Tumi Holdings Announces Financial Results for the Second Quarter 2014

SOUTH PLAINFIELD, N.J.--()--Tumi Holdings, Inc. (NYSE:TUMI), the leading global brand of premium travel, business and lifestyle products and accessories, today announced its financial results for the second quarter ended June 29, 2014.

Jerome Griffith, Chief Executive Officer, President and Director, commented, “We were pleased to see the accelerated sales performance that we had anticipated during the second quarter. Trends throughout our business demonstrated strong reception to our product offering. Double digit sales growth across all of our segments was driven by robust comparable store sales expansion in our retail stores and our strong e-commerce business. Looking ahead, we are confident that we can meet our sales and earnings goals for the full year, as we invest in the business to expand our retail footprint and bring our e-commerce platform in-house. Overall, we believe that we are well-positioned to continue driving growth and shareholder value for the long-term as we successfully execute on our stated growth initiatives.”

For the second quarter of 2014:

  • Net sales increased 15.2% to $124.6 million from $108.2 million in the second quarter ended June 30, 2013.
  • Total comparable store sales for all Direct-to-Consumer channels, including company-owned websites, increased 12.9%, compared to an increase of 4.6% in the second quarter of 2013.
  • Direct-to-Consumer North America comparable store sales (including e-commerce sales) increased 12.4%. Excluding e-commerce sales, Direct-to-Consumer North America comparable store sales increased 8.2%.
  • Direct-to-Consumer International comparable store sales (including e-commerce sales) increased 18.1% in U.S. dollars, or 12.5% in Euros. Excluding e-commerce sales, Direct-to-Consumer International comparable stores sales increased 19.3% in U.S. dollars, or 13.6% in Euros.
  • Gross margin increased 15.7% to $72.1 million from $62.3 million in the second quarter of 2013. Gross margin percentage was 57.9% compared to 57.6% in the second quarter of 2013.
  • Operating income increased 11.2% to $19.9 million from $17.9 million in the second quarter of 2013. Operating income margin was 15.9% compared to 16.5% in the second quarter of 2013.
  • In the second quarter of 2013, the company incurred a $1.5 million ($0.9 million after tax) charge in connection with the early termination for an agreement with its web services provider. Excluding this one-time expense, operating income would have been $19.4 million, or 17.9% of net sales.
  • The effective tax rate was 38.0%, compared to 36.8% in the second quarter of 2013. The change in the effective tax rate was largely driven by the change in apportionment percentages for state purposes during the period ended June 29, 2014.
  • Net income was $12.2 million, or $0.18 per diluted share, based on 67.9 million diluted weighted average common shares outstanding, compared to $11.2 million, or $0.16 per diluted share, based on 67.9 million diluted weighted average common shares outstanding in the second quarter of 2013.
  • Excluding the aforementioned early termination charge, net income would have been $12.1 million, or $0.18 per diluted share, in the second quarter of 2013.
  • During the second quarter of 2014, Tumi opened five new stores, renovated three stores, and closed one store.
  • At June 29, 2014, Tumi operated 134 company-owned stores.

For the six months ended June 29, 2014:

  • Net sales increased 10.5% to $233.2 million from $211.1 million in the corresponding period of 2013.
  • Gross margin increased 12.4% to $135.2 million, or 58.0% of net sales, from $120.3 million, or 57.0% of net sales, in the corresponding period of 2013.
  • Operating income decreased 6.3% to $33.2 million, or 14.3% of net sales, from $35.5 million, or 16.8% of net sales, in the first six months of 2013. Excluding the aforementioned early termination charge, as well as approximately $0.5 million in operating expenses incurred in the first quarter of 2013 in conjunction with the secondary common stock offering completed in April 2013, operating income for the first six months of 2013 would have been $37.4 million, or 17.7% of net sales.
  • The effective tax rate was 37.7%, compared to 37.4% in the corresponding period of 2013. The change in the effective tax rate was largely driven by the change in apportionment percentages for state purposes during six months ended June 29, 2014.
  • Net income was $20.4 million, or $0.30 per diluted share, based on 67.9 million diluted weighted average common shares outstanding, compared to $21.7 million, or $0.32 per diluted share, based on 67.9 million diluted weighted average common shares outstanding in the first six months of 2013.
  • Excluding the aforementioned early termination charge and one-time expense incurred in conjunction with the secondary common stock offering completed in April 2013, net income would have been $23.0 million, or $0.34 per diluted share, in the first six months of 2013.

Balance Sheet Highlights as of June 29, 2014:

Cash and cash equivalents were $24.2 million as of June 29, 2014, compared with $37.6 million as of December 31, 2013. In the second quarter of 2014, the Company paid down the remaining $2.0 million on its revolving credit facility, and as of June 29, 2014 had no outstanding balance on its revolving credit facility. Inventories were $91.9 million as of June 29, 2014, compared with $80.0 million as of December 31, 2013.

Outlook

For fiscal 2014, the Company continues to expect net sales to increase between 12% and 15% over the prior year period. This estimate assumes total comparable store sales growth in the mid-single digits. As previously discussed, 2014 will be a year of higher than normal investment and expenses driven primarily by transitioning e-commerce in-house. The launch of the new e-commerce platform has been slightly delayed, and the Company expects the new website to be launched toward the end of the third quarter. The Company now expects to pay total fees to the former platform provider of $4.0 million to $5.0 million, in part because of strong web performance, and in part due to the delay. We anticipate leveraging certain operating expenses to mitigate these additional costs. The Company continues to expect diluted EPS for 2014 to be between $0.88 to $0.92. This estimate assumes diluted weighted average common shares outstanding of approximately 68.1 million, and a revised weighted GAAP tax rate of 38.0%.

The Company is increasing its store openings estimate and now expects to open 20 to 25 new stores in 2014, with the store opening cadence to be heavily weighted toward the back end of the year. Capital expenditures for fiscal 2014 are expected to be in the range of $40.0 million to $45.0 million.

Conference Call

Tumi Holdings, Inc. will host a conference call to discuss second quarter results today, August 7, 2014, at 4:30 p.m. ET. The general public can access the call by dialing 1-888-895-5479 (domestic) or 1-847-619-6250 (international). The passcode is 37738576. Please dial in 5 minutes before the start of the call. The conference call will also be webcast live in the Investor Relations section of www.tumi.com. A telephone replay of the call will be available through August 14, 2014; to access the replay, dial 1-888-843-7419 for domestic callers or 1-630-652-3042 for international callers and enter access code 37738576. The webcast will be accessible on the website for approximately 90 days after the call.

About Tumi

Tumi is the leading global brand of premium travel, business and lifestyle products and accessories. The brand is sold in over 260 stores from New York to Paris to London and Tokyo, as well as in the world’s top department, specialty and travel retail stores in over 75 countries. For more information, please visit www.tumi.com.

Forward-Looking Statements

This release contains forward-looking statements, which address a variety of subjects including, for example, the Company’s outlook for net sales and earnings per share in 2014, its expectations as to the fees to be paid to the third party e-commerce provider and its expectation that it will mitigate the additional costs associated with these fees, the timing of the launch of the new website, the number and timing of new store openings, the estimated effective tax rate and capital expenditures in 2014. All statements other than statements of historical fact, including without limitation, those with respect to the Company’s goals, plans, expectations and strategies set forth herein are forward-looking statements. The following important factors and uncertainties, among others, could cause actual results to differ materially from those described in these forward-looking statements: changes in consumer spending and general economic conditions; a decrease in travel levels; interruption in supply; inventory management and product quality control issues with our contract manufacturers; an inability to open new store locations in a timely and profitable manner; increases in costs of materials, labor or freight; the impact of counterfeiting and transshipping; risks of operating internationally; risks associated with our e-commerce migration; changes in effective tax rates and the success of new product introductions. For a detailed discussion of cautionary statements that may affect the Company’s future results of operations and financial results, please refer to the Company’s filings with the Securities and Exchange Commission, including the Company’s most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Forward-looking statements represent management’s current expectations and are inherently uncertain. We do not undertake any obligation to update forward-looking statements made by us except as otherwise required under federal securities laws.

       

TUMI HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

 
Three Months Ended Six Months Ended
June 29,
2014
    June 30,
2013
June 29,
2014
    June 30,
2013
(unaudited)
Net sales $ 124,582 $ 108,189 $ 233,184 $ 211,114
Cost of sales 52,480   45,879   97,999   90,791  
Gross margin 72,102   62,310   135,185   120,323  
OPERATING EXPENSES
Selling 8,569 7,237 16,836 13,606
Marketing 4,548 3,528 8,903 7,028
Retail operations 28,432 24,467 54,538 46,043
General and administrative 10,697   9,220   21,671   18,174  
Total operating expenses 52,246   44,452   101,948   84,851  
Operating income 19,856   17,858   33,237   35,472  
OTHER INCOME (EXPENSES)
Interest expense (113 ) (199 ) (242 ) (408 )
Earnings from joint venture investment 7 32 154 487
Foreign exchange gains (losses) (253 ) 12 (351 ) (634 )
Other non-operating income (expenses) 205   16   (72 ) (206 )
Total other expenses (154 ) (139 ) (511 ) (761 )
Income before income taxes 19,702 17,719 32,726 34,711
Provision for income taxes 7,483   6,525   12,354   12,982  
Net income $ 12,219   $ 11,194   $ 20,372   $ 21,729  
Weighted average common shares outstanding:
Basic 67,866,667   67,866,667   67,866,667   67,866,667  
Diluted 67,872,947   67,868,475   67,870,428   67,868,134  
Basic earnings per common share $ 0.18   $ 0.16   $ 0.30   $ 0.32  
Diluted earnings per common share $ 0.18   $ 0.16   $ 0.30   $ 0.32  
 
 

TUMI HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

 
  June 29,
2014
  December 31,
2013
(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 24,159 $ 37,613
Accounts receivable, less allowance for doubtful accounts of approximately $489 and $477 at June 29, 2014 and December 31, 2013, respectively 30,754 28,992
Other receivables 4,296 2,914
Inventories, net 91,925 79,969
Prepaid expenses and other current assets 8,481 6,878
Prepaid income taxes 2,313
Deferred tax assets, current 5,347   5,347
Total current assets 167,275   161,713
Property, plant and equipment, net 68,812 60,871
Deferred tax assets, noncurrent 2,124 2,124
Joint venture investment 2,100 1,960
Goodwill 142,773 142,773
Intangible assets, net 130,536 130,673
Deferred financing costs, net of accumulated amortization of $3,005 and $2,923 at June 29, 2014 and December 31, 2013, respectively 454 536
Other assets 10,537   5,837
Total assets $ 524,611   $ 506,487
 
 

TUMI HOLDINGS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (continued)

(In thousands, except share and per share data)

     
June 29,
2014
December 31,
2013
(unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable $ 43,714 $ 33,938
Accrued expenses 29,280 32,120
Income taxes payable   4,680  
Total current liabilities 72,994   70,738  
 
Revolving credit facility 8,000
Other long-term liabilities 10,190 8,556
Deferred tax liabilities 51,195   51,195  
Total liabilities 134,379   138,489  
 
Commitments and contingencies
 
STOCKHOLDERS’ EQUITY
Common stock—$0.01 par value; 350,000,000 shares authorized, 68,144,473 shares issued and 67,866,667 shares outstanding as of June 29, 2014 and December 31, 2013 681 681
Preferred stock—$0.01 par value; 75,000,000 shares authorized and no shares issued or outstanding as of June 29, 2014 and December 31, 2013
Additional paid-in capital 312,177 310,554
Treasury stock, at cost; 277,806 shares as of June 29, 2014 and December 31, 2013 (4,874 ) (4,874 )
Retained earnings 82,097 61,725
Accumulated other comprehensive income (loss) 151   (88 )
Total stockholders’ equity 390,232   367,998  
Total liabilities and stockholders’ equity $ 524,611   $ 506,487  
 
 

TUMI HOLDINGS, INC. AND SUBSIDIARIES

Segment Results

           

Direct-to-
Consumer

North
America

Direct-to-
Consumer
International

Indirect-to-
Consumer

North
America

Indirect-to-
Consumer
International

Non-
Allocated
Corporate
Expenses

Consolidated
Totals

(In thousands)
Three Months Ended June 29, 2014
Net sales $ 57,354 $ 6,350 $ 26,710 $ 34,168 $ $ 124,582
Operating income (loss) $ 16,229 $ 220 $ 9,967 $ 9,725 $ (16,285 ) $ 19,856
Depreciation and amortization $ 1,983 $ 389 $ 364 $ 942 $ 559 $ 4,237
Three Months Ended June 30, 2013
Net sales $ 48,186 $ 5,067 $ 24,171 $ 30,765 $ $ 108,189
Operating income (loss) $ 14,515 $ 538 $ 8,762 $ 9,488 $ (15,445 ) $ 17,858
Depreciation and amortization $ 1,674 $ 255 $ 284 $ 856 $ 396 $ 3,465
Six Months Ended June 29, 2014
Net sales $ 107,401 $ 11,309 $ 48,084 $ 66,390 $ $ 233,184
Operating income (loss) $ 28,613 $ (124 ) $ 18,317 $ 19,193 $ (32,762 ) $ 33,237
Depreciation and amortization $ 3,910 $ 608 $ 728 $ 1,830 $ 1,081 $ 8,157
Six Months Ended June 30, 2013
Net sales $ 92,350 $ 9,341 $ 45,537 $ 63,886 $ $ 211,114
Operating income (loss) $ 26,349 $ 638 $ 16,833 $ 19,942 $ (28,290 ) $ 35,472
Depreciation and amortization $ 3,321 $ 506 $ 518 $ 1,693 $ 826 $ 6,864
 
     

TUMI HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Reconciliation of Operating Income to

Operating Income Before One-Time Costs

(In millions)

               
 
Three Months Ended   Six Months Ended
 
June 29, 2014   June 30, 2013   June 29, 2014   June 30, 2013
 
Operating income $19.9 $17.9 $33.2 $35.5
 
One-time operating expenses incurred in conjunction with the secondary common stock offering completed in April 2013 0.5
One-time operating expense charged in connection with the early termination of an agreement with Tumi's web service provider   1.5     1.5
 
Operating income before one-time costs 1 $19.9   $19.4   $33.2   $37.4
 
       
Note
1 Totals may not foot due to rounding      
 
 

TUMI HOLDINGS, INC. AND SUBSIDIARIES

Unaudited Reconciliation of Net Income to

Net Income Before One-Time Costs

(In millions)

               
 
Three Months Ended   Six Months Ended
   
June 29, 2014   June 30, 2013   June 29, 2014   June 30, 2013
 
Net income $12.2 $11.2 $20.4 $21.7
 
Diluted GAAP earnings per share 1 $0.18 $0.16 $0.30 $0.32
 
One-time operating expenses incurred in conjunction with the secondary common stock offering completed in April 2013 (after tax) 0.3
One-time operating expense charged in connection with the early termination of an agreement with Tumi's web service provider (after tax)   0.9     0.9
 
Net income before one-time costs 2 $12.2   $12.1   $20.4   $23.0
 
Diluted earnings per share before one-time costs 1 $0.18   $0.18   $0.30   $0.34
 
Notes
1 Diluted EPS calculated using 67.9 million shares for three and six months ended June 29, 2014 and June 30, 2013
2 Totals may not foot due to rounding              
 

Non-GAAP Financial Measures

Net income before one-time costs and operating income before one-time costs are non-GAAP financial measures. Net income before one-time costs is defined as net income plus one-time costs. Operating income before one-time costs is defined as operating income plus one-time costs. These measures are an important supplemental measure for Tumi’s internal reporting, including for its board of directors and management, and are key measures used to evaluate profitability and operating performance. These measures provide investors and other users of Tumi’s financial information, when viewed in conjunction with its consolidated financial statements, consistency and comparability with Tumi’s past financial performance, facilitates period-to-period comparisons of operating performance and may facilitate comparisons with other companies. Tumi uses these metrics in conjunction with GAAP operating performance measures as part of its overall assessment of its performance. Undue reliance should not be placed on these measures as Tumi’s only measures of operating performance. Net income before one-time costs should not be viewed as a substitute for net income, and operating income before one-time costs should not be viewed as a substitute for operating income.

Comparable Store Sales Growth

Comparable store sales are calculated based on Tumi’s company-owned stores that have been open for at least a full calendar year as of the end of Tumi’s fiscal year. For example, a store opened in October 2012 will not impact the comparable store comparison until January 1, 2014. Additionally, temporary store closings, store expansions and store relocations are excluded from the comparable store base, under most circumstances.

Contacts

Investor Relations:
ICR, Inc.
Jean Fontana / Joseph Teklits, 203-682-8200
jean.fontana@icrinc.com
or
Media Relations:
ICR, Inc.
Alecia Pulman / Brittany Fraser, 646-277-1231
brittany.fraser@icrinc.com

Contacts

Investor Relations:
ICR, Inc.
Jean Fontana / Joseph Teklits, 203-682-8200
jean.fontana@icrinc.com
or
Media Relations:
ICR, Inc.
Alecia Pulman / Brittany Fraser, 646-277-1231
brittany.fraser@icrinc.com