming@ntrs.com
or
Media Contact:
Doug Holt, (312) 557-1571
Doug_Holt@ntrs.com
http://www.northerntrust.com .
Yahoo Reports Third Quarter 2013 Results
Business WirePress Release: Yahoo! Inc. – Tue, Oct 15, 2013 4:05 PM EDT
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YHOO 32.745 -0.344
SUNNYVALE, Calif.--(BUSINESS WIRE)--
Yahoo! Inc. (YHOO) today reported results for the quarter ended September 30, 2013.
Q3 2012 Q3 2013
Percent
Change
GAAP revenue $1,202 million $1,139 million (5)%
Revenue ex-TAC $1,089 million $1,081 million (1)%
GAAP income from operations $152 million $93 million (39)%
Non-GAAP income from operations $238 million $173 million (27)%
GAAP net earnings per diluted share $2.64 $0.28 (89)%
Non-GAAP net earnings per diluted share $0.39 $0.34 (13)%
“I’m very pleased with our execution, especially as we’ve continued to invest in and strengthen our core business," said Yahoo CEO Marissa Mayer. "In Q3, we launched new user experiences across many of our digital daily habits -- Yahoo Screen, My Yahoo, Fantasy Sports, and more. Now with more than 800 million monthly users on Yahoo -- up 20 percent over the past 15 months -- we're achieving meaningful increases in user engagement and traffic.”
GAAP revenue was $1,139 million for the third quarter of 2013, a 5 percent decrease from the third quarter of 2012. Revenue excluding traffic acquisition costs (“revenue ex-TAC”) was $1,081 million for the third quarter of 2013, a 1 percent decrease compared to the third quarter of 2012.
Adjusted EBITDA for the third quarter of 2013 was $331 million, a 19 percent decrease compared to the same period of 2012.
GAAP income from operations was $93 million for the third quarter of 2013, a 39 percent decrease from the third quarter of 2012 (which reflected a restructuring charge of $25 million). Non-GAAP income from operations was $173 million for the third quarter of 2013, a 27 percent decrease from the third quarter of 2012.
GAAP net earnings for the third quarter of 2013 was $297 million, a 91 percent decrease compared to $3,160 million in the third quarter of 2012 (which included a net gain of $2.8 billion related to the sale of Alibaba Group shares). Non-GAAP net earnings for the third quarter of 2013 was $358 million, a 24 percent decrease from the same period of 2012.
GAAP net earnings per diluted share was $0.28 in the third quarter of 2013, compared to $2.64 in the third quarter of 2012. Non-GAAP net earnings per diluted share was $0.34 in the third quarter of 2013, compared to $0.39 in the third quarter of 2012.
Business Highlights
Yahoo continued its product momentum in the third quarter, launching new experiences for users’ daily habits across desktop, mobile and tablets (including Yahoo Screen, Sports, Fantasy Sports, Movies, Music, TV, omg!, Games and Weather), as well as a new camera experience on Flickr for iPhone. The Company introduced a new My Yahoo, allowing users to personalize their homepage with a more modern design. Yahoo also rolled out a new logo to reflect the evolution of the Company’s products and experiences after more than 18 years without a major redesign.
The Company continues to generate business opportunities through streamlined advertising seamlessly integrated with the content experience. In the third quarter, Yahoo expanded Yahoo Stream Ads across Mail and mobile media properties.
Yahoo began offering more premium content through its partnerships with ABC News and NBC Sports, and launched its Fall Comedy Lineup including eight original web series, the Saturday Night Live clip archive and clips from Viacom's Comedy Central and MTV shows, including The Daily Show with Jon Stewart, The Colbert Report, and more.
During the third quarter, Yahoo made eight acquisitions to strengthen its products, content offerings, core technology and talent, including Bignoggins, Qwiki, Xobni, Admovate, Ztelic, Lexity, Rockmelt and IQ Engines.
Yahoo continued to invest in people, recruiting exceptional talent from around the world. The Company hired Ned Brody as Senior Vice President and Head of the Americas, and Dawn Airey as Senior Vice President and Head of EMEA. Yahoo also brought on New York Times journalist and editor Megan Liberman as Editor-in-Chief for Yahoo News. Jeff Bonforte, who joined Yahoo through the Company's acquisition of Xobni, was appointed as Senior Vice President of Communications Products; and Mike Kerns was named Senior Vice President of Homepage and Verticals.
Yahoo also announced today that it has entered into an amendment to the share repurchase and preference sale agreement with Alibaba Group. The amendment reduces the maximum number of shares of Alibaba Group that Yahoo is required to sell in connection with a qualified initial public offering of Alibaba, from 261.5 million shares to 208 million shares.
Third Quarter 2013 Financial Highlights
Display:
GAAP display revenue was $470 million for the third quarter of 2013, a 7 percent decrease compared to $506 million for the third quarter of 2012.
Display revenue ex-TAC was $421 million for the third quarter of 2013, a 7 percent decrease compared to $452 million for the third quarter of 2012.
The Number of Ads Sold (excluding Korea) increased approximately 1 percent compared to the third quarter of 2012.
Price-per-Ad (excluding Korea) decreased approximately 7 percent compared to the third quarter of 2012.
Search:
GAAP search revenue was $435 million for the third quarter of 2013, an 8 percent decrease compared to $473 million for the third quarter of 2012.
Search revenue ex-TAC was $426 million for the third quarter of 2013, a 3 percent increase compared to $414 million for the third quarter of 2012.
Paid Clicks (excluding Korea) increased approximately 21 percent compared to the third quarter of 2012.
Price-per-Click (excluding Korea) decreased approximately 4 percent compared to the third quarter of 2012.
Cash Balance:
Cash, cash equivalents, and investments in marketable securities were $3.2 billion as of September 30, 2013 compared to $6 billion as of December 31, 2012, a decrease of $2.8 billion.
During the third quarter of 2013, Yahoo repurchased 59 million shares for $1,685 million and used a net $163 million for acquisitions.
"In Q3, we generated free cash flow of $249 million and returned an additional $1.7 billion to shareholders through buybacks," said Ken Goldman, CFO of Yahoo. "As we exit Q3, we are extremely pleased with the strength of our balance sheet, with nearly $3.2 billion in cash and securities, and we are well positioned with ample liquidity to fund our future investments for growth."
Live Stream
Yahoo will live stream a video broadcast of the Company's third quarter 2013 financial results at 2 p.m. Pacific Time/5 p.m. Eastern Time today. The live stream will be broadcast from Yahoo’s Sunnyvale studio and will be available exclusively on Yahoo Finance at http://finance.yahoo.com. The Company will provide its business outlook for the fourth quarter and full year during the presentation. Supplemental financial information can be accessed through the Company’s Investor Relations website at http://investor.yahoo.net. The video will be archived after the event at http://investor.yahoo.net and will be available for 90 days following the broadcast.
Non-GAAP Financial Measures
This press release and its attachments include the following financial measures defined as non-GAAP financial measures by the Securities and Exchange Commission (“SEC”): revenue ex-TAC; adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per share - diluted; and free cash flow.
Revenue ex-TAC is GAAP revenue less traffic acquisition costs. Adjusted EBITDA, non-GAAP income from operations, non-GAAP net earnings and non-GAAP net earnings per share - diluted, exclude from the most comparable GAAP financial measures certain gains, losses, and expenses that we do not believe are indicative of ongoing results, and exclude stock-based compensation expense. Adjusted EBITDA also excludes taxes, depreciation, amortization of intangible assets, other income, net (which includes interest), earnings in equity interests, and net income attributable to noncontrolling interests. Free cash flow is GAAP net cash provided by operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees.
These measures may be different than non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (“GAAP”). Explanations of the Company’s non-GAAP financial measures and reconciliations of these financial measures to the GAAP financial measures the Company considers most comparable are included in the accompanying “Note to Unaudited Condensed Consolidated Financial Statements,” “Supplemental Financial Data and GAAP to Non-GAAP Reconciliations,” and “GAAP to Non-GAAP Reconciliations.”
About Yahoo
Yahoo is focused on making the world's daily habits inspiring and entertaining. By creating highly personalized experiences for our users, we keep people connected to what matters most to them, across devices and around the world. In turn, we create value for advertisers by connecting them with the audiences that build their businesses. Yahoo is headquartered in Sunnyvale, California, and has offices located throughout the Americas, Asia Pacific (APAC) and the Europe, Middle East and Africa (EMEA) regions. For more information, visit the pressroom (pressroom.yahoo.net) or the Company's blog (yahoo.tumblr.com).
“Affiliates” refers to the third-party entities that have integrated Yahoo’s advertising offerings into their Websites or other offerings (those Websites and other offerings, “Affiliate sites”).
“Alibaba Group” means Alibaba Group Holding Limited.
“Net earnings” means net income attributable to Yahoo! Inc., and “net earnings per diluted share” means net income attributable to Yahoo! Inc. common stockholders per share – diluted.
“Number of Ads Sold” is defined as the total number of display ad impressions for paying advertisers on Yahoo Properties.
“Paid Clicks” are defined as the total number of times an end-user clicks on a sponsored search listing on Yahoo Properties and Affiliate sites.
“Price-per-Ad” is defined as display revenue from Yahoo Properties divided by our Number of Ads Sold.
“Price-per-Click” is defined as search revenue divided by our Paid Clicks.
We periodically review and refine our methodologies for monitoring, gathering, and counting Number of Ads Sold and Paid Clicks, and for calculating Price-per-Ad and Price-per-Click. Commencing this quarter, the impressions and revenue associated with Yahoo’s new Stream Ad units are included in our display price and volume metrics (Number of Ads Sold and Price-per-Ad). Further, to provide metrics that are more consistent with our historical revenue trends, the revenue and volume associated with other display advertisements sold on a price-per-click basis have been excluded from our search price and volume metrics (and will continue to be excluded from our display price and volume metrics). Also, the Microsoft RPS guarantee has been excluded from the calculation of Price-per-Click. Prior period amounts have been revised to conform to the current presentation. Additional information about how “Number of Ads Sold,” “Paid Clicks,” “Price-per-Ad,” and “Price-per-Click” are defined and calculated is included under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, which is on file with the SEC and available on the SEC's website at www.sec.gov. Due to the closure of the Korea business in the fourth quarter of 2012, “Number of Ads Sold”, “Paid Clicks”, “Price-per-Ad”, and “Price-per-Click,” as presented above, exclude the Korea market for all periods.
“Search Agreement” refers to the Search and Advertising Services and Sales Agreement between Yahoo and Microsoft Corporation, as amended.
“TAC” refers to traffic acquisition costs. TAC consists of payments to Affiliates and payments made to companies that direct consumer and business traffic to Yahoo Properties.
“Yahoo Properties” refers to the online properties and services that Yahoo provides to users.
This press release contains forward-looking statements concerning Yahoo's expected financial performance and Yahoo's strategic and operational plans (including, without limitation, the quotations from management). Risks and uncertainties may cause actual results to differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, acceptance by users of new products and services (including, without limitation, products and services for mobile devices and alternative platforms); Yahoo's ability to compete with new or existing competitors; reduction in spending by, or loss of, advertising customers; risks associated with the Search Agreement with Microsoft Corporation; risks related to Yahoo’s regulatory environment; Yahoo’s ability to protect its intellectual property and the value of its brands; adverse results in litigation; security breaches; interruptions or delays in the provision of Yahoo’s services; risks related to Yahoo's international operations; risks related to joint ventures and the integration of acquisitions; dependence on third parties for technology, services, content, and distribution; and general economic conditions. All information set forth in this press release and its attachments is as of October 15, 2013. Yahoo does not intend, and undertakes no duty, to update this information to reflect subsequent events or circumstances. More information about potential factors that could affect the Company's business and financial results is included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, which are on file with the SEC and available on the SEC's website at www.sec.gov. Additional information will also be set forth in those sections in Yahoo’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, which will be filed with the SEC in the fourth quarter of 2013.
Yahoo!, Flickr, omg!, Qwiki, Xobni, Lexity, Rockmelt, IQ Engines, and the Yahoo logos are trademarks and/or registered trademarks of Yahoo! Inc. All other names are trademarks and/or registered trademarks of their respective owners.
Yahoo! Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands)
December 31,
September 30,
2012
2013
ASSETS
Current assets:
Cash and cash equivalents $ 2,667,778 $ 842,428
Short-term marketable securities 1,516,175 987,870
Accounts receivable, net 1,008,448 844,118
Prepaid expenses and other current assets 460,312 891,807
Total current assets 5,652,713 3,566,223
Long-term marketable securities 1,838,425 1,384,638
Alibaba Group Preference Shares 816,261 -
Property and equipment, net 1,685,845 1,536,362
Goodwill 3,826,749 4,704,859
Intangible assets, net 153,973 427,351
Other long-term assets 289,130 165,866
Investments in equity interests
2,840,157 3,120,450
Total assets $ 17,103,253 $ 14,905,749
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 184,831 $ 123,042
Accrued expenses and other current liabilities 808,475 776,466
Deferred revenue 296,926 293,615
Total current liabilities 1,290,232 1,193,123
Long-term deferred revenue 407,560 295,970
Capital lease and other long-term liabilities 124,587 121,169
Deferred and other long-term tax liabilities, net 675,271 749,168
Total liabilities 2,497,650 2,359,430
Total Yahoo! Inc. stockholders' equity 14,560,200 12,494,111
Noncontrolling interests 45,403 52,208
Total equity 14,605,603 12,546,319
Total liabilities and equity $ 17,103,253 $ 14,905,749
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2013 2012 2013
Revenue $ 1,201,732 $ 1,138,973 $ 3,640,759 $ 3,414,585
Operating expenses:
Cost of revenue - traffic acquisition costs 112,829 58,464 393,945 188,848
Cost of revenue - other 282,081 271,763 814,513 821,032
Sales and marketing 269,272 282,562 827,450 819,319
Product development 217,301 267,444 645,407 723,272
General and administrative 135,249 151,304 395,637 419,764
Amortization of intangibles 8,084 15,253 27,893 30,702
Restructuring charges (reversals), net 24,727 (576 ) 159,536 (4,060 )
Total operating expenses 1,049,543 1,046,214 3,264,381 2,998,877
Income from operations 152,189 92,759 376,378 415,708
Other income, net 4,607,656 5,370 4,630,109 46,048
Income before income taxes and earnings in equity interests 4,759,845 98,129 5,006,487 461,756
Provision for income taxes (1,774,094 ) (31,891 ) (1,857,036 ) (111,894 )
Earnings in equity interests 175,265 232,756 527,499 675,034
Net income 3,161,016 298,994 3,676,950 1,024,896
Less: Net income attributable to noncontrolling interests (778 ) (2,338 ) (3,738 ) (6,805 )
Net income attributable to Yahoo! Inc. $ 3,160,238 $ 296,656 $ 3,673,212 $ 1,018,091
Net income attributable to Yahoo! Inc. common stockholders per share - diluted (1) $ 2.64 $ 0.28 $ 3.02 $ 0.93
Shares used in per share calculation - diluted 1,195,085 1,041,698 1,214,430 1,081,495
Stock-based compensation expense by function:
Cost of revenue - other $ 2,363 $ 2,608 $ 7,871 $ 9,215
Sales and marketing 19,876 29,175 59,954 68,995
Product development 17,050 28,702 54,329 57,502
General and administrative 22,077 20,241 44,749 57,755
Restructuring expense reversals, net - - (3,429 ) -
Supplemental Financial Data:
Revenue ex-TAC $ 1,088,903 $ 1,080,509 $ 3,246,814 $ 3,225,737
Adjusted EBITDA $ 407,793 $ 331,125 $ 1,189,815 $ 1,085,912
Free cash flow (2) $ 920,424 $ 249,037 $ 1,209,637 $ 530,345
(1)
The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company's diluted earnings per share by $0.01 for the nine months ended September 30, 2013.
(2)
The three and nine months ended September 30, 2012 include a payment of $550 million from Alibaba Group related to a technology and intellectual property license agreement.
Yahoo! Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2013 2012 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,161,016 $ 298,994 $ 3,676,950 $ 1,024,896
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 146,483 127,356 401,022 412,646
Amortization of intangible assets 23,878 30,888 84,087 68,365
Stock-based compensation expense 61,366 80,726 163,474 193,467
Non-cash restructuring charges 1,824 - 40,462 547
Dividend income related to Alibaba Group Preference Shares - - - (35,726 )
Dividends received from equity investees - - 83,648 135,058
Tax benefits from stock-based awards (5,536 ) 24,169 (9,471 ) 33,894
Excess tax benefits from stock-based awards (13,981 ) (28,680 ) (30,751 ) (47,193 )
Deferred income taxes (872,814 ) (46,984 ) (891,288 ) (74,981 )
Earnings in equity interests (175,265 ) (232,756 ) (527,499 ) (675,034 )
Gain related to sale of Alibaba Group shares (4,603,322 ) - (4,603,322 ) -
(Gain) loss from sale of investments, assets, and other, net 654 6,819 (18,308 ) 19,994
Changes in assets and liabilities, net of effects of acquisitions:
Accounts receivable, net 96,850 102,949 86,942 161,459
Prepaid expenses and other 30,041 20,936 41,059 (17,738 )
Accounts payable 13,257 5,411 (22,457 ) (54,343 )
Accrued expenses and other liabilities 2,644,717 (53,051 ) 2,628,962 (183,706 )
Deferred revenue 537,140 (38,767 ) 514,811 (114,085 )
Net cash provided by operating activities (2) 1,046,308 298,010 1,618,321 847,520
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment, net (139,865 ) (77,653 ) (355,787 ) (229,310 )
Purchases of marketable securities (1,193,594 ) (3,000 ) (1,838,860 ) (2,247,302 )
Proceeds from sales of marketable securities 136,540 1,183,955 684,979 2,642,548
Proceeds from maturities of marketable securities 52,155 95,159 250,653 557,565
Proceeds related to the sale of Alibaba shares, net 6,247,728 - 6,247,728 -
Proceeds related to the redemption of Alibaba Group Preference Shares - - - 800,000
Purchases of intangible assets - (238 ) (3,088 ) (2,290 )
Proceeds from the sale of investments - - 26,132 -
Acquisitions, net of cash acquired - (163,072 ) - (1,187,229 )
Other investing activities, net - (7,906 ) (9,421 ) (11,045 )
Net cash provided by investing activities 5,102,964 1,027,245 5,002,336 322,937
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 38,549 80,325 116,420 203,417
Repurchases of common stock (190,372 ) (1,685,293 ) (716,379 ) (3,113,118 )
Excess tax benefits from stock-based awards 13,981 28,680 30,751 47,193
Tax withholdings related to net share settlements of restricted stock units (9,603 ) (55,040 ) (48,097 ) (106,177 )
Proceeds from credit facility - 150,000 - 150,000
Repayment of credit facility - (150,150 ) - (150,150 )
Other financing activities, net (1,297 ) (2,935 ) (3,519 ) (5,713 )
Net cash used in financing activities (148,742 ) (1,634,413 ) (620,824 ) (2,974,548 )
Effect of exchange rate changes on cash and cash equivalents 20,601 9,363 (1,823 ) (21,259 )
Net change in cash and cash equivalents 6,021,131 (299,795 ) 5,998,010 (1,825,350 )
Cash and cash equivalents, beginning of period 1,539,269 1,142,223 1,562,390 2,667,778
Cash and cash equivalents, end of period $ 7,560,400 $ 842,428 $ 7,560,400 $ 842,428
(2)
The three and nine months ended September 30, 2012 include a payment of $550 million from Alibaba Group related to a technology and intellectual property license agreement.
Yahoo! Inc.
Note to Unaudited Condensed Consolidated Financial Statements
This press release and its attachments include the non-GAAP financial measures of revenue excluding traffic acquisition costs (“revenue ex-TAC”); adjusted EBITDA; non-GAAP income from operations; non-GAAP net earnings; non-GAAP net earnings per diluted share; and free cash flow, which are reconciled to revenue; net income attributable to Yahoo! Inc. (in the case of adjusted EBITDA and non-GAAP net earnings); income from operations; net income attributable to Yahoo! Inc. common stockholders per share – diluted; and net cash provided by operating activities, which we believe are the most comparable GAAP measures. We use these non-GAAP financial measures for internal managerial purposes and to facilitate period-to-period comparisons. We describe limitations specific to each non-GAAP financial measure below. Management generally compensates for limitations in the use of non-GAAP financial measures by relying on comparable GAAP financial measures and providing investors with a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measure or measures. Further, management uses non-GAAP financial measures only in addition to and in conjunction with results presented in accordance with GAAP. We believe that these non-GAAP financial measures reflect an additional way of viewing aspects of our operations that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, revenue, net income attributable to Yahoo! Inc., income from operations, net income attributable to Yahoo! Inc. common stockholders per share – diluted, and net cash provided by operating activities calculated in accordance with GAAP.
Revenue ex-TAC is a non-GAAP financial measure defined as GAAP revenue less TAC. TAC consists of payments made to third-party entities that have integrated our advertising offerings into their Websites or other offerings (those Websites and other offerings, “Affiliate sites”) and payments made to companies that direct consumer and business traffic to Yahoo’s online properties and services (“Yahoo Properties”). Based on the terms of the Search Agreement with Microsoft, Microsoft retains a revenue share of 12 percent of the net (after TAC) search revenue generated on Yahoo Properties and Affiliate sites in transitioned markets. Yahoo reports the net revenue it receives under the Search Agreement as revenue and no longer presents the associated TAC. Accordingly, for transitioned markets Yahoo reports GAAP revenue associated with the Search Agreement on a net (after TAC) basis rather than a gross basis. For markets that have not yet transitioned, revenue continues to be recorded on a gross basis, and TAC is recorded as a part of operating expenses. We present revenue ex-TAC to provide investors a metric used by the Company for evaluation and decision-making purposes during the Microsoft transition and to provide investors with comparable revenue numbers when comparing periods preceding, during and following the transition period. A limitation of revenue ex-TAC is that it is a measure which we have defined for internal and investor purposes that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry who have similar business arrangements but address the impact of TAC differently. Management compensates for these limitations by also relying on the comparable GAAP financial measures of revenue and total operating expenses, which includes TAC in non-transitioned markets.
Adjusted EBITDA is defined as net income attributable to Yahoo! Inc. before taxes, depreciation, amortization of intangible assets, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results. Yahoo presents adjusted EBITDA because the exclusion of certain gains, losses, and expenses facilitates comparisons of the operating performance of our Company on a period to period basis. Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for results reported under GAAP. These limitations include: adjusted EBITDA does not reflect tax payments and such payments reflect a reduction in cash available to us; adjusted EBITDA does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses; adjusted EBITDA does not include stock-based compensation expense related to the Company’s workforce; adjusted EBITDA also excludes other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and other gains, losses, and expenses that we do not believe are indicative of our ongoing results, and these items may represent a reduction or increase in cash available to us; and adjusted EBITDA is a measure that may be unique to the Company, and therefore it may not enhance the comparability of our results to other companies in our industry. Management compensates for these limitations by also relying on the comparable GAAP financial measure of net income attributable to Yahoo! Inc., which includes taxes, depreciation, amortization, stock-based compensation expense, other income, net (which includes interest), earnings in equity interests, net income attributable to noncontrolling interests and the other gains, losses and expenses that are excluded from adjusted EBITDA.
Non-GAAP income from operations is defined as income from operations excluding certain gains, losses, and expenses that we do not believe are indicative of our ongoing operating results and further adjusted to exclude stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on income from operations. We consider non-GAAP income from operations to be a profitability measure which facilitates the forecasting of our operating results for future periods and allows for the comparison of our results to historical periods. A limitation of non-GAAP income from operations is that it does not include all items that impact our income from operations for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measure of income from operations which includes the gains, losses, and expenses that are excluded from non-GAAP income from operations.
Non-GAAP net earnings is defined as net income attributable to Yahoo! Inc. excluding certain gains, losses, expenses, and their related tax effects that we do not believe are indicative of our ongoing results and further adjusted to exclude stock-based compensation expense and its related tax effects. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, and the subjective assumptions involved in those determinations, we believe excluding stock-based compensation expense enhances the ability of management and investors to understand the impact of stock-based compensation expense on net income and net income per share. We consider non-GAAP net earnings and non-GAAP net earnings per diluted share to be profitability measures which facilitate the forecasting of our results for future periods and allow for the comparison of our results to historical periods. A limitation of non-GAAP net earnings and non-GAAP net earnings per diluted share is that they do not include all items that impact our net income and net income per diluted share for the period. Management compensates for this limitation by also relying on the comparable GAAP financial measures of net income attributable to Yahoo! Inc. and net income attributable to Yahoo! Inc. common stockholders per share - diluted, both of which include the gains, losses, expenses and related tax effects that are excluded from non-GAAP net earnings and non-GAAP net earnings per diluted share.
Free cash flow is a non-GAAP financial measure defined as net cash provided by operating activities (adjusted to include excess tax benefits from stock-based awards), less acquisition of property and equipment, net and dividends received from equity investees. We consider free cash flow to be a liquidity measure which provides useful information to management and investors about the amount of cash generated by the business after the acquisition of property and equipment, which can then be used for strategic opportunities including, among others, investing in the Company's business, making strategic acquisitions, strengthening the balance sheet, and repurchasing stock. A limitation of free cash flow is that it does not represent the total increase or decrease in the cash balance for the period. Management compensates for this limitation by also relying on the net change in cash and cash equivalents as presented in the Company’s unaudited condensed consolidated statements of cash flows prepared in accordance with GAAP which incorporates all cash movements during the period.
Yahoo! Inc.
Supplemental Financial Data and GAAP to Non-GAAP Reconciliations
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2012 2013 2012 2013
Revenue for groups of similar services:
Display $ 506,002 $ 469,932 $ 1,552,191 $ 1,396,745
Search 472,537 435,192 1,403,903 1,278,081
Other 223,193 233,849 684,665 739,759
Total revenue $ 1,201,732 $
1,138,973
$ 3,640,759 $ 3,414,585
Revenue excluding traffic acquisition costs ("revenue ex-TAC") for groups of similar services:
GAAP display revenue $ 506,002 $ 469,932 $ 1,552,191 $ 1,396,745
TAC associated with display revenue (54,361 ) (48,617 ) (173,339 ) (150,274 )
Display revenue ex-TAC $ 451,641 $ 421,315 $ 1,378,852 $ 1,246,471
GAAP search revenue $ 472,537 $ 435,192 $ 1,403,903 $ 1,278,081
TAC associated with search revenue for non-transitioned markets (58,468 ) (9,100 ) (220,606 ) (40,088 )
Search revenue ex-TAC $ 414,069 $ 426,092 $ 1,183,297 $ 1,237,993
Other GAAP revenue $ 223,193 $ 233,849 $ 684,665 $ 739,759
TAC associated with other GAAP revenue - (747 ) - 1,514
Other revenue ex-TAC $ 223,193 $ 233,102 $ 684,665 $ 741,273
Revenue ex-TAC:
GAAP revenue $ 1,201,732 $ 1,138,973 $ 3,640,759 $ 3,414,585
TAC (112,829 ) (58,464 ) (393,945 ) (188,848 )
Revenue ex-TAC $ 1,088,903 $ 1,080,509 $ 3,246,814 $ 3,225,737
Revenue ex-TAC by segment:
Americas:
GAAP revenue $ 843,731 $ 850,935 $ 2,501,515 $ 2,521,667
TAC (41,289 ) (36,435 ) (130,154 ) (111,077 )
Revenue ex-TAC $ 802,442 $ 814,500 $ 2,371,361 $ 2,410,590
EMEA:
GAAP revenue $ 96,473 $ 89,156 $ 358,534 $ 281,367
TAC (17,399 ) (9,929 ) (97,248 ) (32,837 )
Revenue ex-TAC $ 79,074 $ 79,227 $ 261,286 $ 248,530
Asia Pacific:
GAAP revenue $ 261,528 $ 198,882 $ 780,710 $ 611,551
TAC (54,141 ) (12,100 ) (166,543 ) (44,934 )
Revenue ex-TAC $ 207,387 $ 186,782 $ 614,167 $ 566,617
Total revenue ex-TAC $ 1,088,903 $ 1,080,509 $ 3,246,814 $ 3,225,737
Direct costs by segment (3):
Americas $ 189,345 $ 171,285 $ 550,080 $ 513,677
EMEA 39,167 39,922 120,665 119,766
Asia Pacific 56,329 47,583 164,068 152,264
Global operating costs (4) 396,269 490,594 1,228,686 1,354,118
Restructuring charges (reversals), net 24,727 (576 ) 159,536 (4,060 )
Depreciation and amortization 169,511 158,216 480,498 480,797
Stock-based compensation expense 61,366 80,726 166,903 193,467
Income from operations $ 152,189 $ 92,759 $ 376,378 $ 415,708
Reconciliation of net income attributable to Yahoo! Inc. to adjusted EBITDA:
Net income attributable to Yahoo! Inc. $ 3,160,238 $ 296,656 $ 3,673,212 $ 1,018,091
Deal costs related to the sale of Alibaba Group shares - - 6,500 -
Depreciation and amortization 169,511 158,216 480,498 480,797
Stock-based compensation expense 61,366 80,726 166,903 193,467
Restructuring charges (reversals), net 24,727 (576 ) 159,536 (4,060 )
Other income, net (4,607,656 ) (5,370 ) (4,630,109 ) (46,048 )
Provision for income taxes 1,774,094 31,891 1,857,036 111,894
Earnings in equity interests (175,265 ) (232,756 ) (527,499 ) (675,034 )
Net income attributable to noncontrolling interests 778 2,338 3,738 6,805
Adjusted EBITDA $ 407,793 $ 331,125 $ 1,189,815 $ 1,085,912
Reconciliation of net cash provided by operating activities to free cash flow:
Net cash provided by operating activities $ 1,046,308 $ 298,010 $ 1,618,321 $ 847,520
Acquisition of property and equipment, net (139,865 ) (77,653 ) (355,787 ) (229,310 )
Dividends received from equity investees - - (83,648 ) (135,058 )
Excess tax benefits from stock-based awards 13,981 28,680 30,751 47,193
Free cash flow (2) $ 920,424 $ 249,037 $ 1,209,637 $ 530,345
(2)
The three and nine months ended September 30, 2012 include a payment of $550 million from Alibaba Group related to a technology and intellectual property license agreement.
(3)
Direct costs for each segment include cost of revenue (excluding TAC) and other operating expenses that are directly attributable to the segment such as employee compensation expense (excluding stock-based compensation expense), local sales and marketing expenses, and facilities expenses.
(4)
Global operating costs include product development, service engineering and operations, general and administrative, and other corporate expenses that are managed on a global basis and that are not directly attributable to any particular segment.
Yahoo! Inc.
GAAP to Non-GAAP Reconciliations
(in thousands, except per share amounts)
Three Months Ended
September 30,
2012 2013
GAAP income from operations $ 152,189 $ 92,759
(a) Restructuring charges (reversals), net 24,727 (576 )
(b) Stock-based compensation expense 61,366 80,726
Non-GAAP income from operations (5) $ 238,282 $ 172,909
GAAP net income attributable to Yahoo! Inc. $ 3,160,238 $ 296,656
(a) Restructuring charges (reversals), net 24,727 (576 )
(b) Stock-based compensation expense 61,366 80,726
(c) Gain related to sale of Alibaba Group shares (4,603,322 ) -
(d)
To adjust the provision for income taxes to exclude the tax impact of items (a) through (c) above for the
three months ended September 30, 2012 and 2013
1,827,093 (18,354 )
Non-GAAP net earnings (6) $ 470,102 $ 358,452
GAAP net income attributable to Yahoo! Inc. common stockholders per share - diluted $ 2.64 $ 0.28
Non-GAAP net earnings per share - diluted (6) $ 0.39 $ 0.34
Shares used in per share calculation - diluted 1,195,085 1,041,698
Nine Months Ended
September 30,
2012 2013
GAAP income from operations $ 376,378 $ 415,708
(a) Restructuring charges (reversals), net 159,536 (4,060 )
(b) Stock-based compensation expense 166,903 193,467
(c) Deal costs related to the sale of Alibaba Group shares 6,500 -
Non-GAAP income from operations (5) $ 709,317 $ 605,115
GAAP net income attributable to Yahoo! Inc. $ 3,673,212 $ 1,018,091
(a) Restructuring charges (reversals), net 159,536 (4,060 )
(b) Stock-based compensation expense 166,903 193,467
(c) Deal costs related to the sale of Alibaba Group shares 6,500 -
(d) Gain related to sale of Alibaba Group shares (4,603,322 ) -
(e)
To adjust the provision for income taxes to exclude the tax impact of items (a) through (d) above for the
nine months ended September 30, 2012 and 2013
1,763,437 (42,995 )
Non-GAAP net earnings (6) $ 1,166,266 $ 1,164,503
GAAP net income attributable to Yahoo! Inc. common stockholders per share - diluted (1) $ 3.02 $ 0.93
Non-GAAP net earnings per share - diluted (1) (6) $ 0.96 $ 1.07
Shares used in per share calculation - diluted 1,214,430 1,081,495
(1)
The impact of outstanding stock awards of entities in which the Company holds equity interests that are accounted for using the equity method reduced the Company's diluted earnings per share by $0.01 for the nine months ended September 30, 2013.
(5)
Commencing in 2013, non-GAAP income from operations excludes stock-based compensation expense. Prior period amounts have been revised to conform to the current presentation.
(6)
Commencing in 2013, non-GAAP net earnings and non-GAAP net earnings per share - diluted exclude stock-based compensation expense and its related tax effects. Prior period amounts have been revised to conform to the current presentation.
Contact:
Media Relations Contact:
Yahoo! Inc.
Sara Gorman, 408-349-4040
media@yahoo-inc.com
or
Investor Relations Contact:
Yahoo! Inc.
Joon Huh, 408-349-3382
investorrelations@yahoo-inc.com
Travelzoo Reports Third Quarter 2013 Results
Business WirePress Release: Travelzoo Inc. – 14 hours ago
Travelzoo Inc. (TZOO):
Third Quarter 2013 Financial Highlights:
Revenue of $37.3 million, up 5% year-over-year
Non-GAAP net income of $3.0 million
Non-GAAP earnings per share of $0.19, compared to $0.21 in the prior-year period
GAAP net loss of $19.0 million; GAAP loss per share of $1.24
Cash flow from operations of $2.2 million
Travelzoo Inc., a global Internet media company, today announced financial results for the third quarter ended September 30, 2013, with revenue of $37.3 million, an increase of 5% year-over-year. Non-GAAP operating income was $4.0 million. Non-GAAP net income was $3.0 million, with non-GAAP earnings per share (non-GAAP EPS) of $0.19, down from non-GAAP EPS of $0.21 in the prior-year period. Non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share exclude a $22.0 million charge related to a reserve for Travelzoo Inc.'s settlement agreements in connection with a dispute over unclaimed property audits.
"Our combined Travel business grew 16% year-over-year, this progress was offset by disappointing results in our Search and Local businesses," said Chris Loughlin, chief executive officer. "We continue to invest in product development in order to make it easier to find and book deals on Travelzoo and to spur future growth. We launched a new home page this quarter and intend to start beta-testing our new hotel booking platform at the beginning of next year. Purchases on mobile products increased 41% year-over-year. On the social media side, we are now one of the more active travel brands, with over 1.8 million combined fans and followers on Facebook and Twitter."
North America
North America business segment revenue increased 4% year-over-year to $26.2 million. Non-GAAP operating income for the third quarter ended September 30, 2013 was $2.5 million, or 10% of revenue, down from $3.1 million, or 12% of revenue, in the prior-year period.
Europe
Europe business segment revenue increased 7% year-over-year to $11.0 million. In local currency terms, revenue for the third quarter September 30, 2013 increased 9% year-over-year. Operating profit was $1.5 million, or 13% of revenue, up from an operating profit of $1.1 million, or 10% of revenue in the prior-year period.
Subscribers
Travelzoo had a total unduplicated number of subscribers in North America and Europe of 23.2 million as of September 30, 2013, up 4% from September 30, 2012. In North America, total unduplicated number of subscribers was 16.5 million as of September 30, 2013, up 3% from September 30, 2012. In Europe, total unduplicated number of subscribers was 6.7 million as of September 30, 2013, up 6% from September 30, 2012.
Income Taxes
Income tax expense was $1.2 million, compared to $896,000 in the prior-year period. The Non-GAAP effective income tax rate was 29%, up from 21% in the prior-year period.
Asset Management
During the third quarter of 2013, Travelzoo generated $2.2 million of cash from operating activities. Accounts receivable decreased by $622,000 over the prior-year period to $14.8 million. Accounts payable increased by $4.4 million over the prior-year period to $27.7 million. Capital expenditures were $1.5 million, up from $774,000 in the prior-year period. As of September 30, 2013, cash and cash equivalents were $77.9 million.
Unclaimed Property Audits
Travelzoo entered into agreements with 34 states to resolve those states’ claims related to unclaimed property audits. As previously disclosed in the Company’s reports on Form 10-K and Form 10-Q, multiple states have claimed that certain shares of Travelzoo, which were not claimed by former shareholders of Travelzoo.com Corporation following the 2002 merger, were unclaimed property. While the Company disputes the states’ claims, the Company determined that it was in its best interest to resolve the disputes and settle with 34 of the states.
The multi-state settlement relates to an approximate 700,000 shares of Travelzoo that those states claim may be subject to escheat. An additional 15 states remain that have or may raise claims on a remaining approximate 400,000 shares that were not exchanged following the merger by residents in those states.
The Company expects to make one-time cash payments to the 34 states after further due diligence, which it intends to make from cash on hand. To cover those payments, as well as potential future settlements with the remaining 15 states, the Company recorded an estimated $22.0 million charge in the three months ended September 30, 2013.
Non-GAAP Measures
To give an enhanced view of Travelzoo's operating performance, management has calculated non-GAAP operating expense, non-GAAP North America operating income, non-GAAP operating income, non-GAAP operating margin, non-GAAP effective tax rate, non-GAAP net income and non-GAAP earnings per share by excluding the charges related to our unexchanged merger shares. The company believes these metrics assist investors to assess certain business trends in the same way that these trends are analyzed by management. The discussion of these non-GAAP metrics are not in accordance with GAAP and may differ from non-GAAP methods of accounting and reporting used by other companies. Non-GAAP metrics are merely a supplement to, and not a replacement for, GAAP financial measures. As the only difference between GAAP and non-GAAP measures is the charges related to our unexchanged merger shares, today’s reporting should not be viewed as Travelzoo’s intention to report non-GAAP measures in future periods. Refer to the “Reconciliation of GAAP to Non-GAAP Measures” section of this press release for a summary of these non-GAAP measures and their reconciliation to the reported GAAP measures.
Conference Call
Travelzoo will host a conference call to discuss third quarter results at 11:00 a.m. ET today. Please visit http://www.travelzoo.com/earnings to
download the management presentation (PDF format) to be discussed in the conference call;
access the webcast.
About Travelzoo
Travelzoo Inc. is a global Internet media company. With more than 26 million subscribers in North America, Europe, and Asia Pacific and 25 offices worldwide, Travelzoo® publishes deals from more than 2,000 travel and entertainment companies. Travelzoo’s deal experts review offers to find the best deals and confirm their true value. In Asia Pacific, Travelzoo is independently owned and operated by Travelzoo (Asia) Ltd. and Travelzoo Japan K.K. under a license agreement with Travelzoo Inc.
Certain statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements may include, but are not limited to, statements about our plans, objectives, expectations, prospects and intentions, markets in which we participate and other statements contained in this press release that are not historical facts. When used in this press release, the words “expect,” “predict,” “project,” “anticipate,” “believe,” “estimate,” “intend,” “plan,” “seek” and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including changes in our plans, objectives, expectations, prospects and intentions, and other factors discussed in our filings with the SEC. We cannot guarantee any future levels of activity, performance or achievements. Travelzoo undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release. Travelzoo and Top 20 are registered trademarks of Travelzoo Inc. All other company and product names mentioned are trademarks of their respective owners.
Travelzoo Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2013 2012 2013 2012
Revenues $ 37,256 $ 35,447 $ 120,759 $ 114,140
Cost of revenues 4,322 3,989 12,733 11,672
Gross profit 32,934 31,458 108,026 102,468
Operating expenses:
Sales and marketing 18,449 17,427 57,563 49,753
General and administrative 10,510 9,836 30,659 28,583
Unexchanged promotional merger shares 22,000 — 22,000 3,000
Total operating expenses 50,959 27,263 110,222 81,336
Income (loss) from operations (18,025 ) 4,195 (2,196 ) 21,132
Other income 224 135 369 218
Income (loss) before income taxes (17,801 ) 4,330 (1,827 ) 21,350
Income taxes 1,235 896 6,414 6,908
Net income (loss) $ (19,036 ) $ 3,434 $ (8,241 ) $ 14,442
Net income (loss) per share:
Basic $ (1.24 ) $ 0.22 $ (0.54 ) $ 0.91
Diluted $ (1.24 ) $ 0.21 $ (0.54 ) $ 0.90
Weighted Average Shares:
Basic 15,362 15,884 15,362 15,935
Diluted 15,362 15,992 15,362 16,041
Travelzoo Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
September 30,
2013 December 31,
2012
Assets
Current assets:
Cash and cash equivalents $ 77,900 $ 61,169
Accounts receivable, net 14,818 13,626
Income taxes receivable 4,504 6,682
Deposits 501 389
Prepaid expenses and other current assets 3,483 2,260
Deferred tax assets 2,007 2,194
Total current assets 103,213 86,320
Deposits, less current portion 979 1,107
Deferred tax assets, less current portion 1,229 1,710
Restricted cash 1,618 3,396
Property and equipment, net 6,376 4,314
Intangible assets, net 540 986
Total assets $ 113,955 $ 97,833
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 27,676 $ 28,695
Accrued unexchanged promotional merger shares 25,000 3,000
Accrued expenses 10,043 8,993
Deferred revenue 1,740 2,698
Deferred rent 306 280
Income tax payable 1,353 —
Total current liabilities 66,118 43,666
Long-term tax liabilities 10,388 10,030
Deferred rent, less current portion 1,423 798
Total liabilities 77,929 54,494
Common stock 163 163
Treasury stock (7,898 ) (7,898 )
Additional paid-in capital 9,851 8,863
Accumulated other comprehensive loss (797 ) (737 )
Retained earnings 34,707 42,948
Total stockholders’ equity 36,026 43,339
Total liabilities and stockholders’ equity $ 113,955 $ 97,833
Travelzoo Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Three months ended Nine months ended
September 30, September 30,
2013 2012 2013 2012
Cash flows from operating activities:
Net income (loss) $ (19,036 ) $ 3,434 $ (8,241 ) $ 14,442
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 709 630 2,185 1,856
Deferred income taxes 241 (3 ) 641 (3 )
Stock-based compensation 375 307 989 900
Provision for losses on accounts receivable (94 ) (84 ) (44 ) 116
Net foreign currency effects (74 ) (46 ) 38 (6 )
Changes in operating assets and liabilities:
Accounts receivable 1,021 53 (1,106 ) (2,069 )
Deposits (3 ) (17 ) 17 (382 )
Income tax receivable (1,424 ) 689 2,169 1,819
Prepaid expenses and other current assets 59 (161 ) (975 ) (241 )
Accounts payable (1,886 ) 680 (1,041 ) 1,189
Accrued unexchanged promotional shares 22,000 — 22,000 3,000
Accrued expenses (182 ) 897 1,039 3,198
Deferred revenue (109 ) 383 (956 ) 323
Deferred rent 188 55 299 21
Income tax payable 254 (1 ) 1,292 (284 )
Other non-current liabilities 149 34 359 (190 )
Net cash provided by operating activities 2,188 6,850 18,665 23,689
Cash flows from investing activities:
Purchases of restricted cash 2,048 — 1,786 —
Purchases of property and equipment (1,487 ) (774 ) (3,596 ) (2,046 )
Net cash provided by (used in) investing activities 561 (774 ) (1,810 ) (2,046 )
Cash flows from financing activities:
Cash used in purchase of common stock — (3,611 ) — (3,611 )
Net cash used in financing activities — (3,611 ) — (3,611 )
Effect of exchange rate on cash and cash equivalents 1,770 1,008 (124 ) 858
Net increase in cash and cash equivalents 4,519 3,473 16,731 18,890
Cash and cash equivalents at beginning of period 73,381 54,161 61,169 38,744
Cash and cash equivalents at end of period $ 77,900 $ 57,634 $ 77,900 $ 57,634
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net $ 1,897 $ 177 $ 1,917 $ 5,568
Travelzoo Inc.
Segment Information
(Unaudited)
(In thousands)
Three months ended September 30, 2013 North
America
Europe
Elimination
and Other (a)
Consolidated
Revenue from unaffiliated customers $ 26,209 $ 11,047 $ — $ 37,256
Intersegment revenue 361 110 (471 ) —
Total net revenues 26,570 11,157 (471 ) 37,256
Operating income $ 2,506 $ 1,469 $ (22,000 ) $ (18,025 )
Three months ended September 30, 2012 North
America
Europe Elimination Consolidated
Revenue from unaffiliated customers $ 25,147 $ 10,300 $ — $ 35,447
Intersegment revenue 211 10 (221 ) —
Total net revenues 25,358 10,310 (221 ) 35,447
Operating income $ 3,121 $ 1,074 $ — $ 4,195
Nine months ended September 30, 2013 North
America Europe
Elimination
and Other (b)
Consolidated
Revenue from unaffiliated customers $ 86,368 $ 34,391 $ — $ 120,759
Intersegment revenue 757 440 (1,197 ) —
Total net revenues 87,125 34,831
(1,197
) 120,759
Operating income $ 13,888 $ 5,916 $ (22,000 ) $ (2,196 )
Nine months ended September 30, 2012 North
America Europe
Elimination
and Other (b)
Consolidated
Revenue from unaffiliated customers $ 82,415 $ 31,725 $ — $ 114,140
Intersegment revenue 496 41 (537 ) —
Total net revenues 82,911 31,766 (537 ) 114,140
Operating income $ 18,094 $ 6,038 $ (3,000 ) $ 21,132
(a) Includes a charge of $22.0 million for the three months ended September 30, 2013 related
to settlement agreements in connection with a dispute over unclaimed property audits.
(b) Includes a charge of $22.0 million and $3.0 million for the nine months ended September 30, 2013
and 2012, respectively, related to settlement agreements in connection with a dispute over
unclaimed property audits.
Travelzoo Inc.
Reconciliation of GAAP to Non-GAAP Measures
(Unaudited)
(In thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
2013 2012 2013 2012
GAAP operating expense $ 50,959 $ 27,263 $ 110,222 $ 81,336
Unexchanged merger shares (a) (b) 22,000 — 22,000 3,000
Non-GAAP operating expense $ 28,959 $ 27,263 $ 88,222 $ 78,336
GAAP operating income (loss) $ (18,025 ) $ 4,195 $ (2,196 ) $ 21,132
Unexchanged merger shares (a) (b) 22,000 — 22,000 3,000
Non-GAAP operating income $ 3,975 $ 4,195 $ 19,804 $ 24,132
GAAP operating margin (48.4) % 11.8 % (1.8) % 18.5 %
Unexchanged merger shares (a) (b) 59.1 % — % 18.2 % 2.6 %
Non-GAAP operating margin 10.7 % 11.8 % 16.4 % 21.1 %
GAAP effective tax rate (6.9) % 20.7 % (351.1) % 32.4 %
Unexchanged merger shares (a) (b) 36.4 % — % 382.9 % (4.0) %
Non-GAAP effective tax rate 29.4 % 20.7 % 31.8 % 28.4 %
GAAP net income (loss) $ (19,036 ) $ 3,434 $ (8,241 ) $ 14,442
Unexchanged merger shares (a) (b) 22,000 — 22,000 3,000
Non-GAAP net income $ 2,964 $ 3,434 $ 13,759 $ 17,442
Earnings (loss) per share $ (1.24 ) $ 0.21 $ (0.54 ) $ 0.90
Unexchanged merger shares (a) (b) 1.43 — 1.42 0.19
Non-GAAP earnings per share (c) $ 0.19 $ 0.21 $ 0.88 $ 1.09
(a) Includes a charge of $22.0 million for the three months ended September 30, 2013 related to
settlement agreements in connection with a dispute over unclaimed property audits.
(b) Includes a charge $22.0 million and $3.0 million for the nine months ended September 30, 2013
and 2012, respectively, related to settlement agreements in connection with a dispute over
unclaimed property audits.
(c) Shares used to calculate non-GAAP earnings per share for the three months ended September 30,
2013 were 15,482,802, which were different than the shares used in GAAP loss per share
calculation due to the anti-dilutive effect on the GAAP loss per share. Shares used to calculate
non-GAAP earnings per share for the nine months ended September 30, 2013 were 15,550,982,
which were different than the shares used in GAAP loss per share calculation due to the anti-
dilutive effect on the GAAP loss per share.
Contact:
Media:
Travelzoo, North America
Christie McConnell, 212-484-4912
cmcconnell@travelzoo.com
WD-40 Company Reports Fourth Quarter 2013 Sales And Earnings
PR NewswirePress Release: WD-40 Company – 5 hours ago
Email
Print
SAN DIEGO, Oct. 17, 2013 /PRNewswire/ -- WD-40 Company (Nasdaq:WDFC) today reported net sales for the quarter ended August 31, 2013 of $93.5 million, an increase of 10% from the fourth quarter last fiscal year. Year-to-date net sales were $368.5 million, up 8% from the prior fiscal year.
Net income for the fourth quarter was $8.1 million, a decrease of 9% compared to the prior year fiscal quarter. Year-to-date net income was $39.8 million, an increase of 12% from the prior fiscal year.
Summary
Fourth quarter multi-purpose maintenance products sales, which include the WD-40®, 3-IN-ONE®, and BLUE WORKS® brands were $81.6 million, up 16% from the prior year fiscal quarter, and $320.9 million year-to-date, up 12% from the prior fiscal year. The multi-purpose maintenance products are considered a primary focus for the Company. Homecare and cleaning products sales, which include all other brands, were $11.9 million for the fourth quarter, down 16%, and were $47.6 million year-to-date, down 15%, both as compared to the prior fiscal year periods. The U.S. homecare and cleaning products are considered harvest brands providing healthy profit returns to the Company and are becoming a smaller part of the business as the multi-purpose maintenance products sales grow.
Americas segment sales in the fourth quarter were $47.3 million, up 1% compared to the fourth quarter last fiscal year and were $180.5 million year-to-date, up 2% compared to the prior fiscal year. The Europe, Middle East and Africa ("EMEA") segment sales in the fourth quarter were $35.9 million, up 25% and were $136.0 million year-to-date, up 16% compared to the same periods last fiscal year. Asia-Pacific segment sales in the fourth quarter were $10.3 million, up 10% and were $52.0 million year-to-date, up 7% compared to the same periods last fiscal year.
Diluted earnings per share were $0.53 in the fourth quarter, compared to $0.56 per share for the same quarter of the prior fiscal year. Year-to-date diluted earnings per share were $2.54 compared to $2.20 in the prior fiscal year.
"We have been celebrating our 60th anniversary and are pleased to report a record year for the company during this important milestone," said Garry Ridge, WD-40 Company president and chief executive officer. "Our tribes continued focus on our key strategic initiatives and thinking big about our future has paid off in spades with great results across all trading blocs. We continue to see ourselves as a growth company, and our performance supports that."
Net sales by segment as a percent of total net sales were as follows: for the Americas, 51% for the fourth quarter and 49% year-to-date; for EMEA, 38% for the fourth quarter and 37% year-to-date; and, for Asia-Pacific, 11% for the fourth quarter and 14% year-to-date.
"Our results throughout EMEA have continued to be strong and we expect that the sustainability of the economic recovery in that region will continue to provide positive results," Ridge said. "Our Asia Pacific business has grown steadily since 2009 and the preparations we have made in that region in the past year will support our continued growth. We had a record year in China and continue to focus on long-term opportunities there, but we do know there will be some volatility along the way due to promotional timing, the fluctuations of building distribution, shifting economic growth patterns and varying industrial activities."
Gross margin was 53.0% in the fourth quarter compared to 49.4% in the same quarter last fiscal year. Year-to-date, gross margin was 51.3%, compared to 49.2% in the prior fiscal year.
"We are pleased that our gross margin held up in the fourth quarter and are fortunate that many things fell in our corner this year," Ridge said. "During the year we saw favorable improvements in gross margin as a result of price increases, changes in our sales mix and foreign currency exchange rates, as well as lower input and other manufacturing costs stemming from our strategic initiatives."
Selling, general and administrative expenses were up 36% in the fourth quarter to $29.4 million and were up 17% year-to-date to $104.4 million as compared to the same periods last fiscal year. The company's cost of doing business increased in fiscal year 2013 primarily due to the Company achieving most of the metrics required to trigger the payout of bonuses.
Advertising and sales promotion expenses were up 10% in the fourth quarter to $6.8 million compared to the same period last fiscal year and were down 3% year-to-date to $24.8 million compared to last fiscal year.
The WD-40 Specialist® product line was launched in fiscal year 2012 and additional products were added to the product line during fiscal year 2013. Distribution of the WD-40 Specialist product line was also expanded into 22 additional countries during fiscal year 2013.
"During the year we saw growth of the WD-40 Multi-Use Product in all of our trading blocs and have been able to leverage our platform category approach with WD-40 Specialist to bring the power of the shield to more places on more products," Ridge said. "We have also been able to further enhance some of the infrastructure work our tribe has done as we grow distribution of WD-40 Specialist across the globe. We continue to maintain the homecare and cleaning products as harvest brands that continue to generate profits while we work to develop strategic alternatives for their future."
Dividend and Share Buy-Back
As previously announced, WD-40 Company's board of directors declared on Friday, October 4, 2013 the regular quarterly cash dividend $0.31 per share payable on October 31, 2013 to shareholders of record on October 21, 2013.
Share repurchases have been executed by the Company under both the $50.0 million and $60.0 million approved share buy-back plans. The $50.0 million plan has been fully utilized and the final $6.4 million in shares under the plan were purchased in the fourth quarter of fiscal year 2013. On June 18, 2013, the board of directors approved a new share buy-back plan, which authorizes the Company to acquire up to $60.0 million of its outstanding shares effective from August 1, 2013 through August 31, 2015. During the fourth quarter of 2013, WD-40 Company acquired $2.7 million in shares under this plan.
Fiscal Year 2014 Guidance
WD-40 Company expects fiscal year 2014 net sales of $383.3 million to $398.0 million and net income of $40.5 million to $42.8 million. We expect diluted earnings per share of $2.65 to $2.80 based on an estimated 15.3 million weighted average shares outstanding. Gross margin for the full year is expected to be close to 51%. We also expect advertising and promotion expenses of 6.5% to 7.5% of net sales. This guidance does not include any acquisitions or divestures, and assumes that foreign currency exchange rates will remain close to recent levels.
"Our business is solid and we see a bright future through a lens of evidence-based optimism," Ridge added. "We have built a solid base platform for growth, and our tribe continues to deliver results."
More detailed information will be available in WD-40 Company's Form 10-K which will be filed on October 22, 2013.
About WD-40 Company
WD-40 Company, with headquarters in San Diego, is a global consumer products company dedicated to delivering unique, high-value and easy-to-use solutions for a wide variety of maintenance needs of "doer" and "on-the-job" users by leveraging and building the brand fortress of the company. The company markets multi-purpose maintenance products – under the WD-40®, 3-IN-ONE® and BLUE WORKS® brand names. The company also markets homecare and cleaning brands: X-14® mildew stain remover and automatic toilet bowl cleaners, 2000 Flushes® automatic toilet bowl cleaners, Carpet Fresh® and No Vac® rug and room deodorizers, Spot Shot® aerosol and liquid carpet stain removers, 1001® household cleaners and rug and room deodorizers, and Lava® and Solvol® heavy-duty hand cleaners.
WD-40 Company markets its products in 187 countries worldwide and recorded sales of $368.5 million in fiscal year 2013. Additional information about WD-40 Company can be obtained online at http://www.wd40company.com.
Except for the historical information contained herein, this news release contains forward-looking statements concerning WD-40 Company's outlook for sales, earnings, dividends and other financial results. These statements are based on an assessment of a variety of factors, contingencies and uncertainties considered relevant by WD-40 Company. Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from the forward-looking statements, including the impact of commodity prices, the introduction of new product lines and fluctuating global market conditions, including foreign currency exchange rates, both in the United States and internationally. The company's expectations, beliefs and projections are expressed in good faith and are believed by the company to have a reasonable basis, but there can be no assurance that the company's expectations, beliefs or projections will be achieved or accomplished.
The risks and uncertainties are detailed from time to time in reports filed by WD-40 Company with the SEC, including Forms 8-K, 10-Q, and 10-K, and readers are urged to carefully review these and other documents.
WD-40 COMPANY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
August 31,
August 31,
2013
2012
Assets
Current assets:
Cash and cash equivalents
$
53,434
$
69,719
Short-term investments
37,516
1,033
Trade accounts receivable, less allowance for doubtful accounts of $540 and $391 at August 31, 2013 and 2012, respectively
56,878
55,491
Inventories
32,433
29,797
Current deferred tax assets, net
5,672
5,551
Other current assets
6,210
4,526
Total current assets
192,143
166,117
Property and equipment, net
8,535
9,063
Goodwill
95,236
95,318
Other intangible assets, net
24,292
27,685
Other assets
2,858
2,687
Total assets
$
323,064
$
300,870
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable
$
19,693
$
21,242
Accrued liabilities
16,562
16,492
Revolving credit facility
63,000
45,000
Accrued payroll and related expenses
17,244
5,904
Income taxes payable
1,146
807
Total current liabilities
117,645
89,445
Long-term deferred tax liabilities, net
24,011
24,007
Deferred and other long-term liabilities
1,901
1,956
Total liabilities
143,557
115,408
Shareholders' equity:
Common stock ? authorized 36,000,000 shares, $0.001 par value; 19,392,979 and 19,208,845 shares issued at August 31, 2013 and 2012, respectively; and 15,285,536 and 15,697,534 shares outstanding at August 31, 2013 and 2012, respectively
19
19
Additional paid-in capital
133,239
126,210
Retained earnings
214,034
193,265
Accumulated other comprehensive loss
(5,043)
(2,727)
Common stock held in treasury, at cost ? 4,107,443 and 3,511,311 shares at August 31, 2013 and 2012, respectively
(162,742)
(131,305)
Total shareholders' equity
179,507
185,462
Total liabilities and shareholders' equity
$
323,064
$
300,870
WD-40 COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended August 31,
Fiscal Year Ended August 31,
2013
2012
2013
2012
Net sales
$
93,469
$
84,851
$
368,548
$
342,784
Cost of products sold
43,943
42,932
179,385
174,302
Gross profit
49,526
41,919
189,163
168,482
Operating expenses:
Selling, general and administrative
29,431
21,638
104,378
88,918
Advertising and sales promotion
6,833
6,237
24,811
25,702
Amortization of definite-lived intangible assets
806
464
2,260
2,133
Impairment of definite-lived intangible assets
1,077
-
1,077
-
Total operating expenses
38,147
28,339
132,526
116,753
Income from operations
11,379
13,580
56,637
51,729
Other income (expense):
Interest income
144
79
506
261
Interest expense
(210)
(245)
(693)
(729)
Other (expense) income, net
(76)
(6)
417
(348)
Income before income taxes
11,237
13,408
56,867
50,913
Provision for income taxes
3,096
4,435
17,054
15,428
Net income
$
8,141
$
8,973
$
39,813
$
35,485
Earnings per common share:
Basic
$
0.53
$
0.57
$
2.55
$
2.22
Diluted
$
0.53
$
0.56
$
2.54
$
2.20
Shares used in per share calculations:
Basic
15,332
15,760
15,517
15,914
Diluted
15,431
15,905
15,619
16,046
WD-40 COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Fiscal Year Ended August 31,
2013
2012
Operating activities:
Net income
$
39,813
$
35,485
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
5,359
4,869
Impairment of definite-lived intangible assets
1,077
-
Net losses on sales and disposals of property and equipment
3
67
Deferred income tax
(1,004)
367
Excess tax benefits from settlements of stock-based equity awards
(850)
(671)
Stock-based compensation
2,453
2,769
Unrealized foreign currency exchange losses, net
1,113
2,112
Provision for bad debts
511
157
Changes in assets and liabilities:
Trade accounts receivable
(3,800)
226
Inventories
(2,829)
(12,347)
Other assets
(1,998)
(64)
Accounts payable and accrued liabilities
(886)
3,206
Accrued payroll and related expenses
10,362
(2,794)
Income taxes payable
2,284
1,412
Deferred and other long-term liabilities
(39)
(545)
Net cash provided by operating activities
51,569
34,249
Investing activities:
Purchases of property and equipment
(2,854)
(3,765)
Proceeds from sales of property and equipment
158
1,167
Purchases of short-term investments
(38,838)
(1,029)
Maturities of short-term investments
2,000
514
Net cash used in investing activities
(39,534)
(3,113)
Financing activities:
Repayments of long-term debt
-
(10,715)
Proceeds from revolving credit facility
18,000
114,550
Repayments of revolving credit facility
-
(69,550)
Dividends paid
(19,044)
(18,228)
Proceeds from issuance of common stock
4,791
7,030
Treasury stock purchases
(31,437)
(39,840)
Excess tax benefits from settlements of stock-based equity awards
850
671
Net cash used in financing activities
(26,840)
(16,082)
Effect of exchange rate changes on cash and cash equivalents
(1,480)
(1,728)
Net (decrease) increase in cash and cash equivalents
(16,285)
13,326
Cash and cash equivalents at beginning of period
69,719
56,393
Cash and cash equivalents at end of period
$
53,434
$
69,719
Fourth Quarter Fiscal 2013 Earnings Conference Call
GlobeNewswirePress Release: WD-40 Company – Thu, Oct 10, 2013 4:05 PM EDT..
SAN DIEGO, Oct. 10, 2013 (GLOBE NEWSWIRE) -- WD-40 Company (WDFC) has scheduled its quarterly earnings conference call to discuss fourth quarter financial results and business highlights for fiscal 2013. The call is scheduled for Thursday, October 17, 2013 at 2:00pm PDT.
In addition, the company may answer one or more questions concerning business and financial developments and trends and other business and financial matters affecting the company, some of the responses to which may contain information that has not been previously disclosed.
This call is being webcast by Thomson Reuters and can be accessed at WD-40 Company's web site at www.wd40company.com in the Investor Relations section. The quarterly earnings press release for the fourth quarter will cross the wire at 1:00pm PDT on October 17, 2013.
The webcast is also being distributed through the Thomson StreetEvents Network to both institutional and individual investors. Individual investors can listen to the call at www.earnings.com, Thomson's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson's password-protected event management site, StreetEvents (www.streetevents.com).
WD-40 Company, with headquarters in San Diego, is a global consumer products company dedicated to delivering unique, high-value and easy-to-use solutions for a wide variety of maintenance needs of "doer" and "on-the-job" users by leveraging and building the brand fortress of the company. The company markets multi-purpose maintenance products -under the WD-40(R), 3-IN-ONE(R), and BLUE WORKS(R) brand names. The company also markets homecare and cleaning brands: X-14(R) mildew stain remover and automatic toilet bowl cleaners, 2000 Flushes(R) automatic toilet bowl cleaners, Carpet Fresh(R) and No Vac(R) rug and room deodorizers, Spot Shot(R) aerosol and liquid carpet stain removers, 1001(R) household cleaners and rug and room deodorizers, and Lava(R) and Solvol(R) heavy-duty hand cleaners.
WD-40 Company markets its products in 187 countries worldwide and recorded sales of $343 million in fiscal year 2012.
.
.
Contact:.
.
To reserve a spot in our live conference call, please contact:
Maria M. Mitchell
Phone: 1-800-448-9340 Ext 1215
Tupperware Brands Corporation Announces Third Quarter 2013 Earnings Conference Call Webcast
GlobeNewswirePress Release: Tupperware Brands Corporation – Mon, Sep 23, 2013 1:00 PM EDT
ORLANDO, Fla., Sept. 23, 2013 (GLOBE NEWSWIRE) -- Tupperware Brands Corporation (TUP) will release its third quarter 2013 earnings results on Wednesday, October 23, 2013, prior to the opening of the market, followed by its earnings release conference call at 8:30 a.m. Eastern Time (7:30 a.m. Central Time). To participate in the call, dial 678-905-9434, Code: 69111317.
This call is being webcast by NASDAQ OMX and can be accessed at www.tupperwarebrands.com.
The webcast is also being distributed through third party distribution channels, including the StreetEvents Network operated by Thomson Reuters (Markets) LLC and its affiliates.
Tupperware Brands Corporation is a portfolio of global direct selling companies, selling innovative, premium products across multiple brands and categories through an independent sales force of 2.8 million. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products for consumers through the Armand Dupree, Avroy Shlain, BeautiControl, Fuller Cosmetics, NaturCare, Nutrimetics and Nuvo brands.
Contact:
Media Contact
Teresa Burchfield
TeresaBurchfield@tupperware.com
407-826-4475
KKR & Co. L.P. to Announce Third Quarter 2013 Results
Business WirePress Release: Kohlberg Kravis Roberts & Co. L.P. – 3 hours ago
KKR & Co. L.P. (KKR) announced today that it plans to release its financial results for the third quarter 2013 on Thursday, October 24, 2013, before the opening of trading on the New York Stock Exchange.
A conference call to discuss KKR’s financial results will be held on Thursday, October 24, 2013 at 11:00 a.m. EDT. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Center section of KKR’s website at http://ir.kkr.com/kkr_ir/kkr_events.cfm.
A replay of the live broadcast will be available on KKR’s website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 76308413, beginning approximately two hours after the broadcast.
ABOUT KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $83.5 billion in assets under management as of June 30, 2013. With offices around the world, including Beijing, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (KKR) and "KKR", as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information, please visit KKR's website at www.kkr.com.
Contact:
Investor Relations:
Craig Larson
Kohlberg Kravis Roberts & Co. L.P.
Tel: +1 (877) 610-4910 (U.S.) / +1 (212) 230-9410
investor-relations@kkr.com
or
Media Contact:
Kristi Huller
Kohlberg Kravis Roberts & Co. L.P.
Tel: + 1 (212) 750-8300
media@kkr.com
Travelzoo Q3 2013 Earnings Conference Call Thursday, October 17 at 11:00 AM ET
Business WirePress Release: Travelzoo Inc. – Thu, Oct 10, 2013 5:00 PM EDT
Travelzoo Inc. (TZOO):
WHAT: Travelzoo Inc. will host a conference call to discuss the Company’s financial results for the third quarter ended September 30, 2013. Travelzoo Inc. will issue a press release reporting its results before the market opens on October 17, 2013.
WHEN Thursday, October 17, 2013 at 11:00 AM ET
HOW:
A live webcast of Travelzoo’s Q3 2013 earnings conference call can be accessed at http://ir.travelzoo.com/earnings.cfm. The webcast will be archived within 24 hours of the end of the call and will be available through the same link.
CONTACT: Investor Relations
Glen Ceremony, CFO, Travelzoo Inc.
gceremony@travelzoo.com
About Travelzoo
Travelzoo Inc. is a global Internet media company. With more than 26 million subscribers in North America, Europe, and Asia Pacific and 25 offices worldwide, Travelzoo® publishes deals from more than 2,000 travel, entertainment and local companies. Travelzoo Deal Experts review offers to find the best deals and confirm their true value. In Asia Pacific, Travelzoo is independently owned and operated by Travelzoo (Asia) Ltd. and Travelzoo Japan K.K. under a license agreement with Travelzoo Inc.
Certain statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements may include, but are not limited to, statements about our plans, objectives, expectations, prospects and intentions, markets in which we participate and other statements contained in this press release that are not historical facts. When used in this press release, the words “expect”, “predict”, “project”, “anticipate”, “believe”, “estimate”, “intend”, “plan”, “seek” and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including changes in our plans, objectives, expectations, prospects and intentions and other factors discussed in our filings with the SEC. We cannot guarantee any future levels of activity, performance or achievements. Travelzoo undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this press release. Travelzoo and Top 20 are registered trademarks of Travelzoo. All other names are trademarks and/or registered trademarks of their respective owners.
Contact:
Media:
Travelzoo, North America
Christie McConnell, 212-484-4912
Newell Rubbermaid To Webcast Third Quarter 2013 Earnings Results
Business WirePress Release: Newell Rubbermaid – 1 hour 44 minutes ago
Newell Rubbermaid (NWL) today announced its third quarter 2013 earnings results will be released Friday, October 25, prior to market open, followed by a live webcast at 10:00 a.m. ET. To listen to the webcast, please visit Events & Presentations in the Investor Relations section of Newell Rubbermaid’s Web site at www.newellrubbermaid.com. The live webcast will be recorded and made available for replay.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of consumer and commercial products with 2012 sales of approximately $5.6 billion and a strong portfolio of leading brands, including Sharpie®, Paper Mate®, Rubbermaid Commercial Products®, Irwin®, Lenox®, Parker®, Waterman®, Rubbermaid®, Levolor®, Calphalon®, Goody®, Graco®, Aprica® and Dymo®. As part of the company’s Growth Game Plan, Newell Rubbermaid is making sharper portfolio choices and investing in new marketing and innovation to accelerate performance.
This press release and additional information about Newell Rubbermaid are available on the company’s Web site, www.newellrubbermaid.com.
Contact:
Newell Rubbermaid
Nancy O’Donnell, 770-418-7723
Vice President, Investor Relations
or
David Doolittle, 770-418-7519
Vice President, Global Communications
KKR to Acquire The Crosby Group and Acco Material Handling Solutions
Business WirePress Release: KKR – 44 minutes ago..
Global investment firm KKR announced today the signing of a definitive agreement to acquire The Crosby Group (“Crosby”) and Acco Material Handling Solutions (“Acco”) from Melrose Industries PLC for approximately $1.0 billion.
With roots dating back to 1885, Crosby is a leading global provider of highly engineered solutions for lifting and rigging applications across the oil and gas, construction, mining and industrial sectors. Headquartered in Tulsa, Oklahoma, Crosby has over 1,300 employees globally and is known for its iconic brands, including Crosby, McKissick, National and Lebus.
Acco, headquartered in York, Pennsylvania, has 130 employees and provides custom-built specialty material handling equipment, including a full line of hoists, industrial cranes, monorails, carts and trailers that are sold under the well-recognized Louden, Wright and Nutting brands.
Pete Stavros, a Member of KKR and Head of the Industrials investing team, stated: “Crosby and Acco have long and distinguished histories of providing distributors and end customers with the highest quality products and customer support to meet their lifting and rigging needs. We are excited to partner with the many dedicated employees of both companies and look forward to working together to begin a new chapter of growth and global expansion.”
The transaction is subject to customary regulatory approvals and is expected to close in the fourth quarter of 2013.
Rothschild and Simmons & Company International served as lead financial and M&A advisors to KKR, and Morgan Stanley, UBS Investment Bank, and RBC Capital Markets also served as M&A advisors. Fully committed financing will be provided by Morgan Stanley, UBS Investment Bank, and KKR Capital Markets. Kirkland & Ellis LLP served as legal counsel to KKR.
About KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $83.5 billion in assets under management as of June 30, 2013. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with fund investors through its client relationships and capital markets platform. KKR & Co L.P. is publicly traded on the New York Stock Exchange (KKR), and "KKR," as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate.
About the Crosby Group and Acco Material Handling Solutions
Crosby and Acco are global market leaders in the design, manufacture and marketing of highly-engineered solutions and accessories used in lifting, rigging and material handling applications. Headquartered in Tulsa, OK, Crosby manufactures lifting and rigging products, such as shackles, blocks, sheaves, fittings, hooks, swivels, and clamps under leading brands, which include Crosby, McKissick, National and Lebus. Headquartered in York, PA, Acco manufactures specialty material handling solutions under the well-recognized Louden, Wright and Nutting brands.
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Contact:.
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Media:
New York
KKR
Kristi Huller, 212-230-9722
P&G to Webcast Discussion of First Quarter 2013/14 Earnings Results on October 25
Business WirePress Release: Procter & Gamble – Fri, Oct 4, 2013
The Procter & Gamble Company (PG) will webcast a discussion of its first quarter earnings results on Friday, October 25, 2013 beginning at 8:30 a.m. ET.
Media and investors may access the live audio webcast at www.pg.com/investors, beginning at 8:30 a.m. ET. The webcast will also be available for replay.
About Procter & Gamble
P&G serves approximately 4.8 billion people around the world with its brands. The Company has one of the strongest portfolios of trusted, quality, leadership brands, including Ace®, Always®, Ambi Pur®, Ariel®, Bounty®, Charmin®, Crest®, Dawn®, Downy®, Duracell®, Fairy®, Febreze®, Fusion®, Gain®, Gillette®, Head & Shoulders®, Iams®, Lenor®, Mach3®, Olay®, Oral-B®, Pampers®, Pantene®, Prestobarba®, SK-II®, Tide®, Vicks®, Wella®, and Whisper®. The P&G community includes operations in approximately 70 countries worldwide. Please visit http://www.pg.com for the latest news and in-depth information about P&G and its brands.
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Procter & Gamble
Mandy Wagner, 513-983-6628
P&G Corporate Media Relations
wagner.aj@pg.com
Clorox Announces Oct. 31 Webcast of First-Quarter Fiscal Year 2014 Results
MarketwiredPress Release: The Clorox Company – 2 hours 2 minutes ago..OAKLAND, CA--(Marketwired - Oct 7, 2013) - The Clorox Company (NYSE: CLX) today announced its plan to host a live audio webcast of a discussion with the investment community about the company's first-quarter fiscal year 2014 results, on Thursday, Oct. 31. The webcast is scheduled to begin at 10:30 a.m. PT (1:30 p.m. ET) and can be accessed at Clorox investor events. A replay of the webcast will be available for two weeks on the company's website.
The Clorox Company
The Clorox Company is a leading multinational manufacturer and marketer of consumer and professional products with approximately 8,400 employees and fiscal year 2013 revenues of $5.6 billion. Clorox markets some of the most trusted and recognized brand names, including its namesake bleach and cleaning products, Clorox Healthcare™, HealthLink®, Aplicare® and Dispatch® products, Green Works® naturally derived products, Pine-Sol® cleaners, Poett® home care products, Fresh Step® cat litter, Glad® bags, wraps and containers, Kingsford® charcoal, Hidden Valley® and KC Masterpiece® dressings and sauces, Brita® water-filtration products, and Burt's Bees® and gud® natural personal care products. Nearly 90 percent of the company's brands hold the No. 1 or No. 2 market share positions in their categories. Clorox's commitment to corporate responsibility includes making a positive difference in its communities. In fiscal year 2013, The Clorox Company Foundation awarded about $4 million in cash grants, and Clorox made product donations valued at nearly $15 million. For more information, visit TheCloroxCompany.com.
Newell Rubbermaid Appoints Lead Creative and Media Agencies to Drive More Impactful Global Marketing
Consolidates agencies to step-change effectiveness and efficiency
PR NewswirePress Release: Newell Rubbermaid – 2 hours 1 minute ago
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NWL 27.51 -0.15
ATLANTA, Oct. 3, 2013 /PRNewswire/ -- Newell Rubbermaid (NWL) today announced a significant step in making bigger, more strategic, global investments behind its brands with the consolidation of scores of local agencies worldwide into one lead creative partner and one lead media-buying partner. The two agencies will help oversee Newell Rubbermaid's global advertising and promotion investment.
Bartle Bogle Hegarty (BBH) has been selected as lead creative agency, which will have full responsibility to deliver strategy, creative execution and implementation (excluding media) in all brand-related communication channels. Part of the Publicis Groupe, BBH was named 2013 "Mid-Sized Agency of the Year" by the O'Toole Awards and is one of the most awarded advertising agencies in the world. BBH works with leading brands including Johnnie Walker, British Airways, KFC, Audi, Barclays Bank, Westin Hotels & Resorts, and Axe. The global assignment will be led by BBH New York, supported by the entire BBH global agency network including offices in London, Sao Paulo and Shanghai.
PHD has been selected as lead media agency, which will help with overall strategic communication planning and be responsible for all media placements across all channels. Originally founded as the world's first planning-led media agency, PHD, part of the Omnicom Media Group, was named Adweek's "Global Media Agency of the Year" in 2012 and is a proven innovator in communications planning and buying. PHD's clients include Mondelez, Porsche, Bentley, ANZ, GlaxoSmithKline, Hyatt and Canon.
"For the first time, we are aligning all our brands and categories behind one set of agency partners to drive big ideas that create a strong point of difference for consumers," said Richard Davies, Chief Marketing and Insights Officer of Newell Rubbermaid. "BBH and PHD are the best in the business at what they do. With their partnership, we now have the power to achieve much greater scale, reach and impact as we invest behind growing our brands worldwide."
"Our ambition is to push the limits of what's possible for our brands," said Mark Tarchetti, Newell Rubbermaid's Chief Development Officer. "The Growth Game Plan strategy promises to accelerate growth through sharper portfolio choices and new capabilities. Our progress is becoming an increasing reality in important steps like a new state of the art design center that will open next year, investments in e-commerce and innovation, and the appointment of global creative and media agencies. These moves allow us to step-change quality while taking all the efficiencies that come with scale. Our momentum is increasingly visible in the marketplace as we make new A&P investments that are unprecedented in Newell Rubbermaid's history, and build an even stronger 2014 plan."
The new agency relationships are effective Oct. 1, with transition work beginning immediately to ensure integrated teams are fully operational by the beginning of the year.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of consumer and commercial products with 2012 sales of approximately $5.6 billion and a strong portfolio of leading brands, including Sharpie®, Paper Mate®, Rubbermaid Commercial Products®, Irwin®, Lenox®, Parker®, Waterman®, Rubbermaid®, Levolor®, Calphalon®, Goody®, Graco®, Aprica® and Dymo®. As part of the company's Growth Game Plan, Newell Rubbermaid is making sharper portfolio choices and investing in new marketing and innovation to accelerate performance.
This press release and additional information about Newell Rubbermaid are available on the company's Web site, www.newellrubbermaid.com.
Gregory L. Probert Appointed Chief Executive Officer of Nature's Sunshine Products
GlobeNewswirePress Release: Nature's Sunshine Products, Inc. – 5 hours ago
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NATR 19.17 -0.20
LEHI, Utah, Oct. 2, 2013 (GLOBE NEWSWIRE) -- Nature's Sunshine Products, Inc. (NATR), a leading natural health and wellness company engaged in the manufacture and direct selling of nutritional and personal care products, today announced that its Board of Directors has appointed Gregory L. Probert as Chief Executive Officer. Mr. Probert will continue as Chairman of the Board. Willem Mesdag, who has served on the board since 2009 and was previously the chair of the Audit Committee, will continue as Lead Independent Director.
Mr. Probert has led the Company as Interim Chief Executive Officer since April 1, 2013. Additionally, he has served as Executive Chairman of the Board since January 2013 and as Executive Vice Chairman of the Board since June 2011. Prior to his election as Executive Vice Chairman, Mr. Probert was an independent consultant to the Company since 2010. Previously, he was Chairman of the Board and Chief Executive Officer of Penta Water Company, President and Chief Operating Officer of Herbalife International of America, Chief Executive Officer of DMX Music and Executive Vice President of Worldwide Home Entertainment at the Walt Disney Company.
"Greg provides the vision, leadership and experience necessary to guide Nature's Sunshine Products through its next phase of growth," said Kristine F. Hughes, Co-Founder and Vice Chairman of the Board. "He is extremely knowledgeable about our company and has guided the formation of our world class management team, aligned messaging among our Distributor and employee base, developed long term growth strategies and is building the infrastructure upon which we can grow in the years ahead." Ms. Hughes continued, "The Board is confident Greg is the right person at the right time to lead Nature's Sunshine Products into its next phase of profitable growth."
"The opportunities to drive growth and continue to improve operational excellence at Nature's Sunshine Products are exciting," said Gregory L. Probert, Chairman and Chief Executive Officer. "Our best-in-class product lines and reputation for the highest quality products sold through our multi-faceted Distributor base enables us to help improve the lives of our customers and Distributors around the globe," continued Mr. Probert. "Our ongoing investments in the business positions us well to capitalize on the expanding global opportunity in health and wellness and I look forward to continuing to build upon our history of helping people live healthier and happier lives."
About Nature's Sunshine Products
Nature's Sunshine Products (NATR), a leading natural health and wellness company, markets and distributes nutritional and personal care products through a global direct sales force of over 340,000 active independent Managers, Distributors and customers in more than 40 countries. Nature's Sunshine manufactures most of its products through its own state-of-the-art facilities to ensure its products continue to set the standard for the highest quality, safety and efficacy on the market today. The Company has three reportable business segments that are divided based on the characteristics of their Distributor base, similarities in compensation plans, as well as the internal organization of NSP's officers and their responsibilities (NSP Americas, Asia Pacific and Europe; NSP Russia, Central and Eastern Europe; and Synergy WorldWide). The Company also supports health and wellness for children around the world through its partnership with the Little Heroes Foundation. Additional information about the Company can be obtained at its website, www.natr.com.
Contact:
Steve M. Bunker
Chief Financial Officer
Nature's Sunshine Products, Inc.
Lehi, Utah 84043
(801) 341-7303
Panasonic and KKR Agree to Panasonic Healthcare Share Purchase
Companies to form joint holding company
Business WirePress Release: Kohlberg Kravis Roberts & Co. L.P. – 18 hours ago
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KKR 20.89 +0.29
TOKYO & NEW YORK--(BUSINESS WIRE)--
Panasonic Corporation (“Panasonic”) and Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, "KKR") today announced the signing of a share purchase agreement and a shareholders’ agreement under which Panasonic and KKR will become joint partners of Panasonic Healthcare Co., Ltd. (“Panasonic Healthcare”).
Based on today’s agreements, PHC Holdings Co, Ltd. (“PHCHD"), which is wholly-owned by KKR investment funds, will purchase all outstanding shares of Panasonic Healthcare, including its related intellectual property and assets, for an equity value of approximately JPY 165 billion (approximately US$ 1.67 billion at the exchange rate of US$1=JPY99). The transaction will be followed by a third party share allocation by PHCHD, after which KKR will own 80% of outstanding shares of PHCHD and Panasonic will own 20%. Panasonic and KKR will cooperate in the management of Panasonic Healthcare.
Panasonic Healthcare is a comprehensive healthcare company focusing on three core businesses—In Vitro Diagnostics, Medicom, and Biomedical. Panasonic Healthcare’s In Vitro Diagnostics business has a leading global market share in the manufacture and sale of blood glucose monitoring meters and sensors for diabetics. Its Medicom business has the top share in Japan in medical receipt computers, electronic health record systems and other IT equipment for medical clinics, while its Biomedical business has a leading market share in Japan and overseas in biomedical laboratory equipment including CO2 incubators and ultra-low temperature freezers.
Panasonic and KKR will leverage their respective business resources, including their healthcare industry knowledge, technology, and specialist expertise, as well as their global healthcare industry investment experience and network, to together aim for further growth of Panasonic Healthcare.
Panasonic President, Kazuhiro Tsuga, said, “As previously announced in Panasonic’s New Midterm Management Plan, we have been seeking a partner who shares our vision for achieving a step change in the growth and evolution of Panasonic Healthcare. Today, we are pleased to have reached an agreement with KKR to acquire Panasonic Healthcare. We understand KKR has been actively investing in the expanding healthcare sector, and we highly respect KKR’s industry expertise and its capability to provide the necessary growth capital and operational know-how, in preparation for the future development of Panasonic Healthcare in the global healthcare industry. Through our partnership, Panasonic will work with KKR to support the growth of Panasonic Healthcare, which will continue to be a member of the Panasonic Group. At the same time, we believe that partnering with KKR will also allow us to learn from KKR’s global operational and business management expertise as we pursue the next stage in growth for Panasonic.”
Commenting on the agreements, KKR’s Co-Founder and Co-CEO Henry Kravis said, “Panasonic Healthcare has excellent market positions and high-level technical capabilities, and we believe it has significant growth potential. Panasonic Healthcare’s experienced management team and employees, our equity partner Panasonic, and KKR all share a common goal of working together as partners over the long term to support further growth of Panasonic Healthcare. Japan is a very important and attractive market for KKR, and our experienced team on the ground in Japan looks forward to leveraging KKR’s global expertise and experience to make this a highly successful partnership.”
Panasonic Healthcare President Kenji Yamane said, “KKR has built long-term relationships with its portfolio companies around the world, and I am delighted for their support as Panasonic’s new partner for Panasonic Healthcare. Looking ahead, we aim to accelerate growth by building out our global sales channels to major overseas healthcare facilities, aided by KKR’s overseas network, and delivering to customers around the world an enhanced range of products and services. We also welcome the continued support of Panasonic as an important shareholder in this partnership.”
Subject to approval by the relevant authorities and other customary closing conditions the above agreements are expected to be completed by the end of March 2014.
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About Panasonic Corporation
Panasonic Corporation is a worldwide leader in the development and engineering of electronic technologies and solutions for customers in residential, non-residential, mobility and personal applications. Since its founding in 1918, the company has expanded globally and now operates over 500 consolidated companies worldwide, recording consolidated net sales of 7.30 trillion yen for the year ended March 31, 2013. Committed to pursuing new value through innovation across divisional lines, the company strives to create a better life and a better world for its customers. For more information about Panasonic, please visit the company's website at http://panasonic.net/.
About Panasonic Healthcare
Established in 1969, Panasonic Healthcare is a Panasonic group company involved in developing, manufacturing, selling and servicing medical equipment. It seeks to strengthen its core businesses, In Vitro Diagnostics including self-monitoring of blood glucose systems, its Medicom businesses involved in medical IT businesses and its life sciences based Biomedical business and to continue to pursue an important role in the provision of optimal healthcare for all. For further information on Panasonic Healthcare please visit http://panasonic.net/corporate/segments/phc/.
About KKR
KKR was founded in 1976 and is led by Henry Kravis and George Roberts. KKR is a leading global investment firm with $83.5 billion in assets under management as of June 30, 2013. KKR has offices located worldwide and manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (KKR), and “KKR,” as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. For additional information on KKR, please visit KKR's website at www.kkr.com.
Contact:
Media Contacts:
Panasonic / Panasonic Healthcare
Tokyo Public Relations Office
Tel: +81 3 3574 5664 Fax: +81 3 3574 5699
or
Panasonic News Bureau
Tel: +81 3 3542 6205 Fax: +81 3 3542 9018
or
KKR Asia Pacific
Steven Okun, +65 6922 5800
Steven.Okun@kkr.com
or
KKR Japan
Ashton Consulting
+81 3 5425 7220
KKRJapanPR@ashton.jp
or
KKR New York
Kristi Huller, +1 212 230 9722
Kristi.Huller@kkr.com
SIFCO Industries, Inc. Declares Cash Dividend
Business WirePress Release: SIFCO Industries, Inc. – 4 hours ago
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SIF 19.00 +0.17
CLEVELAND--(BUSINESS WIRE)--
The Board of Directors of SIFCO Industries, Inc. (NYSE MKT:SIF) declared on September 26, 2013 a special cash dividend of $0.20 per common share, payable November 21, 2013 to shareholders of record at the close of business on November 7, 2013.
Forward-Looking Language
Certain statements contained in this press release are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to financial results and plans for future business development activities, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions, competition and other uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings.
The Company’s Form 10-Q for the quarter ended June 30, 2013 can be accessed through its website: www.sifco.com, or on the Securities and Exchange Commission’s website: www.sec.gov.
SIFCO Industries, Inc. is engaged in a variety of metalworking services and produces products primarily for the aerospace and energy industries. The services include forging, heat-treating, coating, and machining. In May 2013, SIFCO Industries was recognized at the 2013 Leading EDGE Awards. This award was developed by the Entrepreneurs EDGE to recognize value-creating, mid-sized companies in the Northeast Ohio region.
Contact:
SIFCO Industries, Inc.
Catherine M. Kramer, 216-881-8600
Or visit our home page: www.sifco.com
AZZ incorporated Reports Financial Results for the Second Quarter and Year-To-Date of Fiscal Year 2014, and Declares Cash Dividend
PR NewswirePress Release: AZZ incorporated – 4 hours ago
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FORT WORTH, Texas, Sept. 27, 2013 /PRNewswire/ -- AZZ incorporated (AZZ), a global provider of electrical products and services and a provider of galvanizing services, today announced unaudited financial results for the three and six-month periods ended August 31, 2013. Revenues for the second quarter were $189.8 million compared to $153.4 million for the same quarter last year, an increase of 24 percent. Net income for the second quarter was $16.4 million, or $0.64 per diluted share, compared to net income of $15.9 million, or $0.62 per diluted share, in last year's second fiscal quarter.
For the six-month period, the Company reported revenues of $373 million compared to $280.5 million for the comparable period last year, an increase of 33 percent. Net income for the six months was $30.9 million, or $1.20 per diluted share, compared to $31.9 million, or $1.25 per diluted share in the comparable period of last year.
Non-recurring expenses and income items recorded during the second quarter are related to the fire at our Joliet facility. While we expect to receive substantial additional insurance proceeds under our insurance policy in the future, the ultimate amount that we collect has not yet been determined. Any future recoveries under this policy will be recognized in the period in which proceeds are approved by our insurance carrier. Included with the financial tables is a reconciliation of these non-recurring items for the compared periods.
Our E&I products backlog at the end of our second quarter of fiscal 2014 was $211.4 million, compared to $213.1 million at the end of the second quarter of fiscal 2013 and $221.7 million on February 28, 2013. Incoming orders for the second quarter were $180.7 million while shipments for the quarter totaled $189.7 million, resulting in a book to ship ratio of 96 percent. Of our E&I products backlog of $211.4 million, 35 percent is to be delivered outside of the U.S.
Revenues for the Electrical and Industrial Products and Services Segment for the second quarter of fiscal 2014 were $104.1 million as compared to $66.5 million for the same quarter last year, an increase of 57 percent. Operating income for the segment increased 15 percent to $10.7 million compared to $9.3 million in the same period last year. Operating margins for the second quarter were 10.3 percent for the quarter as compared to 14 percent in the prior year period. NLI, acquired June 1, 2012 and WSI, acquired April 1, 2013, contributed $55.6 million in revenues and $1.7 million in operating income. Excluding NLI and WSI, margins for the quarter would have been 18.6 percent. For the first six months of fiscal 2014, revenues increased 80 percent to $200.6 million and operating income increased 47 percent to $23.8 million compared to $111.2 million and $16.1 million respectively, for the first six months of the prior year. Operating margins for the first six months were 11.9 percent as compared to 14.5 percent in the prior year period. NLI, acquired June 1, 2012 and WSI, acquired April 1, 2013, contributed $114.6 million in revenues and $9.2 million in operating income. Excluding NLI and WSI, year to date margins would have been 16.9 percent.
Revenues for the Company's Galvanizing Service Segment for the second quarter were $85.6 million, compared to the $86.9 million in the same period last year. Operating income was $26.2 million as compared to $23.5 million in the prior period, an increase of 11 percent. Operating margins for the second quarter were 30.6 percent, compared to 27 percent in the same period last year. For the first six months of fiscal 2014, revenues increased 2 percent to $172.4 million and operating income increased 12 percent to $51.9 million compared to $169.3 million and $46.2 million respectively, for the first six months of the prior year. Year to date operating margins were 30 percent compared to 27 percent in the prior year period. The Galvanizing Service Segment recorded net non-operating income and expense items during the second quarter of fiscal 2014 in the amount of $1.9 million resulting from the fire at the Joliet galvanizing facility. The losses at the Joliet facility are expected to continue to be offset with insurance proceeds for business interruption in future quarters, once the claim is settled. Pro forma operating income without the non-operating items would have been $24.4 million for the quarter resulting in an operating margin for the segment of 28.4 percent. The Joliet facility is expected to re-open in October 2013.
David H. Dingus, president and chief executive officer of AZZ incorporated, commented, "Despite the continued sluggish economic conditions in our served markets, combined with significant project delays, we anticipate that the net earnings for fiscal 2014 will reflect an improvement over fiscal 2013. We continue to face headwinds in both our operating segments in fiscal 2014 tied to the deferral of capital and maintenance spending by our customers. With the acquisitions of both WSI and NLI, we have reoriented our business to capture benefits from maintenance spending on existing infrastructure required in the power generation, oil & gas and industrial markets. Our businesses are well positioned to capture a meaningful share of this spending which we expect to occur in fiscal 2015. We remain very bullish on our opportunities and look forward to seeing those come to fruition in fiscal 2015 and beyond."
Based upon the evaluation of information currently available to management, we are revising our fiscal year 2014 guidance for revenues to be in the range of $780 to $810 million. The continuing delay in new construction for domestic and international nuclear power projects and the delayed start for the petrochemical renaissance in the Gulf Coast have resulted in a significant portion of our backlog in the Electrical and Industrial Products and Services segment, as well as projected volume in the Galvanizing segment, to move out of the second half of this fiscal year. Our earnings are anticipated to be in the range of $2.45 and $2.65 per diluted share. Our guidance reflects the acquisition of WSI during the last eleven months of fiscal 2014. Our third quarter guidance for revenues will be in the range of $210 million to $230 million and our earnings are anticipated to be in the range of $0.65 to $0.75 per diluted share. The guidance does not reflect any additional gains which may be realized from the insurance settlement associated with the fire loss at the Company's Joliet facility. Any gains will be recognized in the period in which it is received.
Additionally, the Company announced that the Board of Directors, at its regularly scheduled quarterly meeting, declared a 14 cent per share cash dividend on the Company's common stock outstanding. The dividend will be paid at the close of business on October 25, 2013, to shareholders of record on October 11, 2013.
AZZ incorporated will conduct a conference call to discuss financial results for the second quarter of fiscal year 2014 at 11:00 A.M. ET on Friday, September 27, 2013. Interested parties can access the conference call by dialing (877) 317-6789 or (412) 317-6789 (international). The call will be web cast via the Internet at www.azz.com/azzinvest.htm. A replay of the call will be available for three days at (877) 344-7529 or (412) 317-0088 (international), confirmation #10033514, or for 30 days at www.azz.com/azzinvest.htm.
AZZ incorporated is a global provider of specialty electrical equipment and highly engineered services to the power generation, transmission, distributions, and industrial markets as well as a leading provider of hot dip galvanizing services to the North American steel fabrication market.
Certain statements herein about our expectations of future events or results constitute forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by terminology such as, "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Such forward-looking statements are based on currently available competitive, financial and economic data and management's views and assumptions regarding future events. Such forward-looking statements are inherently uncertain, and investors must recognize that actual results may differ from those expressed or implied in the forward-looking statements. This release may contain forward-looking statements that involve risks and uncertainties including, but not limited to, changes in customer demand and response to products and services offered by AZZ, including demand by the power generation markets, electrical transmission and distribution markets, the industrial markets, and the hot dip galvanizing markets; prices and raw material cost, including zinc and natural gas which are used in the hot dip galvanizing process; changes in the economic conditions of the various markets that AZZ serves, foreign and domestic, customer request delays of shipments, acquisition opportunities, currency exchange rates, adequacy of financing, and availability of experienced management employees to implement AZZ's growth strategy. AZZ has provided additional information regarding risks associated with the business in AZZ's Annual Report on Form 10-K for the fiscal year ended February 28, 2013 and other filings with the SEC, available for viewing on AZZ's website at www.azz.com and on the SEC's website at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. These statements are based on information as of the date hereof and AZZ assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.
---Financial tables on the following page---
AZZ incorporated
Condensed Consolidated Statement of Income
(in thousands except per share amounts)
Three Months Ended
Six Months Ended
August 31, 2013
August 31, 2012
August 31, 2013
August 31, 2012
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Net sales
$189,782
$153,385
$372,957
$280,528
Costs and Expenses:
Cost of Sales
133,877
110,073
266,337
199,351
Selling, General and Administrative
26,179
15,768
52,865
31,124
Interest Expense
4,651
3,228
9,129
6,568
Net (Gain) Loss on Sales or
Insurance Settlement of Property,
Plant and Equipment
(859)
17
(883)
(5,952)
Other (Income)
117
(294)
(3,710)
(246)
$163,965
$128,792
$323,738
$230,845
Income before income taxes
25,817
24,593
49,219
49,683
Income Tax Expense
9,454
8,720
18,309
17,824
Net income
$16,363
$15,873
$30,910
$31,859
Net income per share
Basic
$0.64
$0.63
$1.21
$1.26
Diluted
$0.64
$0.62
$1.20
$1.25
Diluted average shares outstanding
25,664
25,509
25,665
25,481
Segment Reporting
(in thousands)
Three Months Ended
Six Months Ended
August 31, 2013
August 31, 2012
August 31, 2013
August 31, 2012
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Net Sales:
Electrical and Industrial Products
$104,134
$66,530
$200,600
$111,212
Galvanizing Services
85,648
86,855
172,357
169,316
$189,782
$153,385
$372,957
$280,528
Segment Operating Income :
Electrical and Industrial Products
$10,733
$9,339
$23,781
$16,135
Galvanizing Services
26,245
23,549
51,943
46,182
Total Segment Operating Income
$36,978
$32,888
$75,724
$62,317
Condensed Consolidated Balance Sheet
(in thousands)
August 31, 2013
February 28, 2013
(unaudited)
(audited)
Assets:
Current assets
$318,683
$262,432
Net property, plant and equipment
193,265
154,476
Other assets, net
471,868
277,297
Total assets
$983,816
$694,205
Liabilities and shareholders' equity:
Current liabilities
$139,004
$118,899
Long term debt due after one year
434,455
196,429
Other liabilities
52,031
44,943
Shareholders' equity
358,326
333,934
Total liabilities and shareholders' equity
$983,816
$694,205
Condensed Consolidated Statements of Cash Flows
(in thousands)
Six Months Ended
August 31, 2013
August 31, 2012
(unaudited)
(unaudited)
Net cash provided by (used in) operating activities
$55,183
$30,165
Net cash provided by (used in) investing activities
($298,661)
($81,109)
Net cash provided by (used in) financing activities
$229,950
($23,664)
Effect of exchange rate changes on cash
($86)
$ 21
Net increase (decrease) in cash and cash equivalents
($13,614)
($74,587)
Cash and cash equivalents at beginning of period
$55,598
$143,303
Cash and cash equivalents at end of period
$41,984
$68,716
AZZ incorporated
Non-GAAP Disclosure
Adjusted Earning and Adjusted Earnings Per Share
Adjusted Earnings and Adjusted Earnings Per Share
In addition to reporting financial results in accordance with GAAP, the Company has provided adjusted earnings and adjusted earnings per share, which are non-GAAP measures. Management believes that the presentation of these measures provides investors with greater transparency comparison of operating results across a broad spectrum of companies , which provides a more complete understanding of the Company's financial performance, competitive position and prospects for the future. Management also believes that investors regularly rely on non-GAAP financial measures, such as adjusted earnings and adjusted earnings per share, to assess operating performance and that such measures may highlight trends in the Company's business that may not otherwise be apparent when relying on financial measure calculated in accordance with GAAP.
The following table provides a reconciliation for the three and six months ended August 31, 2013 and 2012 between net income and diluted earnings per share calculated in accordance with GAAP to adjusted earnings and adjusted per share, respectively, which are shown net of tax (dollars in thousands, except per share data):
Three Months Ended August 31,
2013
2012
(in thousands)
Per Diluted Share
Per Diluted Share
Net income and diluted earnings per share
$16,363
$0.64
$15,873
$0.62
Adjustments (net of tax)
Joliet Facility Fire Operating Loss
$524
$0.02
$764
$0.03
Law Suit Settlement
-
-
-
-
Acquisition Related Expenditures
$8
$0.00
$48
$0.00
Joliet Facility Fire-Gain from Insurance Proceeds
$(519)
$ (0.02)
-
-
Joliet Facility Fire-Business Interruption Insurance Proceeds
$(1,697)
$(0.07)
-
-
Adjusted earnings and adjusted earnings per share
$14,679
$0.57
$16,685
$0.65
Six Months Ended August 31,
2013
2012
(in thousands)
Per Diluted Share
Per Diluted Share
Net income and diluted earnings per share
$30,910
$1.20
$31,859
$1.25
Adjustments (net of tax)
Joliet Facility Fire Operating Loss
$1,019
$0.04
$1,095
$0.04
Law Suit Settlement
$(2,637)
$(0.10)
-
-
Acquisition Related Expenditures
$2,001
$0.08
$430
$0.02
Joliet Facility Fire-Gain from Insurance Proceeds
$(514)
$ (0.02)
$(3,847)
$(0.15)
Joliet Facility Fire-Business Interruption Insurance Proceeds
$(1,682)
$(0.07)
-
-
Adjusted earnings and adjusted earnings per share
$29,097
$1.13
$29,537
$1.16
Non-GAAP Disclosure
In addition to the financial information prepared in conformity with GAAP the Company provides historical non-GAAP financial information. Management believes that presentation of non-GAAP financial information is meaningful and useful in understanding the activities and business metrics of the Company's operations. Management believes that these non-GAAP financial measures reflect an additional way of viewing aspects of the Company's business that, when viewed with its GAAP results, provide a more complete understanding of factors and trends affecting its business.
Contact:
Dana Perry, Senior Vice President – Finance and CFO
AZZ incorporated 817-810-0095
Internet: www.azz.com
Lytham Partners 602-889-9700
Joe Dorame or Robert Blum
Internet: www.lythampartners.com
5 Stocks Set to Soar on Bullish Earnings
BY Roberto Pedone| 09/24/13 - 12:29 PM EDT
Stock quotes in this article: THO, FINL, MTN, AZZ, JBL
Find out if (THO) is in Cramer's Portfolio.
AZZ
Another earnings short-squeeze prospect is electrical equipment and components maker AZZ (AZZ), which is set to release numbers on Friday before the market open. Wall Street analysts, on average, expect AZZ to report revenue of $202.83 million on earnings of 66 cents per share.
>>How to Win With the Twitter IPO
The current short interest as a percentage of the float for AZZ sits at 2.9%. That means that out of the 24.47 million shares in the tradable float, 696,000 shares are sold short by the bears. If the bulls get the earnings news they're looking for, then shares of AZZ could spike sharply higher post-earnings as the bears look to cover some of their bets.
From a technical perspective, AZZ is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last three months, with shares moving higher from its low of $34.61 to its recent high of $44.69 a share. During that uptrend, shares of AZZ have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of AZZ within range of triggering a near-term breakout trade post-earnings.
If you're bullish on AZZ, then I would wait until after its report and look for long-biased trades if this stock manages to break out above some near-term overhead resistance at $44.69 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 229,856 shares. If that breakout triggers, the AZZ will set up to re-test or possibly take out its 52-week high at $49.10 a share. Any high-volume move above that level will then give AZZ a chance to trend north of $50 a share.
I would simply avoid AZZ or look for short-biased trades if after earnings it fails to trigger that breakout and then drops back below its 200-day at $41.10 a share with high volume. If we get that move, then AZZ will set up to re-test or possibly take out its next major support levels at its 50-day of $38.70 a share to $36 to $35 a share.
Thanks!
LIONSGATE AND ODDLOT ENTERTAINMENT FORM MULTIPICTURE CO-PRODUCING, CO-FINANCING AND DISTRIBUTION AGREEMENT
Pictures include Mortdecai, starring Johnny Depp, and the previously announced Draft Day, directed by Ivan Reitman and starring Kevin Costner
PR NewswirePress Release: Lionsgate – 4 hours ago
SANTA MONICA, Calif. and CULVER CITY, Calif., Sept. 19, 2013 /PRNewswire/ -- Lionsgate (LGF) and OddLot Entertainment have formed a multiyear, multipicture co-financing and distribution deal beginning with OddLot's co-financing of the action comedy Mortdecai, starring Johnny Depp, the two companies announced today. The arrangement provides a framework for Lionsgate and OddLot to co-produce and co-finance additional pictures that may be sourced by either party, and it provides OddLot with access to committed distribution on certain pictures.
(Logo: http://photos.prnewswire.com/prnh/20130919/LA83194LOGO)
Mortdecai, which is set to begin production this fall, features an all-star cast including Depp, Gwyneth Paltrow, Ewan McGregor, Paul Bettany and Olivia Munn. OddLot is already partnered with Lionsgate on the sports drama/comedy Draft Day, starring Kevin Costner, Jennifer Garner, Denis Leary and Frank Langella, slated for release next year. OddLot also produced and spearheaded the partnership with Lionsgate and Digital Domain on the science fiction adventure Ender's Game, starring Harrison Ford, Asa Butterfield, Haile Seinfeld, Viola Davis and Ben Kingsley, which will be released November 1.
"We're delighted to extend and expand our longstanding relationship with OddLot founder Gigi Pritzker and her team," said Lionsgate Motion Picture Group Co-Chairs Rob Friedman and Patrick Wachsberger. "Our partnership on Ender's Game and Draft Day has now been extended to include Mortdecai, and we look forward to finding many more pictures to partner on in the future. OddLot is a reliable, accomplished, respected company and an important financial partner, and they will provide us with a valuable and consistent supply of future films for our portfolio."
"We've partnered with Lionsgate on a number of films over the past five years and we feel their entire team shares our entrepreneurial spirit and commitment to commercially exciting, star-driven films with global appeal," said OddLot Chief Executive Officer and founder Gigi Pritzker. "Lionsgate is one of the most dynamic and exciting studios in the entertainment industry today, and we look forward to expanding our current partnership on Ender's Game, Draft Day and Mortdecai to encompass an even broader slate as our relationship continues to evolve."
The deal was negotiated by Lionsgate Motion Picture Group General Manager Sean Kisker, Lionsgate EVP Business & Legal Affairs and Deputy General Counsel David Friedman and Lionsgate SVP Business & Legal Affairs Jean Chi. For OddLot negotiations were led by Co-Presidents Bill Lischak and Michael Nathanson, EVP Business and Legal Affairs Aaron Michiel, SVP of Finance Natalya Petrosova and outside counsel Bryan Wolf and Matt Johnson of Ziffren Brittenham LLP.
About Lionsgate
Lionsgate is a leading global entertainment company with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, digital distribution, new channel platforms and international distribution and sales. Lionsgate currently has 30 television shows on 20 different networks spanning its primetime production, distribution and syndication businesses, including such critically-acclaimed hits as the multiple Emmy Award-winning Mad Men and Nurse Jackie, the comedy Anger Management, the network series Nashville, the syndication success The Wendy Williams Show and the critically-acclaimed new series Orange Is The New Black.
Its feature film business has been fueled by such recent successes as the blockbuster first installment of The Hunger Games franchise, The Twilight Saga Breaking Dawn – Part 2, Now You See Me, Kevin Hart: Let Me Explain, Warm Bodies, Snitch, Texas Chainsaw 3D, The Expendables 2, The Possession, Sinister, Arbitrage and Pantelion Films' breakout hit Instructions Not Included, one of the highest-grossing Spanish-language films ever in the U.S.
Lionsgate's home entertainment business is an industry leader in box office-to-DVD and box office-to-VOD revenue conversion rate. Lionsgate handles a prestigious and prolific library of approximately 15,000 motion picture and television titles that is an important source of recurring revenue and serves as the foundation for the growth of the Company's core businesses. The Lionsgate and Summit brands remain synonymous with original, daring, quality entertainment in markets around the world.
About OddLot
OddLot Entertainment is a Los Angeles-based film and television production company that develops, produces, finances and arranges distribution for quality, commercial properties for both the domestic and international markets.
OddLot's next production to be released is Ender's Game, written and directed by Gavin Hood, and starring Harrison Ford, Ben Kingsley, Viola Davis, Hailee Steinfeld, Abigail Breslin and Asa Butterfield as "Ender." Summit Entertainment is co-financing the film and will release it domestically November 1, 2013. OddLot also produced The Way, Way Back, a comedic drama from Academy Award®-winning writers Jim Rash and Nat Faxon, which was acquired by Fox Searchlight at the 2013 Sundance Film Festival and was released in theatres on July 5, 2013. The film stars Steve Carell, Toni Collette, Sam Rockwell, Allison Janney, Maya Rudolph, AnnaSophia Robb, Amanda Peet and Liam James.
The company is currently producing Ivan Reitman's Draft Day starring Kevin Costner which will be released by Summit Entertainment, and Jon Stewart's upcoming directorial debut Rosewater. OddLot's other credits include producing the critically-acclaimed Drive, Rabbit Hole and From Prada to Nada. Past credits for Gigi Pritzker, OddLot's CEO, include The Wedding Planner, Green Street Hooligans and Mean Creek.
For further information, please contact:
For Lionsgate
For OddLot
Peter D. Wilkes
Paul Pflug
310-255-3726
Principal Communications
pwilkes@lionsgate.com
323-658-1555
Newell Rubbermaid Appoints Nate Young VP of Global Innovation
Significant addition to in-house capabilities will advance ideation and strengthen company's innovation pipeline
PR NewswirePress Release: Newell Rubbermaid – 4 hours ago
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ATLANTA, Sept. 19, 2013 /PRNewswire/ -- Newell Rubbermaid (NWL) today announced the appointment of Nate Young to the newly created position of Vice President of Global Innovation, where he will be responsible for energizing the company's innovation funnel.
(Photo: http://photos.prnewswire.com/prnh/20130919/CL82742 )
Young brings 30 years of experience and a proven track record of leading innovation at large, complex organizations. Most recently, he was president of the NewNorth Center for Design in Business, a nonprofit, hybrid education and business institution based in Holland, Mich. Previously, Young was Executive VP and Chief Academic Officer at Art Center College of Design in Pasadena, Calif., working with leading innovation-driven companies like Disney, Nike and NTT DoCoMo. Young is also the founder of TWISThink, a Michigan-based product design and development firm.
"Nate has already been intimately involved with Newell Rubbermaid, having led a successful series of innovation workshops for our business segments that generated hundreds of promising ideas," said Chuck Jones, Newell Rubbermaid's Chief Design and R&D Officer. "His familiarity with our Growth Game Plan and unique, diverse and rich experience across the corporate, consulting and education sectors make him the ideal candidate to lead our innovation efforts."
Young will work closely with Newell Rubbermaid's Marketing and Design/R&D organizations globally to advance ideation and help shape the company's organic innovation platform across all segments and businesses. He will also develop the company's open innovation strategy, which involves building a network of inventor, university and corporate innovation communities.
Young will report to Jones and will be based in the company's new state-of-the-art Design Center which is under construction in Kalamazoo, Mich.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of consumer and commercial products with 2012 sales of approximately $5.6 billion and a strong portfolio of leading brands, including Sharpie®, Paper Mate®, Rubbermaid Commercial Products®, Irwin®, Lenox®, Parker®, Waterman®, Rubbermaid®, Levolor®, Calphalon®, Goody®, Graco®, Aprica® and Dymo®. As part of the company's Growth Game Plan, Newell Rubbermaid is making sharper portfolio choices and investing in new marketing and innovation to accelerate performance.
This press release and additional information about Newell Rubbermaid are available on the company's Web site, www.newellrubbermaid.com.
U.S. Premiere of DOC MARTIN, Series 6 Exclusively on Acorn TV Beginning October 7th
GlobeNewswirePress Release: RLJ Entertainment, Inc. – 23 hours ago
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"Best British TV" Streaming Service Debuts the Highly Anticipated New Season of the #1 Dramedy Only a Month After Its UK Premiere
Acorn TV is Also Featuring the Premieres of the Newest Seasons of Hit Detective Dramas VERA Starring Two-Time Oscar(R) Nominee Brenda Blethyn and ABOVE SUSPICION Starring Kelly Reilly and Ciaran Hinds
SILVER SPRING, Md., Sept. 18, 2013 (GLOBE NEWSWIRE) -- RLJ Entertainment's (RLJE) Acorn TV, the first streaming service focused on the best of British TV in North America, announces the exclusive U.S. premiere of Doc Martin, Series 6 beginning on October 7, 2013. Called "completely addictive" (Slate) and "absolutely bloody hilarious" (London Evening Standard), Doc Martin, starring BAFTA winner Martin Clunes (Men Behaving Badly, Shakespeare in Love), is Acorn's newest best-selling series and, after Downton Abbey, is the biggest success story on public television in recent years. In the U.K., Doc Martin is ITV's highest-rated drama series with more than 10 million viewers, while in the U.S. it's the #1 series on many public television stations and has millions of viewers across the country. The series is also a global phenomenon having sold to more than 70 countries, with licensed local versions in France, Germany, Spain, Russia, among many more. Available at www.Acorn.TV and via its popular Roku channel, Acorn TV begins exclusively streaming Series 6 on Monday, October 7, with a new episode added each Monday through the season final on November 25. Currently, Acorn TV has all previous episodes readily available for catch-up viewing.
Though the U.S. premiere of most British series are several months after their initial British broadcast, Acorn TV can greatly reduce the broadcast window and offer Series 6 only one month after its season premiere on ITV in the U.K. In the U.S., Series 6 will not begin airing on public television until February 2014 or be available on DVD until March 25, 2014, so Acorn TV has a four month exclusive window.
Doc Martin stars Martin Clunes in an uproarious lead performance as a tactless, self-centered, and uptight doctor. After hotshot London surgeon Martin Ellingham develops a crippling fear of blood, he reluctantly becomes the lone doctor in a quirky seaside town, where he quickly offends the eccentric villagers with his dour and dismissive bedside manner. Series 6 features the highly anticipated wedding of Martin and Louisa (Caroline Catz, Murder in Suburbia).
On Oct. 7th, Acorn TV will also add the U.S. premieres of Vera, Series 3, called "one of the best mysteries... in the last decade" (The Baltimore Sun), and Above Suspicion, Set 3, called "the most talked about cop show on British TV since Prime Suspect" (BestBritishTV). In Vera, two-time Oscar(R) nominee Brenda Blethyn (Secrets & Lies, Pride & Prejudice) stars as Vera Stanhope—a brilliant police detective with a disheveled exterior, a sharp tongue, and an uncanny ability to solve crimes. Above Suspicion is based on the bestselling novels by Lynda La Plante (Prime Suspect) and stars Kelly Reilly (Flight, Sherlock Holmes feature films) as a young detective trying to prove herself with Ciaran Hinds (Tinker Tailor Soldier Spy, Game of Thrones) as her flawed and charismatic boss. Acorn TV is also adding the U.S. premiere of Joanna Lumley's Greek Odyssey documentary as well as The Broker's Man starring Kevin Whately (Inspector Lewis) and The Last Detective starring Peter Davison (Dr. Who).
Miguel Penella, Chief Executive Officer of RLJ Entertainment, Inc., said, "Doc Martin is a perfect example of the kind of hugely popular British content that we are excited to exclusively offer Acorn TV's subscribers. There are millions of British drama, comedy, and mystery fans in the U.S., so we're thrilled to offer more exclusive content and shorter timeframes between when programs air in their home country and the U.S."
Currently, Acorn TV features a catalog of more than 70 series for catch-up viewing and discovery of new series, with no set end dates. In September, Acorn TV added the U.S. premiere of Murdoch Mysteries, Season 6, a hit period detective series, as well as all 22 previous episodes of Foyle's War. Additionally, the three new Foyle's War episodes are being added the day after they premiere on MASTERPIECE Mystery! on PBS. Acorn TV also features all previous episodes of many popular British series, including George Gently, Midsomer Murders, The Forsyte Saga starring Damian Lewis (Homeland), iconic miniseries I, Claudius, as well as more than 50 episodes of Agatha Christie's Poirot and the U.S. premiere of Jack Irish starring Guy Pearce.
Called the "chief curators of the best Brit TV" by TIME magazine, RLJ Entertainment's Acorn brand holds exclusive North American distribution rights to the most critically acclaimed British programs, which are available for streaming on Acorn TV and from Acorn in lavishly packaged DVDs/Blu-rays. RLJ Entertainment also manages the literary estate of Agatha Christie, the best-selling novelist of all time, and owns the hugely popular period detective series Foyle's War.
Full access to Acorn TV is available to press upon request.
To watch Acorn TV via computers, iPhones, iPads, etc.: www.Acorn.TV
To add the Acorn TV channel on your Roku: https://owner.roku.com/add/acorntv
About Acorn TV
Available at www.Acorn.TV, Acorn TV is the first British TV focused streaming service in North America. Given the limited broadcast options for U.S. viewers to watch first rate international programs, Acorn TV offers U.S. fans the opportunity to not only stream many of their favorite series but, more importantly, discover new and classic programs previously unavailable to U.S. audiences. Acorn TV offers a free 30-day trial and thereafter is just $4.99/month or $49.99/year. Acorn TV subscribers also receive free shipping on all orders from Acorn's catalog and website, AcornOnline.com. Launched in July 2011, Acorn TV is accessible on the #1 streaming player, Roku, as well as computers, and through the browsers on iPhones and iPads. It is also available on many other portable devices.
RLJ Entertainment, Inc. (RLJE) is a premier independent licensee and distributor of entertainment content and programming in North America, the United Kingdom and Australia with over 5,300 exclusive titles. RLJE is a leader in numerous genres via its owned and distributed brands such as Acorn (British TV), Image (feature films, stand-up comedy), One Village (urban), Acacia (fitness), Slingshot (faith), Athena (documentaries), Criterion (art films) and Madacy (gift sets). These titles are distributed in multiple formats including DVD, Blu-Ray, digital download, digital streaming, broadcast television (including satellite and cable), theatrical and non-theatrical.
Via its relationship with Agatha Christie Limited, a company that RLJE owns 64% of, RLJE manages the intellectual property and publishing rights to some of the greatest works of mystery fiction, including stories of the iconic sleuths Miss Marple and Poirot. And through its direct-to-consumer business, RLJE has direct contacts and billing relationships with millions of consumers.
RLJE leverages its management experience to acquire, distribute, and monetize existing and original content for its many distribution channels, including its nascent branded digital subscription channels, and engages distinct audiences with programming that appeals directly to their unique viewing interests. RLJE has proprietary e-commerce web sites for the Acorn and Acacia brands, and owns the recently launched Acorn TV digital subscription service.
Contact:
RLJ Entertainment, Chad Campbell,
301.608.2115 *138, ccampbell@rljentertainment.com
Sonic Celebrates 60 Years Strong as America’s Drive-In
COMPANY REPORTS STRONG SUMMER SALES
FISCAL 2014 OUTLOOK PROVIDED
FOURTH FISCAL QUARTER 2013 EARNINGS CONFERENCE CALL DATE ANNOUNCED
Business WirePress Release: Sonic Corp. – 6 hours ago..
Sonic Corp. (SONC), the nation's largest chain of drive-in restaurants, today announced it is turning 60 years young as America’s Drive-In. Sonic will be celebrating the achievement of this milestone, along with its franchisees, next week at the Sonic national convention in San Diego.
Sonic’s Chairman, Chief Executive Officer and President, Cliff Hudson offered, “It is going to be great to be with our operators in San Diego celebrating Sonic’s 60year birthday, in addition to celebrating a summer of strong sales and profits. Our results reflect the strength and momentum of the Sonic brand and we look forward to continued growth in the near and long term.”
The company estimates system-wide same-store sales grew 5.9% for the fourth fiscal quarter resulting in estimated system-wide same-store sales growth of 2.3% for the fiscal year ended August 31, 2013. The company’s successful implementation of initiatives to improve service, product quality and value perception with increased media effectiveness and an innovative product and promotion pipeline drove strong fourth quarter sales. The Summer of Shakes promotion featuring 25 different shake flavors and the limited time offer promotion featuring two new pretzel dogs were especially popular; however, food costs associated with the successful fourth quarter promotions were unfavorably impacted due to product mix shift. Based upon these results, the company currently anticipates its fourth fiscal quarter earnings per share will increase 20% to $0.30, excluding the special items outlined below. These preliminary results are unaudited and will be finalized when the company issues its earnings results on October 21, 2013.
Fourth fiscal quarter adjustments are expected to include:
• A debt extinguishment charge in connection with a previously announced partial debt refinancing;
• A write-down associated with the closure of 12 lower-performing company drive-ins; and
• An impairment charge for the write-down of assets associated with the change in the vendor that is implementing the company’s new point-of-sale system.
The company will provide more information detailing these items on its fourth fiscal quarter of 2013 earnings conference call and release.
Fiscal Year 2014 Outlook
Same-store sales and margins are expected to improve with the implementation of key initiatives in fiscal 2014. New technology investments for the consumer including digital point-of-purchase technology and a new point-of-sale system will further drive a differentiated and personalized customer service experience and improved margins for fiscal 2014. All of these initiatives will drive Sonic’s multi-layered growth strategy which incorporates same-store sales growth, leverage from higher sales, deployment of free cash flow1, increasing royalty revenues and new drive-in development over the next few years. This strategy is expected to result in solid double-digit earnings per share growth in the near and long term.
The company expects its initiatives to drive 14% to 15% earnings per share growth in fiscal 2014. The macroeconomic environment and its impact on consumer confidence, in addition to the pacing of capital investments, may impact results. The outlook for fiscal 2014 anticipates the following elements:
• Positive same-store sales in the low single digit range for the system. System same-store sales are expected to perform at the higher end of this range in the back half of the fiscal year as the new point-of-sale system and digital point-of-purchase technology are implemented;
• Company drive-ins are expected to perform above the system average in the back half of the fiscal year as the new digital technology and a point-of-sale system are implemented;
• 40 to 50 new franchise drive-in openings and fewer drive-in closings than in fiscal 2013;
• Drive-in-level margins to improve between 75 to 100 basis points, depending upon the degree of same-store sales growth at company drive-ins;
• Selling, general and administrative expenses of $69 million to $70 million;
• Depreciation and amortization expense of $42.5 million to $43 million;
• Net interest expense of approximately $25 million;
• An income tax rate of between 37% to 37.5%, which may vary depending upon the reinstatement of employment tax credit programs that are scheduled to expire on December 31, 2013 and pending resolution of certain tax matters;
• Capital expenditures of $65 million to $70 million, which assumes the implementation of a new point-of-sale system and digital point-of-purchase technology in company drive-ins during fiscal 2014;
• The repurchase of $40 million of stock across the fiscal year utilizing existing cash and free cash flow; and
• Free cash flow of approximately $15 million to $25 million.
Fourth Fiscal Quarter 2013 Earnings Call
The company will release results for the quarter ended August 31, 2013 after the market close on October 21, 2013. The company will host a conference call to review financial results on Monday, October 21, 2013, at 5:00 PM ET.
The conference call can be accessed live over the phone by dialing (888) 806-6221 or (913) 312-0830 for international callers. A replay will be available one hour after the call and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for international callers; the conference ID is 8270295. The replay will be available until Monday, October 28, 2013. An online replay of the conference call will be available approximately two hours after the conclusion of the live broadcast. A link to this event may be found on the company's investor relations website at http://ir.sonicdrivein.com/.
About Sonic
SONIC®, America's Drive-In®, is the nation's largest chain of drive-in restaurants with more than 3,500 drive-ins serving approximately 3 million customers every day. Over the past 60 years, SONIC has delighted guests with signature menu items, more than 1 million drink combinations, friendly service by iconic Carhops and ongoing support of education through its award-winning Limeades for Learning® program. SONIC received top honors as America's "#1 burger quick service restaurant" in the 2013 Temkin Experience Ratings report. For more information about Sonic Corp. (NASDAQ/NM: SONC) and its subsidiaries, please visit www.sonicdrivein.com. Customers can also connect with SONIC at facebook.com/sonicdrivein or on Twitter @sonicdrive_in.
This press release contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from those expressed in, or underlying, these forward-looking statements are detailed in the company's annual and quarterly report filings with the Securities and Exchange Commission. The company undertakes no obligation to publicly release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.
1 Free cash flow is defined as net income plus depreciation, amortization and stock compensation expense, less capital expenditures.
SONC-F
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Contact:.
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Sonic Corp.
Claudia San Pedro
Vice President of Investor Relations, Communications and Treasurer
405-225-4846.
Newell Rubbermaid Completes Sale of Hardware Business To Nova Capital
Business WirePress Release: Newell Rubbermaid Inc. – Wed, Sep 11, 2013 8:30 AM EDT..
Newell Rubbermaid Inc. (NWL) today announced it has closed the sale of its Hardware business, which includes the Amerock®, Ashland®, Bulldog® and Shur-Line® brands, to Nova Capital, a specialist acquirer of corporate and private equity portfolios. The transaction was first announced Aug. 9.
The transaction provides Newell Rubbermaid with a more cohesive and focused portfolio of brands in five core business segments. As previously announced, gross proceeds from the transaction were $214 million, which includes the retention of accounts receivable. The company will receive after-tax cash proceeds of approximately $175 million.
About Newell Rubbermaid
Newell Rubbermaid Inc., an S&P 500 company, is a global marketer of consumer and commercial products with 2012 sales of approximately $5.6 billion and a strong portfolio of leading brands, including Sharpie®, Paper Mate®, Rubbermaid Commercial Products®, Irwin®, Lenox®, Parker®, Waterman®, Rubbermaid®, Levolor®, Calphalon®, Goody®, Graco®, Aprica® and Dymo®. As part of the company’s Growth Game Plan, Newell Rubbermaid is making sharper portfolio choices and investing in new marketing and innovation to accelerate performance.
This press release and additional information about Newell Rubbermaid are available on the company’s Web site, www.newellrubbermaid.com.
Forward-Looking and Cautionary Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 that reflect management’s current views and estimates regarding future market conditions, company performance and financial results, business prospects, new strategies, the competitive environment and other events. You can identify these statements by the fact that they use words such as ‘anticipate,” “believe,” “assume,” “estimate,” “expect,” “intend,” “project,” ”guidance,” “plan,” “outlook,” and other words and terms of similar meaning. Factors that could cause such differences include: assumptions regarding the anticipated proceeds resulting from the transaction; and other risks and uncertainties including those detailed from time to time in the company’s periodic reports (whether under the caption Risk Factors or Forward-looking Statements or elsewhere). The company assumes no obligations to revise or update any forward-looking statement, except as otherwise required by law.
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.
Contact:.
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Newell Rubbermaid Inc.
Nancy O’Donnell, +1-770-418-7723
Vice President, Investor Relations
or
David Doolittle, +1-770-418-7519
Vice President, Global Communications
SHFL entertainment, Inc. Reports Revenue Of $73.5 Million In Third Quarter, Up 16% Year-Over-Year
PR NewswirePress Release: SHFL entertainment, Inc. – 20 hours
LAS VEGAS, Sept. 6, 2013 /PRNewswire/ -- SHFL entertainment, Inc. (NASDAQ Global Select Market: SHFL) ("SHFL" or the "Company") today announced its results for the Third Quarter ended July 31, 2013.
(Logo: http://photos.prnewswire.com/prnh/20121008/LA88315LOGO)
Third Quarter 2013 Financial Highlights
•Total revenue grew 16% to $73.5 million primarily due to a 79% year-over-year increase in Electronic Table Systems ("ETS") revenue. The Electronic Gaming Machine ("EGM"), Utility and Proprietary Table Games ("PTG") businesses also contributed to overall growth in the quarter.
•Recurring revenue increased to $31.4 million, a 5% year-over-year increase. The $1.1 million increase in PTG recurring revenue contributed to 68% of the overall increase in recurring revenue.
•Adjusted for one-time expenses of $3.6 million, or $0.05 per share, related to entering into a definitive agreement and plan of merger (the "Merger Agreement") with Bally Technologies, Inc. ("Bally"), non-GAAP earnings per share ("EPS") were $0.16 in the third quarter. Diluted earnings per share ("EPS") decreased $0.07 year-over-year to $0.11.
•Net income declined $4.0 million year-over-year to $6.4 million. Adjusted for one-time expenses related to the Merger Agreement with Bally, net income was $9.5 million in the third quarter.
•Gross margin decreased 80 basis points year-over-year to 62%, due to the mix of segment performance, primarily driven by increased revenue in the ETS segment. Gross margin was also impacted by an increase in headcount of the Company's service team that has expanded to service the growing product footprint globally. To a lesser extent, gross margin was affected this quarter by increased depreciation on old Table Master units in the ETS segment.
•Selling, general and administrative ("SG&A") expenses increased $8.3 million compared to the prior year period. Approximately $3.6 million of the increase was due to expenses related to the Merger Agreement with Bally. Also contributing to the increase were: $1.6 million in higher payroll and related expenses arising from increased headcount across various departments and higher stock based compensation and medical costs; a $1.1 million increase in costs associated with the establishment of the iGaming product management and sales teams and, to a lesser extent, litigation costs incurred to protect the Company's valuable intellectual property from online infringement; and $1.1 million split evenly between the Company's expanded participation in tradeshows to support new market growth and litigation expenses related primarily to the Company's ETS segment.
•Research and Development ("R&D") expenses increased $2.4 million year-over-year due to an increase in headcount and product approval expenses related to several initiatives across all product segments. Approximately $0.7 million of the increase was due to expansion of the iGaming department and platform development for the Company's online game content. Other initiatives included the creation of new EGM titles for the Equinox cabinet, development of next-generation Utility products, strengthening the Company's current PTG progressive offerings, and enhancements to next-generation ETS products including Table Master Fusion, SHFL FUSION Hybrid, and SHFL FUSION Virtual.
•Operating margin decreased year-over-year to 12% due to increased operating expenses discussed above. Adjusted for one-time expenses related to the Merger Agreement with Bally, operating margin was 16% in the quarter.
•Adjusted EBITDA declined 3% year-over-year to $20.5 million due to the previously mentioned increase in operating expenses, slightly offset by the increase in total Company revenue.
•Free Cash Flow ("FCF")1, a non-GAAP financial measure, was down 57% year-over-year to $5.1 million. FCF was impacted by an increase of $6.3 million in capital expenditures related to the construction of the Company's new consolidated facility in Las Vegas. The decline in FCF was slightly offset by a $0.7 million decrease year-over-year in cash paid for taxes.
Third Quarter 2013 Business Segment Highlights
Utility
•Utility recurring revenue grew to $14.1 million compared to $13.7 million in the prior year period. The 3% increase was due primarily to a rise in the shuffler average lease price as customers continued to upgrade to newer shuffler models. New shuffler lease placements, in particular the MD3, also contributed to the increase.
•Total Utility revenue grew 5% year-over-year to $25.6 million. Shuffler sales increased 11% over the prior period driven by sales of approximately 270 MD3 shufflers in Asia and, to a lesser extent, sales in Australia and the U.S.
•Total shufflers on lease increased year-over-year to 8,287. Incremental MD3 placements and, to a lesser extent, iDeal and one2six placements drove increases in the lease installed base in the quarter.
•Gross margin fell 210 basis points year-over-year to 61% due mainly to the previously mentioned increase in headcount of the Company's service team to support shuffler growth in new table games markets in the U.S. and expansion into Asia.
•Total MD3 shufflers installed grew 1,896 units year-over-year to 3,277. Placements were driven by sales in Asia in addition to an increase in incremental lease placements over the prior year period. Approximately 45% of MD3 shufflers are currently on lease.
Proprietary Table Games2
•PTG recurring revenue increased 9% year-over-year to $13.4 million. Increased lease placements in premium table games (Ultimate Texas Hold'em, Mississippi Stud), side bets (6 Card Bonus, King's Bounty, House Money), and progressives (Ultimate Texas Hold'em Progressive, Three Card Poker Progressive) contributed to recurring revenue growth.
•Total PTG revenue increased 7% year-over-year to $13.8 million driven primarily by strong lease placements.
•Gross margin remained relatively flat year-over-year at 82%.
•Total progressive units installed grew 10% year-over-year to 1,258, driven by installations of Ultimate Texas Hold'em Progressive and Three Card Poker Progressive.
Electronic Table Systems
•Total ETS revenue grew 79% year-over-year to $10.8 million driven by increased sales of SHFL FUSION Hybrid in Asia and New Zealand, and sales of SHFL FUSION Virtual in Australia.
•ETS recurring revenue stayed relatively flat at $3.6 million compared to the prior year period. The removal of Table Master units in Maryland was offset by increased placements of SHFL FUSION Hybrid in New York and, to a lesser extent, greater i-Table recurring revenue.
•ETS gross margin increased to 46% compared to 34% in the prior year period. The previously discussed increase in total sales revenue, partially offset by increased depreciation of old Table Master units, drove the increase.
Electronic Gaming Machines
•Total EGM revenue grew 16% year-over-year to $23.2 million. The increase was driven primarily by greater placements in Asia over the prior year period and, to a lesser extent, higher average sales prices. Adjusted for foreign exchange, EGM revenue grew to $23.8 million in the quarter.
•Gross margin remained relatively flat year-over-year at 60%.
•There were 1,116 EGM units sold in the quarter compared to 1,021 in the year-ago quarter. The increase was due to approximately 250 placements into Asia in the quarter, driven by sales of the Duo Fu Duo Cai progressive jackpot link.
Further detail and analysis of the Company's financial results for the third quarter ended July 31, 2013, is included in its Form 10-Q, which the Company intends to file with the Securities and Exchange Commission today, September 6, 2013. No conference call will be held. On July 15, 2013, SHFL entered into a definitive agreement and plan of merger with Bally (BYI), pursuant to which Bally has agreed to acquire the Company at a per share price of $23.25 in cash for total consideration of approximately $1.3 billion subject to the satisfaction of the conditions set forth therein.
About SHFL entertainment, Inc.
SHFL entertainment, Inc. is a leading global gaming supplier committed to making gaming more fun for players and more profitable for operators through product innovation, and superior quality and service. The Company operates in legalized gaming markets across the globe and provides state-of-the-art, value-add products in five distinct categories: Utility products, which include automatic card shufflers and roulette chip sorters; Proprietary Table Games, which includes live games, side bets and progressives; Electronic Table Systems, which include various e-Table game configurations; Electronic Gaming Machines, which include video slot machines; and newly introduced iGaming, which features online versions of SHFL entertainment, Inc.'s table games, social gaming and mobile applications. The Company is included in the S&P SmallCap 600 Index. Information about the Company and its products can be found on the Internet at www.shfl.com, or on Facebook and Twitter.
Forward-Looking Statements
This release contains forward-looking statements within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements included in this release other than statements that are purely historical are forward-looking statements. Forward-looking statements in this press release include without limitation: (1) the Company's belief that its innovation will continue to drive competition; (2) the Company's intention to continue to execute against our strategic initiatives; (3) the Company's belief that EPS, Adjusted EBITDA and FCF are useful, widely referenced performance measures in the Company's industry and the Company's belief that references to them are helpful to investors; (4) the Company's estimates of diluted EPS, Adjusted EBITDA and FCF and the assumptions upon which they are based; (5) the Company's belief that investing in its intellectual property is an important use of cash; (6) the Company's ability to develop products that achieve commercial success in the very competitive marketplace in which the Company operates; and (7) the fact that the Company competes in a single industry and is dependent on the success of its customers and the risks that impact the Company's customers, including a change in demand for gaming, a downturn in general worldwide economic conditions, or the gaming industry may adversely impact the Company or its results of operations. The Company's beliefs, expectations, forecasts, objectives, anticipations, intentions and strategies regarding the future, including without limitation those concerning expected operating results, revenues and earnings are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from results contemplated by the forward-looking statements, including but not limited to: (1) unexpected changes in demand for or increased competition with the Company's products; (2) unexpected factors that limit or eliminate the Company's ability to implement its strategic plan or undertake or complete any of its growth initiatives; (3) inaccuracies in the Company's assumptions as to the financial measures that investors use or the manner in which such financial measures may be used by such investors; (4) reduced demand for or increased competition with the Company's products that affects its EPS and Adjusted EBITDA; (5) unexpected changes to the Company's balance sheet or cash flows that would impede the Company's ability to pursue protection and pursuit of its intellectual property; (6) the Company's inability to accurately gauge the commercial appeal of its products; (7) unexpected changes in the market and economic conditions and reduced demand for or increased competition with the Company's products; (8) the risk that the conditions to the closing of the merger are not satisfied (including a failure of the shareholders of SHFL to approve, on a timely basis or otherwise, the merger and the risk that regulatory approvals required for the merger are not obtained, on a timely basis or otherwise, or are obtained subject to conditions that are not anticipated); (9) litigation relating to the merger; (10) uncertainties as to the timing of the consummation of the merger and the ability of each of SHFL and Bally to consummate the merger; (11) risks that the proposed transaction disrupts the current plans and operations of SHFL; (12) the ability of SHFL to retain and hire key personnel; (13) competitive responses to the proposed merger; (14) unexpected costs, charges or expenses resulting from the merger; (15) the failure by Bally to obtain the necessary debt financing arrangements set forth in the commitment letter received in connection with the merger; (16) potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger; and (17) legislative, regulatory and economic developments. Additional information on risk factors that could potentially affect the Company's financial results may be found in documents filed by the Company with the Securities and Exchange Commission, including the Company's current reports on Form 8-K, quarterly reports on Form 10-Q and its latest annual report on Form 10-K, and are based on information available to the Company on the date hereof. The Company does not intend, and assumes no obligation, to update any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this press release.
1 Free Cash Flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.
2 As of FY 2013, revenues from the iGaming segment are being reported separately from the Proprietary Table Games segment. Please see page 13 for more details.
SHFL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
Nine Months Ended
July 31,
July 31,
2013
2012
2013
2012
Revenue:
Product leases and royalties
$ 29,349
$ 27,830
$ 87,941
$ 80,730
Product sales and service
44,185
35,556
121,791
104,763
Total revenue
73,534
63,386
209,732
185,493
Costs and expenses:
Cost of leases and royalties
10,484
9,475
30,938
27,853
Cost of sales and service
17,272
13,889
45,050
39,308
Gross profit
45,778
40,022
133,744
118,332
Selling, general and administrative
27,257
19,007
71,169
55,991
Research and development
10,052
7,622
27,400
23,074
Total costs and expenses
65,065
49,993
174,557
146,226
Income from operations
8,469
13,393
35,175
39,267
Other income (expense):
Interest income
209
116
551
429
Interest expense
(266)
(367)
(789)
(1,222)
Other, net
228
180
498
209
Total other income (expense)
171
(71)
260
(584)
Income before income taxes
8,640
13,322
35,435
38,683
Income tax provision
2,231
2,898
10,122
10,875
Net income
$ 6,409
$ 10,424
$ 25,313
$ 27,808
Basic earnings per share:
$ 0.11
$ 0.19
$ 0.44
$ 0.50
Diluted earnings per share:
$ 0.11
$ 0.18
$ 0.44
$ 0.49
Weighted average shares outstanding:
Basic
57,117
56,284
56,927
55,700
Diluted
57,789
57,029
57,623
56,445
SHFL ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
July 31,
October 31,
2013
2012
ASSETS
Current assets:
Cash and cash equivalents
$41,819
$24,160
Accounts receivable, net of allowance for bad debts of $391 and $491
39,332
45,708
Investment in sales-type leases and notes receivable, net of allowance
for bad debts of $42 and $8
9,366
9,287
Inventories
31,335
21,906
Prepaid income taxes
10,879
4,053
Deferred income taxes
3,782
4,622
Other current assets
7,467
6,901
Total current assets
143,980
116,637
Investment in sales-type leases and notes receivable, net of current portion
8,772
6,310
Products leased and held for lease, net
32,275
34,639
Property and equipment, net
30,217
17,417
Intangible assets, net
54,861
62,836
Goodwill
85,435
84,950
Deferred income taxes
3,173
5,183
Other assets
2,510
3,079
Total assets
$361,223
$331,051
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
$13,386
$6,702
Accrued liabilities and other current liabilities
21,337
22,402
Deferred income taxes
16
16
Customer deposits
3,714
3,383
Income tax payable
3,738
4,179
Deferred revenue
4,595
4,799
Current portion of long-term debt
530
-
Total current liabilities
47,316
41,481
Long-term debt
1,296
1,303
Other long-term liabilities
1,690
2,004
Deferred income taxes
2,528
1,493
Total liabilities
52,830
46,281
Commitments and contingencies
Shareholders' equity:
Common stock, $0.01 par value; 151,368 shares authorized;
56,612 and 55,973 shares issued and outstanding
566
560
Additional paid-in capital
144,728
135,758
Retained earnings
144,757
119,444
Accumulated other comprehensive income
18,342
29,008
Total shareholders' equity
308,393
284,770
Total liabilities and shareholders' equity
$361,223
$331,051
SHFL ENTERTAINMENT, INC.
SUPPLEMENTAL DATA
(Unaudited, in thousands)
Three Months Ended
Nine Months Ended
July 31,
July 31,
2013
2012
2013
2012
Cash Flow Data:
Cash provided by operating activities
$ 16,467
$ 15,264
$ 34,720
$ 35,868
Cash used in investing activities:
Payments for products leased and held for lease
$ (4,162)
$ (4,521)
$ (10,785)
$ (11,227)
Purchases of property and equipment
(7,356)
(1,612)
(13,727)
(5,852)
Purchases of intangible assets
(1,668)
(230)
(1,807)
(4,333)
Acquisition of business
-
-
(1,590)
(5,500)
Proceeds from sale of leased assets
1,145
611
6,285
1,640
Proceeds from sale of assets
-
-
-
-
Other
(74)
(236)
(549)
(690)
$(12,115)
$ (5,988)
$ (22,173)
$ (25,962)
Cash provided by (used in) financing activities
$ (3,317)
$ (4,740)
$ 5,285
$ (5,435)
Free cash flow (2)
$ 5,129
$ 11,859
$ 23,769
$ 31,506
Reconciliation of net income to Adjusted EBITDA:
Net income
$ 6,409
$ 10,424
$ 25,313
$ 27,808
Other expense (income)
(171)
71
(260)
584
Share-based compensation
1,656
1,014
4,543
3,063
Income tax provision
2,231
2,898
10,122
10,875
Depreciation and amortization
6,784
6,260
20,440
18,657
Ongame acquisition expenses
-
500
-
2,152
Expenses related to Merger Agreement with Bally
3,610
-
4,010
-
Adjusted EBITDA (1)
$ 20,519
$ 21,167
$ 64,168
$ 63,139
1.
Adjusted EBITDA is earnings before other expense (income), provision for income taxes, depreciation and amortization expense, Ongame acquisition expenses, expenses related to the Merger Agreement with Bally, and share-based compensation. Adjusted EBITDA is presented exclusively as a supplemental disclosure because management believes that it is a useful performance measure and is widely used to measure performance, and as a basis for valuation, within the Company's industry. Adjusted EBITDA is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparison. Management uses Adjusted EBITDA as a measure of the operating performance and to compare the operating performance with those of its competitors. The Company also presents Adjusted EBITDA because it is used by some investors as a way to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming equipment suppliers have historically reported Adjusted EBITDA as a supplement to financial measures in accordance with U.S. generally accepted accounting principles ("GAAP"). Adjusted EBITDA should not be considered as an alternative to operating income (loss), as an indicator of the Company's performance, as an alternate to cash flows from operating activities, as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income (loss), Adjusted EBITDA does not include depreciation and amortization or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. The Company compensates for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income (loss), net income (loss), cash flows from operations and cash flow data. The Company has significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA.
2.
Free cash flow is Adjusted EBITDA less capital expenditures and cash paid for taxes.
SHFL ENTERTAINMENT, INC.
BUSINESS SEGMENT DATA
(Unaudited, in thousands)
Three Months Ended
Nine Months Ended
July 31,
July 31,
2013
2012
2013
2012
Utility:
Revenue
$ 25,644
$ 24,382
$ 81,445
$ 68,988
Gross profit
15,529
15,285
51,663
42,622
Gross margin
60.6%
62.7%
63.4%
61.8%
Proprietary Table Games:
Revenue
$ 13,839
$ 12,989
$ 40,670
$ 36,300
Gross profit
11,338
10,629
33,352
29,671
Gross margin
81.9%
81.8%
82.0%
81.7%
Electronic Table Systems:
Revenue
$ 10,822
$ 6,053
$ 25,040
$ 21,183
Gross profit
4,943
2,055
10,396
8,868
Gross margin
45.7%
34.0%
41.5%
41.9%
Electronic Gaming Machines:
Revenue
$ 23,167
$ 19,957
$ 62,229
$ 56,699
Gross profit
13,956
12,048
38,043
34,848
Gross margin
60.2%
60.4%
61.1%
61.5%
iGaming:
Revenue
$ 62
$ 5
$ 348
$ 2,323
Gross profit
12
5
290
2,323
Gross margin
19.4%
100.0%
83.3%
100.0%
Total:
Revenue
$ 73,534
$ 63,386
$209,732
$185,493
Gross profit
45,778
40,022
133,744
118,332
Gross margin
62.3%
63.1%
63.8%
63.8%
Adjusted EBITDA
$ 20,519
$ 21,167
$ 64,168
$ 63,139
as a percentage of total revenue
27.9%
33.4%
30.6%
34.0%
Income from operations
$ 8,469
$ 13,393
$ 35,175
$ 39,267
as a percentage of total revenue
11.5%
21.1%
16.8%
21.2%
Tupperware Brands Reports Record First Quarter 2013 Sales and Earnings Per Share
-- First Quarter Sales up 6% in local currency+ versus last year; including negative impact from exchange rates, sales up 4% in dollars.
-- First Quarter GAAP diluted E.P.S. $1.06, up 4% versus last year. Excluding certain items impacting comparability*, diluted E.P.S. $1.18, up 19% in local currency, and 4 cents above the high end of guidance range.
-- First Quarter 2013 share repurchases of $100 million / 1.28 million shares.
PR NewswirePress Release: Tupperware Brands Corporation – Wed, Apr 24, 2013 7:00 AM EDT..
ORLANDO, Fla., April 24, 2013 /PRNewswire/ -- (TUP) Tupperware Brands Corporation today reported first quarter 2013 sales and profit, with sales up 4% in dollars and up 6% in local currency+.
GAAP net income for the quarter was $58.2 million, or $1.06 per diluted share, compared with 2012 first quarter GAAP net income and diluted EPS of $58.3 million and $1.02 per share, respectively. Adjusted diluted earnings per share of $1.18 in the quarter was 15 cents, or15%, better than 2012 in U.S. dollars, including a negative foreign currency impact of 4 cents. Excluding the impact of foreign exchange on the comparison, adjusted diluted earnings per share was up 19 cents, or 19%.
The Company repurchased in the open market 1.28 million shares for $100 million in the first quarter of 2013. Since 2007, the Company has repurchased 16.8 million shares for $928 million and can repurchase up to an additional $1.1 billion of shares under its current authorization that runs until February 2017. The Company expects to repurchase $100 million worth of shares in the second quarter of 2013, and continues to include $400 million of repurchases in its full year 2013 outlook.
Rick Goings, Chairman and CEO, commented, "I'm pleased that our positive trends in sales and profit growth have continued in 2013, with local currency sales up 6% and profit, excluding items, 4 cents ahead of the high end of our guidance. Our ability to increase sales, even in challenging macro-economic environments, continues to illustrate the benefits of being a global portfolio of businesses in emerging and established markets, enabling us to consistently deliver solid top and bottom-line growth. Sales in our emerging markets** were up 13%, in local currency, in the quarter and comprised 62% of our sales. Our established markets were down 3% in local currency. Our growth in the emerging markets is driven by the power of our channel, our brand and the opportunity we provide women. I'm confident that we'll be able to grow our established markets in the future, as we continue to provide innovative products and a real earning opportunity to our sales force. Around the world, we have a lot of runway left."
2013 Updated Guidance (Unaudited)
Based on current business trends and foreign currency rates, the Company's second quarter and 2013 full year guidance is provided below.
Company Level
13 Weeks Ending
13 Weeks
52 Weeks Ending
52 Weeks
June 29, 2013
Ended
Dec 28, 2013
Ended
Low
High
June 30, 2012
Low
High
Dec 29, 2012
USD Sales Growth vs Prior Year
6%
8%
(5)%
5%
7%
0%
(a)
GAAP EPS
$1.36
$1.41
$0.22
$5.30
$5.45
$3.42
GAAP Pre-Tax ROS
14.2%
14.4%
3.9%
13.7%
13.9%
10.6%
Local Currency+ Sales Growth vs Prior Year
5%
7%
5%
5%
7%
5%
(a)
EPS Excluding Items*
$1.41
$1.46
$1.31
$5.52
$5.67
$4.99
Pre-Tax ROS Excluding Items
14.8%
15.1%
15.0%
14.3%
14.4%
14.2%
FX Impact on EPS Comparison
$0.02
$0.02
$0.00
$0.00
(a) 2011 had a 53rd week under the Company's fiscal calendar, and this negatively impacted the year-over-year sales comparison by 1% for full year 2012.
Full year 2013 net interest expense is expected to increase over 2012 by about $7 million, due to higher borrowings and interest rates in conjunction with reaching the Company's new leverage target. The reduction in the diluted earnings per share guidance range versus that provided in January, without items, reflects first quarter performance in local currency 5 cents above the high end of the Company's range using the tax rate included in the January guidance, more than offset by negative impacts of 3 cents on ongoing operations from the devaluation of the Venezuelan bolivar during the first quarter, 5 cents from changes in other foreign exchange rates and 7 cents from less shares repurchased in light of a higher assumed share price. The GAAP diluted earnings per share range is further impacted versus the previous guidance by a negative 8 cent impact from the first quarter devaluation of the Venezuelan bolivar related to the Company's net monetary asset, inventory and non-recurring deferred tax balance sheet positions at the time of the devaluation.
Segment Level
For the full year, sales in local currency are expected to be up by a low single digit percentage in the Europe segment, up by a low double digit to low-teen percentage in Asia Pacific, about even to down slightly in the two North American segments and to be up by a high teen percentage in the South America segment. Pre-tax return on sales for the full year, versus 2012, is expected to increase by about 1 percentage point in Asia Pacific, to increase slightly in Europe and to decrease about 50 basis points in the North and South American segments. The outlook for return on sales in South America excludes the impact of the devaluation of the Venezuelan bolivar on the Company's balance sheet positions at the time of the devaluation and assumes no change in the current 6.3 Venezuelan bolivar to U.S. dollar exchange rate.
*See Non-GAAP Financial Measures Reconciliation Schedules.
** The Company classifies Established Market Units as those operating in Western Europe (including Scandinavia), the United States, Canada, Australia and Japan and its remaining units as Emerging Market Units.
+ Local currency changes are measured by comparing current year results with those of the prior year translated at the current year's foreign exchange rates.
First Quarter Earnings Conference Call
Tupperware Brands will conduct a conference call today, Wednesday, April 24, 2013, at 10:00 am Eastern time. The conference call will be webcast and accessible, along with a copy of this news release, on www.tupperwarebrands.com.
Tupperware Brands Corporation is a portfolio of global direct selling companies, selling innovative, premium products across multiple brands and categories through an independent sales force of 2.7 million. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products for consumers through the Armand Dupree, Avroy Shlain, BeautiControl, Fuller Cosmetics, NaturCare, Nutrimetics, and Nuvo brands.
The Company's stock is listed on the New York Stock Exchange (TUP). Statements contained in this release, which are not historical fact and use predictive words such as "outlook", "expects" or "target" are forward-looking statements. These statements involve risks and uncertainties that include recruiting and activity of the Company's independent sales forces, the success of new product introductions and promotional programs, governmental approvals of materials for use in food containers and beauty and personal care products, the success of buyers in obtaining financing or attracting tenants for commercial and residential developments, the effects of economic and political conditions generally and foreign exchange risk in particular and other risks detailed in the Company's periodic reports as filed in accordance with the Securities Exchange Act of 1934.
The Company does not intend to update forward-looking information, other than through its quarterly earnings releases, unless it expects diluted earnings per share for the current quarter, excluding items impacting comparability and the impact of changes in foreign exchange rates, to be significantly below its previous guidance.
Non-GAAP Financial Measures
The Company has utilized non-GAAP financial measures in this release, which are provided to assist readers' understanding of the Company's results of operations. These amounts, identified as items impacting comparability, at times materially impact the comparability of the Company's results of operations. The adjusted information is intended to be indicative of Tupperware Brands' primary operations, and to assist readers in evaluating performance and analyzing trends across periods.
The non-GAAP financial measures exclude gains from the sale of property, plant and equipment and insurance settlements related to casualty losses, inventory obsolescence in conjunction with decisions to exit or significantly restructure businesses, asset retirement obligations, and re-engineering costs. Further, while the Company is engaged in a multi-year program to sell land adjacent to its Orlando, Florida headquarters, and also disposes of other excess land and facilities periodically, these activities are not part of the Company's primary business operations. Additionally, amounts recognized in any given period are not indicative of amounts that may be recognized in any particular future period. For this reason, these amounts are excluded as indicated. Further, the Company excludes significant charges related to casualty losses caused by significant weather events, fires or similar circumstances. It also excludes any related gains resulting from the settlement of associated insurance claims. While these types of events can and do recur periodically, they are excluded from indicated financial information due to their distinction from ongoing business operations, inherent volatility and impact on the comparability of earnings across quarters. Also, the Company periodically records exit costs accounted for using the applicable accounting guidance for exit or disposal cost obligations and other amounts related to rationalizing its supply chain operations and other restructuring activities, including upon liquidation of operations in a country, the recognition in income of amounts previously recorded in equity as a cumulative translation adjustment, and believes these amounts are similarly volatile and impact the comparability of earnings across quarters. Therefore, they are also excluded from indicated financial information to provide what the Company believes represents a useful measure for analysis and predictive purposes. The Company believes that excluding from indicated financial information costs incurred in connection with a significant change in its capital structure that is of a nature that would be expected to recur infrequently, also provides a useful measure for analysis and predictive purposes. During the first quarter of 2013, the Venezuelan government abolished the exchange rate that the Company had previously used in translating the results of its Venezuelan operations, and at the same time devalued the official foreign exchange rate in that country. Due to the lack of a connection between the market perceived value of the Venezuelan bolivar and the exchange rate mandated by the Venezuelan government, and now used by the Company, and the sporadic timing of such mandated changes in the exchange rate, the non-GAAP measures exclude for analysis and predictive purposes, the impact from the devaluation on the bolivar denominated net monetary asset, inventory and non-recurring deferred tax balance sheet positions of the Company in Venezuela at the time of the devaluation.
The Company has also elected to present financial measures excluding the impact of amortizing the purchase accounting carrying value of certain definite-lived intangible assets, primarily the value of independent sales forces recorded in connection with the Company's December 2005 acquisition of the direct selling businesses of Sara Lee Corporation. The amortization expense related to these assets will continue for several years; however, based on the Company's current estimates, this amortization will decline as the years progress. Similarly, in connection with its evaluation of the carrying value of acquired intangible assets and goodwill, the Company has periodically recognized impairment charges. The Company believes that these types of non-cash charges will not be representative in any single reporting period of amounts recorded in prior reporting periods or expected to be recorded in future reporting periods. Therefore, they are excluded from indicated financial information to also provide a useful measure for analysis and predictive purposes.
As the impact of changes in exchange rates are an important factor in understanding period-to-period comparisons, the Company believes the presentation of results on a local currency basis, in addition to reported results, helps improve readers' ability to understand the Company's operating results and evaluate performance in comparison with prior periods. The Company presents local currency information that compares results between periods as if current period exchange rates had been the exchange rates in the prior period. The Company uses results on a local currency basis as one measure to evaluate performance. The Company generally refers to such amounts as calculated on a local currency basis, as restated or excluding the impact of foreign currency. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a local currency basis may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP.
In information included with this release, the Company has referred to Adjusted EBITDA and a Debt/Adjusted EBITDA ratio, which are non-GAAP financial measures used in the Company's credit agreement. The Company uses these measures in its capital allocation decision process and in discussions with investors, analysts and other interested parties and therefore believes it is useful to disclose this amount and ratio. The Company's calculation of these measures is in accordance with its credit agreement, and is set forth in the reconciliation from GAAP amounts in an attachment to this release; however, the reader is cautioned that other companies define these measures in different ways, and consequently they will likely not be comparable with similarly labeled amounts disclosed by others.
TUPPERWARE BRANDS CORPORATION
FIRST QUARTER SALES STATISTICS*
(UNAUDITED)
All Units
Reported
Sales
Inc/(Dec)%
Restated+
Sales
Inc/(Dec)%
Active
Sales
Force
Inc/(Dec)
vs. 1Q '12
%
Total
Sales
Force
Inc/(Dec)
vs. 1Q '12
%
Europe
-
2
107,744
4
624,312
8
Asia Pacific
12
17
230,915
6
b
921,295
(3)
c
TW North America
(2)
(3)
92,157
(19)
d
334,842
1
Beauty North America
(2)
(3)
267,943
(11)
e
518,705
(7)
South America
8
18
89,956
(11)
f
320,422
14
g
Total All Units
4
6
788,715
(6)
a, d
2,719,576
1
Emerging Market Units
Europe
5
13
68,046
11
444,015
12
Asia Pacific
21
24
205,538
9
b
820,713
(2)
c
TW North America
(4)
(6)
82,439
(4)
253,677
3
Beauty North America
1
-
232,856
(12)
e
429,197
(8)
South America
8
18
89,956
(11)
f
320,422
14
g
Total Emerging Market Units
10
13
678,835
(3)
2,268,024
2
Established Market Units
Europe
(3)
(2)
39,698
(7)
180,297
1
Asia Pacific
(15)
(8)
25,377
(14)
100,582
(8)
TW North America
-
-
9,718
(65)
d
81,165
(5)
Beauty North America
(10)
(10)
35,087
(4)
89,508
(1)
South America
-
-
-
-
-
-
Total Established Market Units
(5)
(3)
109,880
(19)
d
451,552
(3)
* Sales force statistics as collected by the Company and, in some cases, provided by distributors and sales force. The company classifies Established Market Units as those operating in Western Europe, including Scandinavia, the United States, Canada, Australia and Japan, and its remaining units as Emerging Market Units. Active Sales Force is defined as the average number of people ordering in each cycle over the course of the quarter, and Total Sales Force is defined as the number of sales force members of the units as of the end of the quarter.
+ Local currency changes are measured by comparing current year results with those of the prior year translated at the current year's foreign exchange rates.
Notes
a Seven percentage points of the 12 percentage point difference between the 6% local currency sales increase and 6% decrease in active sellers reflected a change in measurement in activity in the Tupperware U.S. and Canada business described below and the shift in sales between reporting segments. There was a shift in active sellers towards Europe, which has a higher level of productivity from a large portion of its business being in established market units where housewares are sold at relatively higher price points than beauty and personal care products and through group demonstrations. There was a shift away from Beauty North America. Active sellers decreased in this segment, where sales are of beauty and personal care products at relatively low price points and where Fuller Mexico sells through one-on-one contact.
b Higher growth in local currency sales than in active sellers reflected higher standards and stocking distributor ordering decisions in Indonesia and a mix shift toward Indonesia and Malaysia/Singapore, that have higher-than-average productivity, and away from the Philippines, that has lower-than-average productivity.
c Due to a change in qualification standards to remain as a member of the sales forces in the Malaysia/Singapore and India units, there has been a significant reduction in total sellers compared with what would have been the case under the previous qualification standards. These units had strong double-digit percentage increases in both active sellers and sales in the first quarter of 2013 compared with 2012.
d In the third quarter of 2012, the Tupperware U.S. and Canada business began measuring sales force activity on a weekly rather than a monthly basis. For the first quarter, this had a negative 15, 2, 66 and 12 percentage point impact on the total Tupperware North America, total company, Tupperware North America established markets and total company established market comparisons, respectively.
e Much lower actives this year in Fuller Mexico reflected higher standards under sales force recruiting and award programs in 2013 compared with 2012, leading to a higher order size in 2013.
f Local currency sales increase despite decrease in active sellers reflected price increases, along with a mix shift toward the more housewares focused/higher net per unit businesses in Brazil and Venezuela. Also contributing was an increase in order size requirement in Argentina, together with a mix shift toward housewares at higher price points than beauty and personal care products.
g The total sales force in South America was up significantly while the number of active sellers was down, from comparisons in Brazil, where changes in qualification levels for awards led to a lower number of higher value orders. There was also a mix shift away from Argentina, which as a beauty and personal care focused unit that operates on a campaign cycle, has a much higher activity rate for its sales force than the segment overall.
TUPPERWARE BRANDS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
13 Weeks Ended
13 Weeks Ended
March 30,
March 31,
(In millions, except per share data)
2013
2012
Net sales
$ 662.9
$ 639.5
Cost of products sold
222.8
213.1
Gross margin
440.1
426.4
Delivery, sales and administrative expense
348.5
339.6
Re-engineering and impairment charges
2.2
0.9
Gains on disposal of assets including insurance recoveries
-
0.2
Operating income
89.4
86.1
Interest income
0.6
0.7
Interest expense
8.9
9.8
Other (income) expense
2.9
(0.3)
Income before income taxes
78.2
77.3
Provision for income taxes
20.0
19.0
Net income
$ 58.2
$ 58.3
Net income per common share:
Basic earnings per share:
$ 1.09
$ 1.04
Diluted earnings per share:
$ 1.06
$ 1.02
TUPPERWARE BRANDS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Amounts in millions, except per share)
13 Weeks
13 Weeks
Ended
Ended
Reported
Restated
Foreign
March 30,
March 31,
%
%
Exchange
2013
2012
Inc (Dec)
Inc (Dec)
Impact *
Net Sales:
Europe
$ 217.6
$ 218.2
-
2
$ (5.7)
Asia Pacific
199.7
177.8
12
17
(6.6)
TW North America
82.8
84.6
(2)
(3)
0.5
Beauty North America
85.5
87.4
(2)
(3)
1.0
South America
77.3
71.5
8
18
(5.9)
$ 662.9
$ 639.5
4
6
$ (16.7)
Segment profit:
Europe
$ 37.2
$ 36.1
3
5
$ (0.6)
Asia Pacific
42.8
33.9
26
32
(1.5)
TW North America
12.3
13.3
(7)
(8)
0.2
Beauty North America
6.4
6.9
(8)
(10)
0.2
South America
5.7
10.0
(43)
(37)
(0.9)
104.4
100.2
4
7
(2.6)
Unallocated expenses
(15.7)
(13.1)
20
18
(0.2)
Gains on disposal of assets including insurance recoveries
-
0.2
(100)
(100)
-
Re-engineering and impairment charges
(2.2)
(0.9)
+
+
-
Interest expense, net
(8.3)
(9.1)
(8)
(8)
-
Income before taxes
78.2
77.3
1
5
(2.8)
Provision for income taxes
20.0
19.0
5
9
(0.7)
Net income
$ 58.2
$ 58.3
-
4
$ (2.1)
Net income per common share (diluted)
$ 1.06
$ 1.02
4
8
(0.04)
Weighted Average number of diluted shares
54.7
57.1
* 2013 actual compared with 2012 translated at 2013 exchange rates.
TUPPERWARE BRANDS CORPORATION
NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
(In millions except per share data)
13 Weeks Ended March 30, 2013
13 Weeks Ended March 31, 2012
Reported
Adj's
Excl Adj's
Reported
Adj's
Excl Adj's
Segment profit
Europe
$ 37.2
$ -
$ 37.2
$ 36.1
$ 0.1
a
$ 36.2
Asia Pacific
42.8
0.2
a
43.0
33.9
0.2
a
34.1
TW North America
12.3
-
12.3
13.3
-
13.3
Beauty North America
6.4
0.1
a
6.5
6.9
0.2
a
7.1
South America
5.7
3.9
b
9.6
10.0
-
10.0
104.4
4.2
108.6
100.2
0.5
100.7
Unallocated expenses
(15.7)
-
(15.7)
(13.1)
(0.5)
c
(13.6)
Gains on disposal of assets
-
-
-
0.2
(0.2)
d
-
Re-eng and impairment chgs
(2.2)
2.2
e
-
(0.9)
0.9
e
-
Interest expense, net
(8.3)
-
(8.3)
(9.1)
-
(9.1)
Income before taxes
78.2
6.4
84.6
77.3
0.7
78.0
Provision for income taxes
20.0
0.2
f
20.2
19.0
-
19.0
Net income
$ 58.2
$ 6.2
$ 64.4
$ 58.3
$ 0.7
$ 59.0
Net income per common share (diluted)
$ 1.06
$ 0.12
$ 1.18
$ 1.02
$ 0.01
$ 1.03
(a) Amortization of intangibles of acquired beauty units.
(b) Translation impact related to the net monetary asset, inventory, and non-recurring deferred tax balance sheet positions when, in the first quarter of 2013, the Venezuelan government devalued the bolivar to U.S. dollar exchange rate to 6.3.
(c) Change in estimate of asset retirement obligation for the Company's Orlando and South Carolina locations.
(d) Gain on disposal of assets in 2012 was from insurance proceeds related to a flood in the Company's Venezuela operations.
(e) Re-engineering and impairment charges of $2.2 million in 2013 were primarily severance costs incurred to reduce headcount in Eastern Europe, Argentina, Uruguay, and several other of the Company's operations, as well as relocation and shutdown costs in several other locations. Re-engineering and impairment charges of $0.9 million in 2012 represented relocation expenses in Poland and severance costs incurred to reduce headcount in the Company's Argentina, BeautiControl, France, Mexico, Switzerland and United Kingdom operations. (f) Provision for income taxes represents the net tax impact of adjusted amounts determined on an item-by-item basis.
See note regarding non-GAAP financial measures in the attached press release.
TUPPERWARE BRANDS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
13 Weeks Ended
13 Weeks Ended
March 30,
March 31,
(In millions)
2013
2012
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities
$ 13.9
$ (24.8)
INVESTING ACTIVITIES
Capital expenditures
(9.1)
(18.8)
Proceeds from disposal of property, plant & equipment
0.5
1.0
Net cash used in investing activities
(8.6)
(17.8)
FINANCING ACTIVITIES
Dividend payments to shareholders
(19.7)
(17.4)
Net proceeds from issuance of senior notes
200.0
-
Repurchase of common stock
(103.6)
(54.1)
Repayment of long-term debt and capital lease obligations
(0.5)
(0.4)
Net change in short-term debt
(71.1)
68.3
Debt issuance costs
(0.2)
-
Proceeds from exercise of stock options
13.8
4.2
Excess tax benefits from share-based payment arrangements
8.3
5.4
Net cash provided by financing activities
27.0
6.0
Effect of exchange rate changes on cash and
cash equivalents
(4.7)
4.1
Net change in cash and cash equivalents
27.6
(32.5)
Cash and cash equivalents at beginning of year
119.8
138.2
Cash and cash equivalents at end of period
$ 147.4
$ 105.7
TUPPERWARE BRANDS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 30,
Dec. 29,
(In millions)
2013
2012
Assets
Cash and cash equivalents
$
147.4
$
119.8
Other current assets
719.7
646.7
Total current assets
867.1
766.5
Property, plant and equipment, net
293.4
298.8
Other assets
738.7
756.5
Total assets
$
1,899.2
$
1,821.8
Liabilities and Shareholders' Equity
Short-term borrowings and current
portion of long-term debt
$
128.1
$
203.4
Accounts payable and other current liabilities
497.0
491.1
Total current liabilities
625.1
694.5
Long-term debt
619.8
414.4
Other liabilities
216.6
233.8
Total shareholders' equity
437.7
479.1
Total liabilities and shareholders' equity
$
1,899.2
$
1,821.8
Debt to Adjusted EBITDA* Ratio as of and for the four quarters ended March 30, 2013: 1.61 times
*Adjusted EBITDA as defined in the Company's credit agreement under
Consolidated EBITDA. See calculation attached to this release.
TUPPERWARE BRANDS CORPORATION
NON-GAAP FINANCIAL MEASURES OUTLOOK RECONCILIATION SCHEDULE
April 24, 2013
(UNAUDITED)
($ in millions, except per share amounts)
Second Quarter
Second Quarter
2012 Actual
2013 Outlook
Range
Low
High
Income before income taxes
$ 24.7
$ 96.1
$ 99.7
Income tax
12.0
23.2
24.1
Effective Rate
49%
24%
24%
Net Income (GAAP)
$ 12.7
$ 72.9
$ 75.6
% change from prior year
474%
495%
Adjustments(1):
Purchase accounting intangibles impairments
$ 76.9
$ -
$ -
Gains on disposal of assets including insurance recoveries
(7.5)
-
-
Impact of Venezuelan bolivar devaluation on balance sheet positions
-
0.5
0.5
Re-engineering and other restructuring costs
1.1
3.5
3.5
Acquired intangible asset amortization
0.5
0.3
0.3
Income tax (2)
(9.9)
(1.5)
(1.5)
Net Income (adjusted)
73.8
75.7
78.4
Exchange rate impact (3)
1.3
-
-
Net Income (adjusted and 2012restated for currency changes)
75.1
75.7
78.4
% change from prior year
1%
4%
Net income (GAAP) per common share (diluted)
$ 0.22
$ 1.36
$ 1.41
% change from prior year
518%
541%
Net Income (adjusted) per common share (diluted)
$ 1.31
$ 1.41
$ 1.46
Net Income (adjusted & restated) per common share (diluted)
$ 1.33
$ 1.41
$ 1.46
% change from prior year
6%
10%
Average number of diluted shares (millions)
56.5
53.6
53.6
(1) Refer to Non-GAAP Financial Measures section of attached release for description of the general nature of adjustment items
(2) Represents income tax impact of adjustments on an item-by-item basis
(3) Difference between 2012 actual and 2012 restated at current currency exchange rates
See the note related to Venezuela foreign exchange on the following page
TUPPERWARE BRANDS CORPORATION
NON-GAAP FINANCIAL MEASURES OUTLOOK RECONCILIATION SCHEDULE
April 24, 2013
(UNAUDITED)
($ in millions, except per share amounts)
Full Year
Full Year
2012 Actual
2013 Outlook
Range
Low
High
Income before income taxes
$ 272.8
$ 372.5
$ 383.1
Income tax
79.8
91.5
94.2
Effective Rate
29%
25%
25%
Net Income (GAAP)
$ 193.0
$ 281.0
$ 288.9
% change from prior year
46%
50%
Adjustments(1):
Gains on disposal of assets including insurance recoveries
$ (7.9)
$ -
$ -
Re-engineering and other restructuring costs
22.1
9.5
9.5
Impact of Venezuelan bolivar devaluation on balance sheet positions
-
4.4
4.4
Acquired intangible asset amortization
2.1
1.3
1.3
Purchase accounting intangibles impairments
76.9
-
-
Income tax (2)
(4.8)
(3.3)
(3.3)
Net Income (adjusted)
281.4
292.9
300.8
Exchange rate impact (3)
(0.1)
-
-
Net Income (adjusted and 2012 restated for currency changes)
281.3
292.9
300.8
% change from prior year
4%
7%
Net income (GAAP) per common share (diluted)
$ 3.42
$ 5.30
$ 5.45
% change from prior year
55%
59%
Net Income (adjusted) per common share (diluted)
$ 4.99
$ 5.52
$ 5.67
Net Income (adjusted & restated) per common share (diluted)
$ 4.99
$ 5.52
$ 5.67
% change from prior year
11%
14%
Average number of diluted shares (millions)
56.4
53.1
53.1
(1) Refer to Non-GAAP Financial Measures section of attached release for description of the general nature of adjustment items
(2) Represents income tax impact of adjustments on an item-by-item basis
(3) Difference between 2012 actual and 2012 restated at current currency exchange rates
The Company's outlook assumes no change in the current 6.3 bolivar to U.S. dollar exchange rate. If the rate had gone to 23 bolivars to the dollar as of the beginning of the second quarter of 2013, the Company estimates its full-year 2013 pre-tax earnings would be $28 million lower than shown above, of which $17 million would relate to amounts already on the balance sheet at the end of March 2012, and the rest to the translation of 2013 activity at the lower rate.
TUPPERWARE BRANDS CORPORATION
ADJUSTED EBITDA AND DEBT/ADJUSTED EBITDA *
(UNAUDITED)
As of and for
the Four Quarters
Ended
March 30,
2013
Adjusted EBITDA:
Net income
$
192.9
Add:
Depreciation and amortization
49.6
Gross interest expense
34.0
Provision for income taxes
80.8
Pretax non-cash re-engineering and impairment charges
93.4
Equity compensation
21.3
Deduct:
Gains on land sales, insurance recoveries, etc.
(7.7)
Total Adjusted EBITDA
$
464.3
Consolidated total debt
$
747.9
Divided by adjusted EBITDA
464.3
Debt to Adjusted EBITDA Ratio
1.61
*
Amounts and calculations are based on the definitions and provisions of the Company's $450 million Credit Agreement
dated June 2, 2011 and, where applicable, are based on the trailing four quarter amounts. "Adjusted EBITDA" is
calculated as defined for "Consolidated EBITDA" in the Credit Agreement.
Lakes Entertainment Announces Receipt of Debt Payment from Shingle Springs Band of Miwok Indians
Lakes Entertainment, Inc. (“Lakes”) (LACO) announced that today, it received a cash payment of $57.1 million per the terms of the Debt Termination Agreement that Lakes entered into with the Shingle Springs Band of Miwok Indians (“Tribe”) on July 16, 2013. Upon receipt of such payment, the management agreement, under which Lakes had been managing the Red Hawk Casino for the Tribe, was terminated.
Tim Cope, President and Chief Financial Officer of Lakes stated, “We are proud to have been involved in the development and management of this first-class casino property and we wish the Shingle Springs Tribe continued success.” Mr. Cope added, “This payment gives us greater financial flexibility as we continue to pursue new opportunities.”
About Lakes Entertainment
Lakes Entertainment, Inc. currently owns the Rocky Gap Casino Resort near Cumberland, Maryland. Lakes also has an investment in Rock Ohio Ventures, LLC’s casino and racino developments in Ohio, and an investment in Dania Entertainment Center, LLC’s Dania Jai Alai fronton in Dania Beach, Florida.
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made or to be made by Lakes Entertainment, Inc.) contains statements that are forward-looking, such as statements relating to plans for future expansion and other business development activities as well as other capital spending, financing sources and the effects of regulation (including gaming and tax regulation) and competition. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the company. These risks and uncertainties include, but are not limited to, need for potential future financing to meet Lakes’ development needs; Lakes operates in a highly competitive industry; possible changes in regulations; possible need for future financing to meet Lakes' expansion goals; risks of entry into new businesses; reliance on Lakes' management; and litigation costs. For more information, review the company's filings with the Securities and Exchange Commission.
.
.
Contact:.
.
Lakes Entertainment, Inc.
Investor Relations Contact:
Timothy Cope, 952-449-7030.
..
The Toro Company Reports Fiscal 2013 Third Quarter Results
Third quarter sales increase to $510 million and net earnings per share increase to $0.68
• Quarterly results strengthened by improved market conditions and increased demand for residential and landscape contractor products
• Company raises full-year earnings outlook on the strength of margin improvement
Business WirePress Release: The Toro Company – Thu, Aug 22, 2013 8:30 AM EDT..
.
The Toro Company (TTC) today reported net earnings of $40.1 million, or $0.68 per share, on a net sales increase of 1.2 percent to $509.9 million for its fiscal third quarter ended August 2, 2013. In the comparable fiscal 2012 period, the company delivered net earnings of $40.5 million, or $0.67 per share, on net sales of $504.1 million.
For the first nine months, Toro reported net earnings of $149.9 million, or $2.53 per share, on a net sales increase of 2.4 percent to $1,659.1 million. In the comparable fiscal 2012 period, the company posted net earnings of $129.3 million, or $2.13 per share, on net sales of $1,619.4 million.
“For the quarter, our results were strengthened by a summer growing season with favorable temperatures and precipitation levels as compared to last year’s severe drought conditions,” said Michael J. Hoffman, Toro’s chairman and chief executive officer. “The more desirable weather helped us drive retail sales across most of our businesses and, in particular, our residential business. In addition to realizing sales delayed in the prior quarter by adverse spring weather conditions, our residential business benefited from increased demand for our new and innovative products, including our Timecutter® zero turn radius riding products and our recently introduced line of lithium-ion battery-powered string and hedge trimmers.”
“As anticipated, the Tier 4 diesel engine transition—which caused a significant portion of our professional sales to be accelerated into our first quarter from later quarters as we’ve historically seen—continued to impact the quarterly results for our professional business. Year-to-date our results are solid and our business fundamentals remain sound. Our golf and landscape contractor businesses are benefitting from innovative and high performing equipment offerings valued by our end-user customers, we continue to grow our micro irrigation business around the world, and we realized additional sales from increased customer demand for our rental products and newly introduced Toro-branded underground and construction products.”
“Looking ahead, although we are always mindful of the challenges that Mother Nature can create for us, as well as continuing expectations for slow worldwide economic growth, we remain cautiously optimistic about the remainder of our year. We expect favorable sales comparisons to last year’s fourth quarter when limited prior season snowfall in North America and Europe significantly affected demand for our snowthrower products. Turning to field inventory, despite elevated positions held through the second quarter due to the planned execution of the Tier 4 transition and the resulting impact of the poor spring weather conditions, we believe that recent retail efforts have reduced field inventories across our product lines and at these improved levels we are well positioned for the future. Lastly, we expect that momentum from our productivity efforts and favorable commodity trends, somewhat offset by product mix, should drive additional earnings gains. As a result, today we are refining our full-year revenue outlook and increasing our earnings expectations.”
The company now expects revenue growth for fiscal 2013 to be about 4 percent and net earnings to be about 2.55 per share, or an increase of about 19 percent over fiscal 2012.
SEGMENT RESULTS
Professional
• Professional segment net sales for the third quarter totaled $343.9 million, down 4.8 percent from the prior year period. The quarterly sales decrease primarily was attributable to the Tier 4 diesel engine transition and related acceleration of a significant portion of our professional sales into our first quarter from later quarters as historically experienced. Offsetting the decrease, shipments of landscape contractor equipment benefited from increased demand for our zero turn radius products driven by more favorable weather conditions this quarter compared to the drought conditions last year, as well as newly introduced product offerings. Rental and construction equipment sales were up on increased product demand. Global micro irrigation sales increased on continued demand for more efficient irrigation solutions for agriculture. For the first nine months, professional segment net sales were $1,169.4 million, up 6.2 percent from the comparable fiscal 2012 period.
• Professional segment earnings for the third quarter totaled $60.5 million, down 14.2 percent from the prior year period. For the first nine months, professional segment earnings were $233.5 million, up 10.5 percent from the comparable fiscal 2012 period.
Residential
• Residential segment net sales for the third quarter totaled $155.5 million, up 14.4 percent from the prior year period. Favorable temperatures and precipitation levels in the quarter led to sales increases across all summer product categories, including riding products, walk power mowers and handheld trimmer and blower products. For the first nine months, residential segment net sales were $477.8 million, down 5.5 percent from the comparable fiscal 2012 period. The year-to-date sales results largely were attributable to the unusually mild 2012/2013 winter season and the late start to spring.
• Residential segment earnings for the third quarter totaled $15.1 million, up 50 percent from the prior year period. For the first nine months, residential segment earnings were $51.9 million, up 1.4 percent from the comparable fiscal 2012 period.
OPERATING RESULTS
Gross margin for the third quarter was 34.9 percent, down 40 basis points from the comparable fiscal 2012 period, primarily due to product mix but offset by favorable commodity costs, productivity gains and realized pricing. For the first nine months, gross margin was up 130 basis points to 35.9 percent.
Selling, general and administrative (SG&A) expense as a percent of sales increased 20 basis points for the third quarter to 23.4 percent. For the first nine months, SG&A expense increased 40 basis points as a percent of sales to 22.5 percent. For both periods, the increase in SG&A as a percent of sales was the result of higher warehousing expense, increased engineering spending and incremental costs from acquisitions, offset by lower warranty expense.
Operating earnings as a percent of sales decreased 60 basis points to 11.5 percent for the third quarter, but was up 90 basis points to 13.4 percent for the year to date.
The effective tax rate for the third quarter was 30.5 percent compared with 31.8 percent in the same period last year. For the year to date comparison, the tax rate decreased to 31.0 percent from 33.3 percent. The decrease in both periods was primarily the result of the reenactment of the Federal Research and Engineering Tax Credit.
Accounts receivable at the end of the third quarter totaled $202.1 million, up 2.6 percent from the prior year period. Net inventories were $258.9 million, up 10.3 percent from the end of last year’s third quarter. Trade payables were $124.2 million, the approximate equivalent of last year.
About The Toro Company
The Toro Company (TTC) is a leading worldwide provider of innovative turf, landscape, rental and construction equipment, and irrigation and outdoor lighting solutions. With sales of more than $1.9 billion in fiscal 2012, Toro’s global presence extends to more than 90 countries through strong relationships built on integrity and trust, constant innovation and a commitment to helping customers enrich the beauty, productivity and sustainability of the land. Since 1914, the company has built a tradition of excellence around a number of strong brands to help customers care for golf courses, sports fields, public green spaces, commercial and residential properties and agricultural fields. More information is available at www.thetorocompany.com.
LIVE CONFERENCE CALL
August 22, 2013 at 10:00 a.m. CDT
www.thetorocompany.com/invest
The Toro Company will conduct its earnings call and webcast for investors beginning at 10:00 a.m. CDT on August 22, 2013. The webcast will be available at www.streetevents.com or at www.thetorocompany.com/invest. Webcast participants will need to complete a brief registration form and should allocate extra time before the webcast begins to register and, if necessary, download and install audio software.
Safe Harbor
Statements made in this news release, which are forward-looking, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied. These uncertainties include factors that affect all businesses operating in a global market as well as matters specific to Toro. Particular risks and uncertainties that may affect the company’s operating results or overall financial position at the present include: slow or negative growth rates in global and domestic economies, resulting in rising or persistent unemployment and weakened consumer confidence; the threat of terrorist acts and war, which may result in contraction of the domestic and global economies; drug cartel-related violence, which may disrupt our production activities and maquiladora operations based in Juarez, Mexico; fluctuations in the cost and availability of raw materials and components, including steel, engines, hydraulics, resins and other commodities and components; fluctuating fuel and other costs of transportation; the impact of abnormal weather patterns, natural disasters and global pandemics; the level of growth or contraction in our key markets; government and municipal revenue, budget and spending levels, which may negatively impact our grounds maintenance equipment business in the event of reduced tax revenues and tighter government budgets; dependence on The Home Depot as a customer for the residential segment; elimination of shelf space for our products at retailers; inventory adjustments or changes in purchasing patterns by our customers; market acceptance of existing and new products; increased competition; our ability to achieve the revenue growth, operating earnings and employee engagement goals of our multi-year employee initiative called “Destination 2014”; our increased dependence on international sales and the risks attendant to international operations and markets, including political, economic and/or social instability in the countries in which we manufacture or sell our products resulting in contraction or disruption of such markets; credit availability and terms, interest rates and currency movements including, in particular, our exposure to foreign currency risk; our relationships with our distribution channel partners, including the financial viability of distributors and dealers; our ability to successfully achieve our plans for and integrate acquisitions and manage alliances or joint ventures, including Red Iron Acceptance, LLC; the costs and effects of changes in tax, fiscal, government and other regulatory policies, including rules relating to environmental, health and safety matters, and Tier 4 emissions requirements; unforeseen product quality or other problems in the development, production and usage of new and existing products; loss of or changes in executive management or key employees; ability of management to manage around unplanned events; our reliance on our intellectual property rights and the absence of infringement of the intellectual property rights of others; and the occurrence of litigation or claims. In addition, factors that could affect completion of the proposed acquisition of a micro irrigation business in China including whether and when the required regulatory approvals will be obtained, and whether and when the other closing conditions will be satisfied. In addition to the factors set forth in this paragraph, market, economic, financial, competitive, legislative, governmental, weather, production and other factors identified in Toro's quarterly and annual reports filed with the Securities and Exchange Commission, could affect the forward-looking statements in this press release. Toro undertakes no obligation to update forward-looking statements made in this release to reflect events or circumstances after the date of this release.
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (Unaudited)
(Dollars and shares in thousands, except per-share data)
Three Months Ended Nine Months Ended
August 2, August 3, August 2, August 3,
2013 2012 2013 2012
Net sales $ 509,918 $ 504,076 $ 1,659,065 $ 1,619,396
Gross profit 178,031 178,122 596,149 560,195
Gross profit percent 34.9 % 35.3 % 35.9 % 34.6 %
Selling, general, and administrative expense 119,451 117,137 373,894 358,689
Operating earnings 58,580 60,985 222,255 201,506
Interest expense (3,909 ) (4,198 ) (12,307 ) (12,791 )
Other income, net 2,982 2,681 7,420 5,231
Earnings before income taxes 57,653 59,468 217,368 193,946
Provision for income taxes 17,556 18,919 67,473 64,656
Net earnings $ 40,097 $ 40,549 $ 149,895 $ 129,290
Basic net earnings per share $ 0.70 $ 0.69 $ 2.58 $ 2.17
Diluted net earnings per share $ 0.68 $ 0.67 $ 2.53 $ 2.13
Weighted average number of shares of common
stock outstanding – Basic
57,653
59,045
58,091
59,642
Weighted average number of shares of common
stock outstanding – Diluted
58,913
60,336
59,266
60,829
Segment Data (Unaudited)
(Dollars in thousands)
Three Months Ended Nine Months Ended
August 2, August 3, August 2, August 3,
Segment Net Sales
2013 2012 2013 2012
Professional $ 343,866 $ 361,120 $ 1,169,446 $ 1,100,899
Residential 155,452 135,894 477,789 505,399
Other 10,600 7,062 11,830 13,098
Total * $ 509,918 $ 504,076 $ 1,659,065 $ 1,619,396
* Includes international sales of $ 138,855 $ 133,623 $ 492,526 $ 480,471
Three Months Ended Nine Months Ended
August 2, August 3, August 2, August 3,
Segment Earnings (Loss) Before Income Taxes
2013 2012 2013 2012
Professional $ 60,508 $ 70,537 $ 233,521 $ 211,329
Residential 15,070 10,048 51,903 51,174
Other (17,925 ) (21,117 ) (68,056 ) (68,557 )
Total $ 57,653 $ 59,468 $ 217,368 $ 193,946
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Dollars in thousands)
August 2, August 3,
2013 2012
ASSETS
Cash and cash equivalents $ 161,180 $ 143,058
Receivables, net 202,148 197,023
Inventories, net 258,929 234,790
Prepaid expenses and other current assets 27,426 24,436
Deferred income taxes 62,324 62,368
Total current assets 712,007 661,675
Property, plant, and equipment, net 179,943 177,723
Goodwill and other assets, net 139,180 147,130
Total assets $ 1,031,130 $ 986,528
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt $ — $ 1,858
Accounts payable 124,244 124,168
Accrued liabilities 284,702 278,797
Total current liabilities 408,946 404,823
Long-term debt, less current portion 223,528 223,467
Deferred revenue 10,547 11,289
Deferred income taxes 2,898 1,380
Other long-term liabilities 6,592 7,822
Stockholders’ equity 378,619 337,747
Total liabilities and stockholders’ equity $ 1,031,130 $ 986,528
THE TORO COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in thousands)
Nine Months Ended
August 2, August 3,
2013 2012
Cash flows from operating activities:
Net earnings $ 149,895 $ 129,290
Adjustments to reconcile net earnings to net cash provided by operating activities:
Noncash income from finance affiliate (5,658 ) (4,521 )
Provision for depreciation and amortization 39,204 37,929
Stock-based compensation expense 7,927 7,465
Decrease (increase) in deferred income taxes 183 (443 )
Other 28 (117 )
Changes in operating assets and liabilities, net of effect of acquisitions:
Receivables, net (56,762 ) (51,640 )
Inventories, net (12,048 ) (6,428 )
Prepaid expenses and other assets (1,539 ) (6,114 )
Accounts payable, accrued liabilities, deferred revenue, and other long-term liabilities
36,910
59,986
Net cash provided by operating activities 158,140 165,407
Cash flows from investing activities:
Purchases of property, plant, and equipment (34,390 ) (28,158 )
Proceeds from asset disposals 344 114
Distributions from finance affiliate, net 2,977 1,777
Acquisitions, net of cash acquired — (9,663 )
Net cash used in investing activities (31,069 ) (35,930 )
Cash flows from financing activities:
Repayments of short-term debt (415 ) (922 )
Repayments of long-term debt (1,769 ) (1,892 )
Excess tax benefits from stock-based awards 5,196 8,080
Proceeds from exercise of stock options 8,146 17,337
Purchases of Toro common stock (76,003 ) (67,354 )
Dividends paid on Toro common stock (24,453 ) (19,748 )
Net cash used in financing activities (89,298 ) (64,499 )
Effect of exchange rates on cash and cash equivalents (2,449 ) (2,806 )
Net increase in cash and cash equivalents 35,324 62,172
Cash and cash equivalents as of the beginning of the period 125,856 80,886
Cash and cash equivalents as of the end of the period $ 161,180 $ 143,058
.
.
Contact:.
.
The Toro Company
Investor Relations
Amy Dahl, 952-887-8917
Managing Director, Corporate Communications and Investor Relations
amy.dahl@toro.com
or
Media Relations
Branden Happel, 952-887-8930
Senior Manager, Public Relations
Sanderson Farms, Inc. Reports Results for Third Quarter of Fiscal 2013
Business WirePress Release: Sanderson Farms, Inc. – 5 hours ago..
Sanderson Farms, Inc. (SAFM) today reported results for the third fiscal quarter and nine months ended July 31, 2013.
Net sales for the third quarter of fiscal 2013 were $739.0 million compared with $624.9 million for the same period a year ago. For the quarter, the Company reported net income of $67.9 million, or $2.95 per share, compared with net income of $28.7 million, or $1.25 per share, for the third quarter of fiscal 2012.
Net sales for the first nine months of fiscal 2013 were $1,955.9 million compared with $1,737.7 million for the first nine months of fiscal 2012. Net income for the first nine months of fiscal 2013 totaled $85.3 million, or $3.71 per share, compared with net income of $44.6 million, or $1.94 per share, for the first nine months of last year.
“Sanderson Farms’ financial results for the third quarter of fiscal 2013 reflect improved market conditions when compared to last year’s third quarter,” said Joe F. Sanderson, Jr., chairman and chief executive officer of Sanderson Farms, Inc. “Market prices for poultry products were higher than the third quarter of fiscal 2012, as the Georgia Dock whole bird price remained historically high during the quarter. The Georgia Dock price reflects steady retail grocery store demand. In addition, market prices for wings, while below last year’s third quarter levels, improved during the quarter. Boneless breast meat prices remained well above last year’s prices and peaked in May as several quick serve restaurants and other food service establishments featured chicken on their menus.”
Overall market prices for poultry products were higher in the third quarter of fiscal 2013 compared with prices in the third quarter of fiscal 2012. As measured by a simple average of the Georgia dock price for whole chickens, prices increased 11.6 percent compared with the third quarter of fiscal 2012. Boneless breast prices improved when compared to last year’s third fiscal quarter, averaging 32.3 percent higher than the prior-year period. Jumbo wing prices averaged $1.28 per pound for the third quarter of fiscal 2013, down 19.3 percent from the average of $1.59 per pound for the third quarter of fiscal 2012. The average quoted market price for bulk leg quarters was essentially flat during the quarter, averaging $0.51 per pound during the third fiscal quarter of 2013 compared to $0.50 during the third fiscal quarter of 2012. Cash prices for corn delivered to the Company increased 8.1 percent compared with the third quarter a year ago, while the price for soybean meal delivered to the Company increased 10.3 percent. For the nine months ended July 31, 2013, the Company’s cash prices for corn increased 13.2 percent and soybean meal increased 29.3 percent when compared to the nine months ended July 31, 2012.
“While poultry market prices improved during our third fiscal quarter, the Company continued to experience higher grain prices compared with the same period last year,” added Sanderson. “Market prices for grain have remained high through most of August, but favorable growing conditions this summer have fueled considerable optimism about this year’s corn and soybean crops. While the available grain quantity and prices during the coming months will ultimately depend on this year’s final crop performance, prices have recently moved lower. If we priced all of our needs for the remainder of the fiscal year at yesterday’s market prices, cash paid for feed grains would be approximately $79 million higher during fiscal 2013 compared to fiscal 2012. However, fourth quarter cash market prices would be $65 million lower than last year’s fourth quarter. We have priced our grain needs through August but will be on the market for our needs starting in September.”
“We are also pleased to report that our due diligence and related permitting processes are substantially complete for our previously announced Palestine, Texas facility,” said Sanderson. “Most conditions precedent to breaking ground on the new poultry complex have been met, and we hope to finalize a date to begin construction of the new feed mill, hatchery, processing plant and wastewater treatment facilities in September, subject to final approval by our board of directors. We greatly appreciate the support, encouragement and welcome we have received from the public officials and communities in Palestine, Anderson County, Freestone County and Austin, and we are anxious to begin this next phase of growth for our shareholders, employees and other stakeholders.”
Sanderson Farms will hold a conference call to discuss this press release today, August 27, 2013, at 10:00 a.m. Central, 11:00 a.m. Eastern. Investors will have the opportunity to listen to a live Internet broadcast of the conference call through the Company's Web site at www.sandersonfarms.com. To listen to the live call, please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, an Internet replay will be available shortly after the call and continue through September 6, 2013. Those without internet access or who prefer to participate via telephone may call 888-228-5307, access code 8155309.
Sanderson Farms, Inc. is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and other prepared food items. Its shares trade on the NASDAQ Global Select Market under the symbol SAFM.
This press release includes forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs, projections and estimates expressed in such statements. These risks, uncertainties and other factors include, but are not limited to, those discussed under “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended October 31,2012 and its subsequent Quarterly Reports on Form 10-Q filed with the SEC, and the following:
(1) Changes in the market price for the Company’s finished products and feed grains, both of which may fluctuate substantially and exhibit cyclical characteristics typically associated with commodity markets.
(2) Changes in economic and business conditions, monetary and fiscal policies or the amount of growth, stagnation or recession in the global or U.S. economies, either of which may affect the value of inventories, the collectability of accounts receivable or the financial integrity of customers, and the ability of the end user or consumer to afford protein.
(3) Changes in the political or economic climate, trade policies, laws and regulations or the domestic poultry industry of countries to which the Company or other companies in the poultry industry ship product, and other changes that might limit the Company’s or the industry’s access to foreign markets.
(4) Changes in laws, regulations, and other activities in government agencies and similar organizations applicable to the Company and the poultry industry and changes in laws, regulations and other activities in government agencies and similar organizations related to food safety.
(5) Various inventory risks due to changes in market conditions, including, but not limited to, the risk that market values of live and processed poultry inventories might be lower than the cost of such inventories requiring a downward adjustment to record the value of such inventories at the lower of cost or market as required by generally accepted accounting principles.
(6) Changes in and effects of competition, which is significant in all markets in which the Company competes, and the effectiveness of marketing and advertising programs. The Company competes with regional and national firms, some of which have greater financial and marketing resources than the Company.
(7) Changes in accounting policies and practices adopted voluntarily by the Company or required to be adopted by accounting principles generally accepted in the United States.
(8) Disease outbreaks affecting the production performance and/or marketability of the Company’s poultry products, or the contamination of its products.
(9) Changes in the availability and cost of labor and growers.
(10) The loss of any of the Company’s major customers.
(11) Inclement weather that could hurt Company flocks or otherwise adversely affect the Company’s operations, or changes in global weather patterns that could impact the supply of feed grains.
(12) Failure to respond to changing consumer preferences.
(13) Failure to successfully and efficiently start up and run a new plant or integrate any business the Company might acquire.
Readers are cautioned not to place undue reliance on forward-looking statements made by or on behalf of Sanderson Farms. Each such statement speaks only as of the day it was made. The Company undertakes no obligation to update or to revise any forward-looking statements. Most of the factors described above cannot be controlled by the Company. When used in this press release, the words “believes”, “estimates”, “plans”, “expects”, “should”, “outlook”, and “anticipates” and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements. Examples of forward-looking statements include (but are not limited to) statements of the Company’s belief about future earnings, expansion plans, sales, production, and expenses, including feed grain costs.
SANDERSON FARMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
Nine Months Ended
July 31,
July 31,
2013
2012
2013
2012
Net sales $ 738,964 $ 624,854 $ 1,955,919 $ 1,737,726
Costs and expenses:
Cost of sales
605,018
555,240
1,752,118 1,600,145
Selling, general and administrative 29,505 20,704 69,902 56,772
634,523 575,944 1,822,020 1,656,917
Operating income 104,441 48,910 133,899 80,809
Other income (expense):
Interest income 5 3 12 9
Interest expense (1,365 ) (1,999 ) (4,977 ) (7,387 )
Other (17 ) 5 34 (560 )
(1,377 ) (1,991 ) (4,931 ) (7,938 )
Income before income taxes 103,064 46,919 128,968 72,871
Income tax expense 35,145 18,198 43,621 28,274
Net income $ 67,919 $ 28,721 $ 85,347 $ 44,597
Basic earnings per share $ 2.95 $ 1.25 $ 3.71 $ 1.94
Diluted earnings per share $ 2.95 $ 1.25 $ 3.71 $ 1.94
Dividends per share $ 0.17 $ 0.17 $ 0.51 $ 0.51
SANDERSON FARMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
July 31,
October 31,
2013
2012
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 62,878 $ 27,802
Accounts receivable, net 118,744 98,022
Inventories 241,343 235,912
Refundable income taxes 0 4,467
Deferred income taxes 0 3,945
Prepaid expenses and other current assets 32,665 27,639
Total current assets 455,630 397,787
Property, plant and equipment 1,020,243 985,198
Less accumulated depreciation
(531,006
)
(489,885
)
489,237 495,313
Other assets 2,958 3,353
Total assets $ 947,825 $ 896,453
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 86,743 $ 82,755
Accrued expenses 51,519 42,082
Accrued income taxes 28,898 0
Current maturities of long-term debt 10,757 10,757
Deferred income taxes 125 0
Total current liabilities 178,042 135,594
Long-term debt, less current maturities 77,149 150,212
Claims payable 10,300 4,000
Deferred income taxes 53,926 56,572
Stockholders' equity:
Common stock 23,014 22,969
Paid-in capital 139,960 135,283
Retained earnings 465,434 391,823
Total stockholders’ equity 628,408 550,075
Total liabilities and stockholder’s equity $ 947,825 $ 896,453
SAFM-G
.
.
Contact:.
.
Sanderson Farms, Inc.
Mike Cockrell, 601-649-4030
Treasurer & Chief Financial Officer