Summer Infant, Inc. ("Summer Infant" or the "Company")
(Nasdaq:SUMR), global leader in premium juvenile products, today
announced financial results for the fourth quarter and year ended
January 3, 2015.
"Summer Infant ended 2014 as a leaner, more nimble, and focused
organization better equipped to build its brands and achieve
superior financial results," said Carol Bramson, Chief Executive
Officer. "Excluding the impact of our exit from the Disney® and
Carter's® licensing arrangements, net sales climbed 5.3%
year-over-year, while gross margin improved 140 basis points and
Adjusted EBITDA grew 32% versus 2013. We also saw substantially
higher revenue in Latin America and across our ecommerce channels –
both areas being targeted to accelerate our top line going forward.
We are pleased with our accomplishments in 2014 but know we have
more work ahead of us to take Summer Infant to a higher level of
operating performance.
"We will continue to focus on our core brands within the safety,
nursery and feeding space and are on track for several product
introductions this year. In addition, we are making meaningful
progress towards restructuring our credit facilities with a goal of
reducing interest expense and bolstering our balance sheet.
Overall, we believe Summer Infant is in much better shape than a
year ago and are committed to building our brands, supporting our
core product categories, and investing in consumer-driven
innovation to drive expansion. We will also target new channels,
international growth and increased ecommerce – all with the aim of
ensuring higher returns for our shareholders going forward."
Fourth Quarter Results
Net sales for the three months ended January 3, 2015 were $51.0
million compared with $44.7 million for the three months ended
December 31, 2013.
Gross profit for the fourth quarter of 2014 was $16.4 million
compared with $14.4 million in the fourth quarter of 2013,
reflecting higher sales year-over-year. Gross profit as a percent
of net sales was essentially unchanged at 32.3% in both fiscal 2014
and fiscal 2013.
Selling expenses were $4.7 million for the fourth quarter of
2014 compared with $4.8 million for the fourth quarter of 2013.
General and administrative expenses (G&A) rose to $10.8 million
in fiscal 2014 from $9.8 million in fiscal 2013 in tandem with the
management changes last year.
The Company reported a net loss of $0.6 million, or $(0.03) per
share, in the fourth quarter of 2014 compared with a net loss of
$1.7 million, or $(0.09) per share, in the fourth quarter of
2013.
Adjusted EBITDA for the fourth quarter of 2014 was $2.0 million
compared with $0.9 million for the fourth quarter of 2013. Adjusted
EBITDA for the fourth quarter of 2014 includes $0.8 million in
permitted add-back charges compared with $1.0 million in the fourth
quarter of 2013.
Adjusted EBITDA is a non-GAAP metric that excludes various items
that are detailed in the financial tables and accompanying
footnotes reconciling GAAP to non-GAAP results contained in this
release. An explanation of these measures also is included under
the heading below "Use of Non-GAAP Financial Information."
Full Year Results
Net sales for the twelve months ended January 3, 2015 were
$205.4 million compared with $208.2 million for the twelve months
ended December 31, 2013. Excluding $0.6 million and $16.9 million
of sales related to the exit of the Disney® and Carter's® licensing
arrangements in fiscal 2014 and 2013, respectively, fiscal 2014 net
sales increased 5.3%.
Gross profit for fiscal 2014 was $66.9 million as compared with
$65.0 million in 2013. Gross profit as a percent of sales rose to
32.6% in 2014 from 31.2% last year, an improvement of 140 basis
points. The increase in gross margin was due to a favorable mix of
higher-margin products sold, partially offset by the negative
impact of the Company's voluntary battery recall announced in the
second quarter of fiscal 2014 and inventory charges related to
exiting certain licensing agreements. Excluding the impact of these
items, in fiscal 2014, gross margin would have been 33.0%.
Selling expenses decreased 11.5% to $18.4 million for fiscal
2014 as compared with $20.8 million for fiscal 2013. As a percent
of net sales, selling expense declined to 9.0% from 10.0% in the
prior-year period, with the reduction primarily attributable to
cost controls implemented over retailer programs such as
cooperative advertising and lower royalty costs due to discontinued
licensing arrangements. G&A expense was $40.3 million for the
year ended January 3, 2015 versus $38.0 million for the year ended
December 31, 2013. G&A expense for 2014 included $2.2 million
of severance costs and special project fees related to the
management changes that took place, along with costs related to the
settlement of legal claims of $0.3 million. Excluding these costs
G&A expense was $37.8 million in 2014.
The Company reported a net loss of $0.2 million, or $(0.01) per
share, for the twelve months ended January 3, 2015, compared with a
net loss of $2.8 million, or $(0.16) per share in 2013, reflecting
higher gross profit, lower expenses, and lower interest expense
year-over-year.
Adjusted EBITDA for fiscal 2014 was $12.7 million, compared with
$9.7 million in 2013. Adjusted EBITDA for 2014 includes $3.3
million in permitted add-back charges compared with $2.6 million in
2013. Adjusted EBITDA does not include the impact of certain
one-time items in fiscal 2014 such as the voluntary battery recall
and related legal claims and unplanned post audit adjustments made
by retailers.
Balance Sheet Highlights
As of January 3, 2015, the Company had approximately $1.3
million of cash and $58.7 million of debt compared with $1.6
million of cash and $49.7 million of debt on December 31,
2013.
Inventory at January 3, 2015 was $44.0 million compared with
$38.4 million at December 31, 2013. The higher year-end inventory
level reflects a certain amount of safety stock, new product
introductions, and proactive measures taken in 2014 preparation for
an anticipated port slow down on the West Coast of the United
States. Inventory in the fourth quarter of 2014 declined nearly 10%
sequentially from the third quarter, a trend that is expected to
continue.
Trade receivables as of January 3, 2015 was $38.8 million
compared with $34.6 million as of December 31, 2013. Accounts
payable and accrued expenses at fiscal year end were $30.5 million,
compared with $31.7 million as of December 31, 2013.
Conference Call Information
Management will host a conference call to discuss the financial
results today, March 4, at 10:00 a.m. ET. To listen to the live
call, visit the Investor Relations section of the Company's website
at www.summerinfant.com or dial (877) 407-8293 or (201) 689-8349.
An archive of the webcast will be available on the Company's
website for one year.
About Summer Infant, Inc.
Based in Woonsocket, Rhode Island, the Company is a global
leader of premium juvenile products for ages 0-3 years which are
sold principally to large North American and international
retailers. The Company currently sells proprietary products in a
number of different categories including nursery audio/video
monitors, safety gates, durable bath products, bed rails, nursery
products, strollers, booster and potty seats, swaddling blankets,
bouncers, travel accessories, highchairs, swings, and infant
feeding products. For more information about the Company, please
visit www.summerinfant.com.
Use of Non-GAAP Financial Information
This release and the referenced webcast include presentations of
non-GAAP financial measures, including Adjusted EBITDA, adjusted
net income and adjusted earnings per share. Adjusted EBITDA
means earnings before interest and taxes plus depreciation,
amortization, non-cash stock-based compensation expenses and other
items added back as detailed in the reconciliation table included
in this release and (ii) adjusted net income and adjusted earnings
per share mean net income excluding certain items as detailed in
the reconciliation table included in this release. Such
information is supplemental to information presented in accordance
with GAAP and is not intended to represent a presentation in
accordance with GAAP. The Company believes that the presentation of
these non-GAAP financial measures provide useful information to
investors to better understand, on a period-to-period comparable
basis, financial amounts both including and excluding these
identified items, and they indicate more clearly the ability of the
Company's assets to generate cash sufficient to repay its
indebtedness, meet capital expenditure and working capital
requirements, comply with the financial covenants of its loan
agreements and otherwise meet its obligations as they become
due. These non-GAAP measures should not be considered in
isolation or as an alternative to such GAAP measures as net income,
cash flows provided by or used in operating, investing or financing
activities or other financial statement data presented in the
Company's consolidated financial statements as an indicator of
financial performance or liquidity. The Company provides
reconciliations of these non-GAAP measures in its press releases of
historical performance. Because these measures are not
determined in accordance with GAAP and are susceptible to varying
calculations, these non-GAAP measures, as presented, may not be
comparable to other similarly titled measures of other
companies.
Forward-Looking Statements
Certain statements in this release that are not historical fact
may be deemed "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, and the Company intends that such
forward-looking statements be subject to the safe harbor created
thereby. These statements are accompanied by words such as
"anticipate," "expect," "project," "will," "believes," "estimate"
and similar expressions, and include statements regarding the
Company's expectations regarding (i) improved financial performance
in 2015 and beyond, (ii) product introductions in 2015, (iii)
restructuring of its credit facilities and reductions in interest
expense and outstanding debt, and (iii) its ability to expand sales
channels and grow ecommerce and international sales. The Company
cautions that these statements are qualified by important factors
that could cause actual results to differ materially from those
reflected by such forward-looking statements. Such factors
include the concentration of the Company's business with retail
customers; the ability of the Company to compete in its industry;
the Company's ability to continue to control costs and expenses;
the Company's dependence on key personnel; the Company's reliance
on foreign suppliers; the Company's ability to develop, market and
launch new products; the Company's ability to grow sales with
existing and new customers and in new channels; the Company's
ability to meet required financial covenants under its loan
agreements; and other risks as detailed in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2013,
and subsequent filings with the Securities and Exchange
Commission. The Company assumes no obligation to update the
information contained in this release.
Tables to Follow
Summer Infant,
Inc. |
Consolidated Statements
of Operations |
(amounts in thousands
of US dollars, except share amounts and per share
data) |
|
|
|
|
|
|
For the 3 Months
Ending |
For the fiscal year
ended |
|
January 3, 2015 |
December 31,
2013 |
January 3, 2015 |
December 31,
2013 |
|
(unaudited) |
(unaudited) |
|
|
Net sales |
$ 50,969 |
$ 44,738 |
$ 205,359 |
$ 208,173 |
Cost of goods sold |
34,521 |
30,307 |
138,418 |
143,166 |
Gross profit |
16,448 |
14,431 |
66,941 |
65,007 |
General & administrative expenses(1) |
10,770 |
9,826 |
40,273 |
38,022 |
Selling expense |
4,695 |
4,785 |
18,437 |
20,839 |
Depreciation and amortization |
1,416 |
1,364 |
5,548 |
6,280 |
Operating (loss)/income |
(433) |
(1,544) |
2,683 |
(134) |
Interest expense |
884 |
871 |
3,455 |
3,999 |
Loss before taxes |
$ (1,317) |
$ (2,415) |
$ (772) |
$ (4,133) |
(Benefit) for income taxes |
(706) |
(737) |
(527) |
(1,318) |
Net loss |
$ (611) |
$ (1,678) |
$ (245) |
$ (2,815) |
|
|
|
|
|
Loss per diluted share |
$ (0.03) |
$ (0.09) |
$ (0.01) |
$ (0.16) |
Shares used in fully diluted EPS |
18,141,738 |
17,979,480 |
18,060,799 |
17,929,734 |
|
|
|
|
|
Reconciliation of Non-GAAP
EBITDA |
|
|
|
|
Net loss |
$ (611) |
$ (1,678) |
$ (245) |
$ (2,815) |
Plus: interest expense |
(884) |
(871) |
(3,455) |
(3,999) |
Plus: benefit for income taxes |
(706) |
(737) |
(527) |
(1,318) |
Plus: depreciation and amortization |
1,416 |
1,364 |
5,548 |
6,280 |
Plus: non-cash stock based stock compensation
expense |
209 |
164 |
1,220 |
893 |
Plus: permitted add-backs (2) |
838 |
951 |
3,294 |
2,637 |
Adjusted EBITDA |
$ 262 |
$ (807) |
$ 5,835 |
$ 1,678 |
|
|
|
|
|
Reconciliation of Adjusted
EPS |
|
|
|
|
Net loss |
$ (611) |
$ (1,678) |
$ (245) |
$ (2,815) |
Plus: permitted add-backs (3) |
479 |
648 |
1,884 |
1,796 |
Plus: unamortized deferred financing
costs(4) |
-- |
-- |
-- |
230 |
Plus: loss on certain close-out sales in
January & February |
-- |
-- |
-- |
99 |
Adjusted Net (loss)/income |
$ (132) |
$ (1,030) |
$ 1,639 |
$ (690) |
|
|
|
|
|
Adjusted earning per diluted share |
$ (0.01) |
$ (0.06) |
$ 0.09 |
$ (0.04) |
|
|
|
|
|
(1) Includes Stock Option
Expense |
|
|
|
|
|
(2) Permitted add-backs consist
of items that the Company is permitted to add-back to the
calculations of consolidated EBITDA under its loan agreements.
Permitted add-backs for the 3 months ended January 3, 2015 include
severance cost ($360), special projects ($275), and Board fees
($203). Permitted add-backs for the the three months ended December
31, 2013 consisted of severance costs ($624), Board Fees ($119),
special projects ($79), Carter's related scrap ($107), and losses
on certain Carter's close-out sales ($22). Permitted add-backs
for the twelve months ended January 3, 2015 include special
projects ($1,446), severance cost ($756), Board fees ($475), Losses
on Carter's related sales ($69), Carter's related scrap
($170), close-out sales related to furniture ($232) and Car
seat related scrap ($146). Permitted add-backs for the twelve
months ended December 31, 2013 consisted of severance costs
($810), Board fees ($384), Disney related items ($337), special
projects ($276), consulting fees ($242), losses on certain Disney
sales ($203), losses on certain Carter's close-out sales ($178),
Carter's related scrap ($107), and losses on certain car seat sales
($100). |
|
|
|
|
|
(3) Permitted add-backs consist
of items that the Company is permitted to add-back to the
calculations of consolidated EBITDA under its loan agreements.
Permitted add-backs for the 3 months ended January 3, 2015 include
severance cost (Gross $360/Net $206), special projects (Gross
$275/Net $157), and Board fees (Gross $203/Net $116). Permitted
add-backs for the the three months ended December 31, 2013
consisted of severance costs (Gross $624/Net $425), Board Fees
(Gross $119/Net $81), special projects (Gross $79/Net $54),
Carter's related scrap (Gross $107/Net $73), and losses on certain
Carter's close-out sales (Gross $22/Net $15). Permitted
add-backs for the twelve months ended January 3, 2015 include
special projects (Gross $1,446/Net $827), severance cost (Gross
$756/Net $432), Board fees (Gross $475/Net $272), Losses on
Carter's related sales (Gross $69/Net $39), Carter's related scrap
(Gross $170/Net $97), close-out sales related to furniture
(Gross $232/Net $133) and Car seat related scrap (Gross $146/Net
$84). Permitted add-backs for the twelve months ended December 31,
2013 consisted of severance costs (Gross $810/Net $552), Board fees
(Gross $384/Net $262), Disney related items (Gross $337/Net $229),
special projects (Gross $276/Net $188), consulting fees (Gross
$242/Net $165), losses on certain Disney sales (Gross $203/Net
$138), losses on certain Carter's sales (Gross $178/Net $121),
Carter's related scrap (Gross $107/Net $73), and losses on certain
car seat sales (Gross $100/Net $68). |
|
|
|
|
|
(4) Write off of unamortized
deferred financing costs for Bank of America retired loan in Q1
2013, (Gross $338/Net $230). |
|
|
|
Summer Infant,
Inc. |
Consolidated Balance
Sheet |
(amounts in thousands
of US dollars) |
|
|
|
|
January 3, 2015 |
December 31,
2013 |
|
|
|
Cash and cash equivalents |
$ 1,272 |
$ 1,573 |
Trade receivables, net |
38,794 |
34,574 |
Inventory, net |
44,010 |
38,378 |
Property and equipment, net |
13,080 |
14,796 |
Other intangibles, net |
20,679 |
21,575 |
Other assets |
4,632 |
4,471 |
Total assets |
$ 122,467 |
$ 115,367 |
|
|
|
Accounts payable |
$ 21,878 |
$ 22,072 |
Accrued expenses |
8,628 |
9,658 |
Current portion of long-term debt |
1,641 |
1,962 |
Long term debt, less current portion |
57,097 |
47,756 |
Other long term liabilities |
2,994 |
3,289 |
Deferred tax liabilities |
2,378 |
3,140 |
Total liabilities |
94,616 |
87,877 |
|
|
|
Total stockholders' equity |
27,851 |
27,490 |
Total liabilities and stockholders'
equity |
$ 122,467 |
$ 115,367 |
CONTACT: Company Contact:
Chris Witty
Investor Relations
646-438-9385
cwitty@darrowir.com
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