Summer Infant, Inc. ("Summer Infant" or the "Company")
(Nasdaq:SUMR), global leader in premium infant and juvenile
products, today announced financial results for the first quarter
ended April 4, 2015.
"We have made good progress in building our brands as well as
taking actions to drive long-term stability and improve
profitability in our business," said Bob Stebenne, Chief Executive
Officer. "Most notably, we recently completed the refinancing of
our credit agreements, providing for increased flexibility and
expected savings of $0.04 per share in annual interest expense
going forward. The new facilities will also allow us to focus on
several initiatives designed to increase Summer Infant's asset
utilization and reduce working capital. We remain dedicated to
decreasing inventory levels and, at the same time, investing in
innovative product line expansion opportunities and new channel
development.
"As a result of our focus on our SwaddleMe®, BornFree®, and
Summer® brands, we drove a 12.9% increase in core branded products.
Including furniture, licensing agreements, and private label items,
overall revenue still rose 4.3%. Although bottom line results were
affected by foreign exchange, the west coast port slowdown, and
certain marketing costs, we have enacted a number of margin
enhancement strategies which – along with lower interest expense
and top line growth – should drive higher returns for our
shareholders.
"We began the year with a clear understanding of the tasks at
hand and are well on our way to accomplishing the goals set out for
2015. We look forward to the Company's next chapter of product
innovation, stability and profitable growth," concluded
Stebenne.
First Quarter Results
Net sales for the three months ended April 4, 2015 were $53.0
million compared with $50.8 million for the three months ended
March 31, 2014. Excluding $1.6 million and $5.3 million of sales
related to licensed, private label, and furniture sales in fiscal
2015 and 2014, respectively, core branded business sales increased
by 12.9% year-over-year.
Gross profit for the first quarter of 2015 was $17.0 million
compared with $16.4 million in the first quarter of 2014,
reflecting higher sales year-over-year. Gross profit as a percent
of net sales was 32.0% in fiscal 2015 compared with 32.4% fiscal
2014. The 2015 results were negatively impacted by $0.3 million of
foreign currency translation (i.e., declining value of the Canadian
dollar) and by $0.3 million tied to the sale of $1.2 million of
inventory below cost; net of these items, gross margin would have
been 33.3% in the first quarter of 2015.
Selling expenses were $4.9 million for the first quarter of 2015
compared with $4.4 million for the first quarter of 2014,
reflecting increased cooperative advertising costs on higher sales
volume. General and administrative expenses (G&A) rose to $10.3
million in fiscal 2015 from $9.5 million in fiscal 2014 primarily
due to additional costs incurred in the first quarter of 2015 to
manage operations through the west coast port slowdown as well as
legal costs incurred in connection with an employee termination and
ongoing investments in marketing and new product
development.
The Company reported a net loss of $0.2 million, or $(0.01) per
share, in the first quarter of 2015 compared with net income of
$0.2 million, or $0.01 per diluted share, in the first quarter of
2014.
Adjusted EBITDA for the first quarter of 2015 was $2.6 million
compared with $3.8 million for the first quarter of 2014. Adjusted
EBITDA for the first quarter of 2015 includes $0.6 million in
permitted add-back charges compared with $1.0 million in the first
quarter of 2014.
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."
Balance Sheet Highlights
As of April 4, 2015, the Company had approximately $1.6 million
of cash and $56.3 million of debt compared with $1.3 million of
cash and $58.7 million of debt on January 3, 2015. As previously
announced, the Company replaced its credit facilities subsequent to
the first quarter, replacing an $80 million revolving credit
facility and $15 million term loan with a $60 million revolving
credit facility, a $5 million "first in last out" (FILO) facility,
and $10 million term loan facility.
Inventory at April 4, 2015 was $43.6 million compared with $44.0
million at January 3, 2015; the Company anticipates further
inventory reductions going forward due to working capital
improvement initiatives. Trade receivables at the end of the first
quarter were $41.1 million compared with $38.8 million as of
January 3, 2015. Accounts payable and accrued expenses were $36.1
million as of April 4, 2015, compared with $30.5 million at the end
of fiscal 2014.
Conference Call Information
Management will host a conference call to discuss the financial
results today, May 7, 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 infant and 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 flexibility and
savings from its refinanced credit facility, (ii) its ability to
increase asset utilization, reduce working capital and decrease
inventory levels, (iii) product introductions in 2015, and (iv) its
ability to expand sales channels. 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 January 3, 2015, and subsequent filings with
the Securities and Exchange Commission. The Company assumes no
obligation to update the information contained in this release.
Summer Infant,
Inc. |
Consolidated Statements
of Operations |
(amounts in thousands
of US dollars, except share amounts and per share
data) |
(unaudited) |
|
For the 3 Months
Ending |
|
April 4, 2015 |
March 31, 2014 |
|
|
|
Net sales |
$ 53,013 |
$ 50,814 |
Cost of goods sold |
36,038 |
34,365 |
Gross profit |
16,975 |
16,449 |
General and administrative expenses(1) |
10,310 |
9,492 |
Selling expense |
4,868 |
4,412 |
Depreciation and amortization |
1,334 |
1,393 |
Operating income |
463 |
1,152 |
Interest expense |
846 |
867 |
(Loss)/income before taxes |
$ (383) |
$ 285 |
Income tax (benefit)/expense |
(141) |
96 |
Net (loss)/income |
$ (242) |
$ 189 |
|
|
|
(Loss)/income per diluted share |
$ (0.01) |
$ 0.01 |
Shares used in fully diluted EPS |
18,178,196 |
17,987,969 |
|
|
|
Reconciliation of Non-GAAP
EBITDA |
|
|
Net (loss)/income |
$ (242) |
$ 189 |
Plus: interest expense |
846 |
867 |
Plus: (benefit)/expense for income taxes |
(141) |
96 |
Plus: depreciation and amortization |
1,334 |
1,393 |
Plus: non-cash stock based compensation
expense |
174 |
254 |
Plus: permitted add-backs (2) |
599 |
956 |
Adjusted EBITDA |
$ 2,570 |
$ 3,755 |
|
|
|
Reconciliation of Adjusted
EPS |
|
|
Net (loss)/income |
$ (242) |
$ 189 |
Plus: permitted add-backs (3) |
379 |
635 |
Adjusted Net
income/(loss) |
$ 137 |
$ 824 |
|
|
|
Adjusted earnings/(loss)
per diluted share |
$ 0.01 |
$ 0.05 |
|
|
|
(1) Includes Stock Option Expense |
|
|
|
|
|
(2) Permitted add-backs consist
of items that the Company is permitted to add-back to the
calculation of consolidated EBITDA under its credit
agreements. Permitted add-backs for the three months ended
April 4, 2015 include special projects ($434 ) and board fees
($165). Permitted add-backs for the three months ended March
31, 2014 include severance costs ($681), board fees ($191),
loss on certain close-out sales ($69), and special projects
($15). |
|
|
|
(3) Permitted add-backs consist
of items that the Company is permitted to add-back to the
calculation of consolidated EBITDA under its credit agreements, net
of taxes. Permitted add-backs for the three months ended April
4, 2015 include special projects ($275) and board fees
($104). Permitted add-backs for the three months ended March
31, 2014 include severance costs ($452), board fees ($127), loss on
certain close-out sales ($46), and special projects ($10). |
|
Summer Infant,
Inc. |
Consolidated Balance
Sheet |
(amounts in thousands
of US dollars) |
|
|
|
|
April 4, 2015 |
January 3, 2015 |
|
(unaudited) |
|
Cash and cash equivalents |
$ 1,589 |
$ 1,272 |
Trade receivables, net |
41,086 |
38,794 |
Inventory, net |
43,628 |
44,010 |
Property and equipment, net |
12,569 |
13,080 |
Other intangibles, net |
20,616 |
20,679 |
Other assets |
5,423 |
4,632 |
Total assets |
$ 124,911 |
$ 122,467 |
|
|
|
Accounts payable |
$ 27,359 |
$ 21,878 |
Accrued expenses |
8,745 |
8,628 |
Current portion of long-term debt |
1,611 |
1,641 |
Long term debt, less current portion |
54,656 |
57,097 |
Other long term liabilities |
2,905 |
2,994 |
Deferred tax liabilities |
2,401 |
2,378 |
Total liabilities |
97,677 |
94,616 |
|
|
|
Total stockholders' equity |
27,234 |
27,851 |
Total liabilities and
stockholders' equity |
$ 124,911 |
$ 122,467 |
CONTACT: Company Contact:
Chris Witty
Investor Relations
646-438-9385
cwitty@darrowir.com
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