- Second consecutive quarter of record breaking revenue
- Operating income increased to a record $1.6 million
- Earnings power demonstrated with record $1.5 million in net income
- Expecting 2016 revenue growth of over 75% to nearly $30 million
DEERFIELD BEACH, Fla., Nov. 14, 2016 (GLOBE NEWSWIRE) -- Capstone Companies, Inc. (OTC:CAPC) (“Capstone” or the “Company”), a designer of innovative LED lighting solutions including power failure lighting, today reported its financial results for the third quarter 2016.
Stewart Wallach, Capstone’s Chairman and CEO, commented, “We believe our performance this year has clearly substantiated that we have the right strategy, have successfully established a distinct niche in the home LED lighting space and have the talent and experience to execute well. We have once again broken our quarterly revenue record on the back of our successful introduction of accent lighting products through the warehouse club channels. Our product innovation, responsive and reliable customer service and strong brands have gained traction resulting in substantial revenue and earnings growth in the first nine months of 2016.
“We will continue to drive growth by developing new lighting products that incorporate previously unmet functionality while utilizing the efficiency of LED lighting. We are starting to see a preliminary picture of what the first part of 2017 may look like for Capstone, and all indications at this point are for a first half of 2017 that outperforms our strong performance in the first half of 2016.”
Third Quarter Financial Summary
($ in thousands, except per share data)
| Q3 2016 | Q3 2015 | Change | % Change | ||||||||||||
| U.S. revenue | $ | 11,396 | $ | 7,425 | 3,971 | 53 | % | ||||||||
| International revenue | 297 | 323 | (26 | ) | -8 | % | |||||||||
| Total revenue | 11,692 | 7,747 | 3,945 | 51 | % | ||||||||||
| Gross profit | 2,851 | 1,980 | 871 | 44 | % | ||||||||||
| Gross margin | 24.4 | % | 25.6 | % | |||||||||||
| Operating income | 1,604 | 1,359 | 245 | 18 | % | ||||||||||
| Operating margin | 13.7 | % | 17.5 | % | |||||||||||
| Net income | $ | 1,490 | $ | 1,247 | 242 | 19 | % | ||||||||
| Earnings per diluted share | $ | 0.03 | $ | 0.03 | - | NM | |||||||||
Revenue growth in the third quarter of 2016 was primarily the result of strong demand for the Company’s battery powered portable lighting products and wireless remote control products. Products sold under both the Capstone Lighting and Hoover® Home LED brands experienced significantly improved revenue.
Increased gross profit was driven by strong revenue growth. Gross margin as a percent of revenue declined due to significantly higher levels of promotional spending in the 2016 quarter, to support the introduction of new products, which reduced gross margin by approximately 5 percentage points when compared with the prior-year period.
Selling, general and administrative expenses (SG&A) increased to $1.2 million, from $0.6 million in the prior-year period on higher revenue. SG&A as a percent of revenue increased to 10.7%, primarily due to higher sales and marketing expenses reflecting $221 thousand of royalty payments related to the Company’s licensing of the Hoover® brand name that did not occur in the third quarter of 2015. As a result of these factors, operating income increased by 18% over the prior-year period to a record $1.6 million.
Net income increased to a record $1.5 million, or $0.03 per diluted share, in the third quarter of 2016.
2016 First Nine Months Financial Summary
($ in thousands, except per share data)
| Q3 2016 YTD | Q3 2015 YTD | Change | % Change | ||||||||||
| U.S. revenue | $ | 20,826 | $ | 7,962 | 12,864 | 162 | % | ||||||
| International revenue | 1,847 | 789 | 1,058 | 134 | % | ||||||||
| Total revenue | 22,673 | 8,751 | 13,922 | 159 | % | ||||||||
| Gross profit | 5,594 | 2,341 | 3,253 | 139 | % | ||||||||
| Gross margin | 24.7 | % | 26.7 | % | |||||||||
| Operating income (loss) | 2,724 | 357 | 2,367 | 663 | % | ||||||||
| Operating margin | 12.0 | % | 4.1 | % | |||||||||
| Net income (loss) | $ | 2,473 | $ | 151 | 2,322 | 1538 | % | ||||||
| Earnings (loss) per diluted share | $ | 0.05 | $ | - | - | NM | |||||||
Financial results for the first nine months 2016 improved significantly over the prior-year period, reflecting the successful introduction of new Capstone lighting products and the Hoover Home LED® brand. Improved operating and net margins are reflected in the operating leverage that the Company realized on higher sales levels.
Webcast and Teleconference to Review Results and Outlook
The Company will host a live webcast and conference call on Tuesday, November 15, 2016 at 10:30 a.m. Eastern Time. During the call, management will review the financial and operating results and discuss the Company’s corporate strategy and outlook, followed by a question-and-answer session. The conference call can be accessed by dialing (201) 689-8562. The listen-only audio webcast can be monitored at www.capstonecompaniesinc.com.
A telephonic replay will be available from 1:30 p.m. Eastern Time the day of the teleconference until Tuesday, November 22, 2016. To listen to the replay of the call, dial (858) 384-5517 and enter replay pin number 13645717. Alternatively, the archive of the webcast will be available on the Company’s website at www.capstonecompaniesinc.com. A transcript will also be posted to the website, once available.
About Capstone Companies, Inc.
Capstone Companies, Inc. is a public holding company that engages, through its wholly-owned subsidiaries, Capstone Industries, Inc., Capstone Lighting Technologies, LLC, and Capstone International HK, Ltd., in the development, manufacturing, logistics, and distribution of consumer and institutional products, including the Hoover® HOME LED lighting product line, to accounts throughout North America and in international markets. See www.capstonecompaniesinc.com for more information about the Company and www.capstoneindustries.com for information on our current product offerings.
FORWARD-LOOKING STATEMENTS:
This news release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995, as amended. Such statements consist of words like “anticipate,” “expect,” “project,” “continue” and similar words. These statements are based on the Company’s and its subsidiaries’ current expectations and involve risks and uncertainties, which may cause results to differ materially from those set forth in the forward-looking statements. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements, include consumer acceptance of the Company’s products, its ability to deliver new products, the success of its strategy to broaden market channels and the relationships it has with retailers and distributors. Prior success in operations does not necessarily mean success in future operations. The ability of the Company to adequately and affordably fund operations and any growth will be critical to achieving and sustaining any expansion of markets and revenue. The introduction of new products or the expanded availability of products does not mean that the Company will enjoy better financial or business performance. The risks associated with any investment in Capstone Companies, Inc., which is a small business concern and a "penny-stock Company” and, as such, a highly risky investment suitable for only those who can afford to lose such investment, should be evaluated together with the risks and uncertainties more fully described in the Company’s Annual and Quarterly Reports filed with the Securities and Exchange Commission. Capstone Companies, Inc. undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Contents of referenced URLs are not incorporated into this press release.
FINANCIAL TABLES FOLLOW. THE FOLLOWING SUMMARY FINANCIAL STATEMENT SHOULD BE READ ALONG WITH THE FORM 10-K FINANCIAL STATEMENT FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION.
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | |||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
| Revenues, net | $ | 11,692,146 | $ | 7,747,450 | $ | 22,672,551 | $ | 8,750,951 | |||||||||||
| Cost of sales | (8,841,148 | ) | (5,767,306 | ) | (17,079,271 | ) | (6,410,197 | ) | |||||||||||
| Gross Profit | 2,850,998 | 1,980,144 | 5,593,280 | 2,340,754 | |||||||||||||||
| Gross margin | 24.4 | % | 25.6 | % | 24.7 | % | 26.7 | % | |||||||||||
| Operating Expenses: | |||||||||||||||||||
| Sales and marketing | 488,057 | 16,716 | 903,888 | 185,229 | |||||||||||||||
| Compensation | 325,283 | 313,953 | 949,753 | 1,007,341 | |||||||||||||||
| Professional fees | 111,339 | 56,947 | 286,681 | 202,511 | |||||||||||||||
| Product development | 127,367 | 74,747 | 227,552 | 181,157 | |||||||||||||||
| Other general and administrative | 195,046 | 158,796 | 501,458 | 407,114 | |||||||||||||||
| Total Operating Expenses | 1,247,092 | 621,159 | 2,869,332 | 1,983,352 | |||||||||||||||
| Net Operating Income | 1,603,906 | 1,358,985 | 2,723,948 | 357,402 | |||||||||||||||
| Operating margin | 13.7 | % | 17.5 | % | 12.0 | % | 4.1 | % | |||||||||||
| Other Income (Expense): | |||||||||||||||||||
| Interest income | 13,664 | - | 13,664 | - | |||||||||||||||
| Interest expense | (103,363 | ) | (111,654 | ) | (227,522 | ) | (205,933 | ) | |||||||||||
| Total Other Income (Expense) | (89,699 | ) | (111,654 | ) | (213,858 | ) | (205,933 | ) | |||||||||||
| Income Before Tax Provision | 1,514,207 | 1,247,331 | 2,510,090 | 151,469 | |||||||||||||||
| Provision for Income Tax | (24,412 | ) | - | (37,012 | ) | - | |||||||||||||
| Net Income | $ | 1,489,795 | $ | 1,247,331 | $ | 2,473,078 | $ | 151,469 | |||||||||||
| Net Income per Common Share | |||||||||||||||||||
| Basic | $ | 0.031 | $ | 0.026 | $ | 0.051 | $ | 0.003 | |||||||||||
| Diluted | $ | 0.031 | $ | 0.026 | $ | 0.051 | $ | 0.003 | |||||||||||
| Weighted Average Common Shares Outstanding | |||||||||||||||||||
| Basic | 48,132,664 | 48,132,664 | 48,132,664 | 46,057,590 | |||||||||||||||
| Diluted | 48,371,158 | 48,132,664 | 48,320,017 | 46,057,590 | |||||||||||||||
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | |||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||
| September 30, | December 31, | ||||||||
| 2016 | 2015 | ||||||||
| (Unaudited) | |||||||||
| Assets: | |||||||||
| Current Assets: | |||||||||
| Cash | $ | 359,587 | $ | 364,714 | |||||
| Accounts receivable, net | 11,832,358 | 5,077,182 | |||||||
| Inventory | 480,758 | 205,708 | |||||||
| Prepaid expenses | 522,694 | 566,459 | |||||||
| Total Current Assets | 13,195,397 | 6,214,063 | |||||||
| Fixed Assets: | |||||||||
| Computer equipment and software | 19,767 | 19,767 | |||||||
| Machinery and equipment | 396,133 | 380,633 | |||||||
| Furniture and fixtures | 5,665 | 5,665 | |||||||
| Less: Accumulated depreciation | (339,579 | ) | (295,180 | ) | |||||
| Total Fixed Assets | 81,986 | 110,885 | |||||||
| Other Non-current Assets: | |||||||||
| Deposit | 12,193 | 12,193 | |||||||
| Investment (AC Kinetics) | - | 500,000 | |||||||
| Note receivable | 513,654 | - | |||||||
| Goodwill | 1,936,020 | 1,936,020 | |||||||
| Total Other Non-current Assets | 2,461,867 | 2,448,213 | |||||||
| Total Assets | $ | 15,739,250 | $ | 8,773,161 | |||||
| Liabilities and Stockholders’ Equity: | |||||||||
| Current Liabilities: | |||||||||
| Accounts payable and accrued liabilities | $ | 3,023,561 | $ | 2,164,283 | |||||
| Income tax payable | 12,600 | 7,500 | |||||||
| Note payable - Sterling National Bank | 6,620,023 | 2,275,534 | |||||||
| Notes and loans payable to related parties | 1,301,596 | 2,064,034 | |||||||
| Total Current Liabilities | 10,957,780 | 6,511,351 | |||||||
| Commitments and Contingent Liabilities (Note 5): | |||||||||
| Stockholders' Equity: | |||||||||
| Preferred Stock, Series A, par value $.001 per share, authorized 6,666,667 shares, issued -0- shares | - | - | |||||||
| Preferred Stock, Series B-1, par value $.0001 per share, authorized 3,333,333 shares, issued -0- shares | - | - | |||||||
| Preferred Stock, Series C, par value $1.00 per share, authorized 67 shares, issued-0-shares | - | - | |||||||
| Common Stock, par value $.0001 per share, authorized 56,666,667 shares, issued 48,132,664 shares | 4,813 | 4,813 | |||||||
| Additional paid-in capital | 7,390,697 | 7,344,115 | |||||||
| Accumulated deficit | (2,614,040 | ) | (5,087,118 | ) | |||||
| Total Stockholders' Equity | 4,781,470 | 2,261,810 | |||||||
| Total Liabilities and Stockholders’ Equity | $ | 15,739,250 | $ | 8,773,161 | |||||
| CAPSTONE COMPANIES, INC. AND SUBSIDIARIES | |||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (Unaudited) | |||||||||
| For the Nine Months Ended | |||||||||
| September 30, | |||||||||
| 2016 | 2015 | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||
| Net Income | $ | 2,473,078 | $ | 151,469 | |||||
| Adjustments necessary to reconcile net income to net cash (used in) operating activities: | |||||||||
| Depreciation and amortization | 44,400 | 49,311 | |||||||
| Accrued interest on note receivable | (13,654 | ) | - | ||||||
| Stock based compensation expense | 46,581 | 81,219 | |||||||
| Accrued sales allowance | (94,203 | ) | (196,978 | ) | |||||
| (Increase) decrease in accounts receivable | (6,755,174 | ) | (6,376,672 | ) | |||||
| (Increase) decrease in inventory | (275,049 | ) | 38,337 | ||||||
| (Increase) decrease in prepaid expenses | 43,764 | (371,317 | ) | ||||||
| (Increase) decrease in other assets | - | 14,456 | |||||||
| Increase (decrease) in accounts payable and accrued liabilities | 958,580 | 1,167,729 | |||||||
| Increase (decrease) in accrued interest on notes payable | (168,492 | ) | 148,385 | ||||||
| Net cash (used in) operating activities | (3,740,169 | ) | (5,294,061 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||
| Purchase of property and equipment | (15,501 | ) | (58,194 | ) | |||||
| Net cash (used in) investing activities | (15,501 | ) | (58,194 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||
| Proceeds from notes payable | 19,393,834 | 5,791,914 | |||||||
| Repayments of notes payable | (15,049,345 | ) | (1,895,194 | ) | |||||
| Proceeds from notes and loans payable to related parties | 860,000 | 2,500,000 | |||||||
| Repayments of notes and loans payable to related parties | (1,453,946 | ) | (1,100,000 | ) | |||||
| Net cash provided by financing activities | 3,750,543 | 5,296,720 | |||||||
| Net (Decrease) in Cash and Cash Equivalents | (5,127 | ) | (55,535 | ) | |||||
| Cash and Cash Equivalents at Beginning of Period | 364,714 | 313,856 | |||||||
| Cash and Cash Equivalents at End of Period | $ | 359,587 | $ | 258,321 | |||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||||
| Cash paid during the period for: | |||||||||
| Interest | $ | 396,014 | $ | 57,549 | |||||
| Income taxes | $ | 31,912 | $ | - | |||||
| $ | 427,926 | $ | 57,549 | ||||||
| Non-cash financing and investing activities: | |||||||||
| Conversion of Series C Preferred Stock to Common Stock | $ | - | $ | 1,000 | |||||
| Sale of Investment for Note receivable | $ | 500,000 | $ | - | |||||