SUMR Brands ("SUMR Brands" or the "Company") (NASDAQ: SUMR), a
global leader in premium infant and juvenile products, today
announced financial results for the fourth quarter and fiscal year
ended December 28, 2019.
Recent Highlights
- Net sales were $42.7 million in the fourth quarter versus $40.0
million in the prior-year period and, for the full year, sales were
$173.2 million in fiscal 2019 versus $173.6 million in fiscal
2018
- During the fourth quarter the Office of the U.S. Trade
Representative announced the exclusion of tariffs on metal gates
effective immediately, retroactive to September 2018; as a result,
the Company recorded a $1.8 million receivable and a $1.5 million
benefit to cost of goods sold during the quarter
- A 50% reduction in the List 4A tariffs – from 15% to 7.5% --
also became effective February 14, 2020, which will positively
impact the Company’s monitors, specialty blankets, and other
products going forward
- The Company began implementing various streamlining measures in
2020 expected to save approximately $7.5 million annually
- Stuart Noyes has agreed to stay on as the Company’s interim CEO
to oversee the many strategic initiatives being undertaken to
improve financial results
- The Company’s lenders again supported SUMR Brands by amending
its credit facility and term loan to facilitate financial
liquidity
- SUMR Brands launched its innovative travel system and infant
car seat in the first quarter
“I’m pleased to announce that SUMR Brands is
making steady progress towards driving improved financial
performance and long-term shareholder value,” said Stuart Noyes,
Interim CEO. “My belief in this Company’s future is underscored by
my commitment to stay on and oversee the numerous steps being
undertaken to reduce costs and position the organization to grow,
de-lever, and achieve sustained profitability. Of the $7.5 million
of anticipated annualized savings, approximately $6.0 million is
expected to positively impact this year’s financial results, and
the implementation of these plans during the first two months of
2020 has exceeded our expectations.
“In addition, during the fourth quarter we
posted solid double-digit revenue gains across a number of core
product categories and were granted a $1.8 million tariff refund,
retroactive to September of 2018, on our metal gates. The overall
stable and improving tariff environment is providing a positive
lift to the outlook for 2020 which, along with our streamlining
initiatives, gives us confidence about the future. While the
coronavirus has impacted certain suppliers in China, the situation
there appears to be stabilizing, and we are closely monitoring
evolving conditions in the U.S.
“We are optimistic about our path to
profitability and will use cash generation to reduce debt as
judiciously as possible going forward. At the same time, our new
car seat and travel system – exempt from tariff regulations – are
already in stores and online, and we are pleased with their initial
reception. We believe the Company is gaining traction across a
number of fronts that set the stage for increased operating
performance during 2020 and beyond.”
Fourth Quarter Results
Net sales for the three months ended December
28, 2019 were $42.7 million compared with $40.0 million for the
three months ended December 29, 2018. The Company’s results reflect
higher sales year-over-year across many key product categories,
including strong double-digit growth in potties, gates, strollers,
and specialty blankets.
Gross profit for the fourth quarter of 2019 was
$14.0 million versus $12.5 million in 2018, while gross margin was
32.8% in 2019 versus 31.3% last year. The Company, in the face of
tariffs on goods from China, was able to mitigate a substantial
portion of the associated negative impact on margins through higher
customer prices, supplier cost concessions, and the transfer of
certain production to other countries. In addition, in December
2019 the Office of the U.S. Trade Representative announced the
exclusion of tariffs on metal baby gates effective immediately,
retroactive to September 2018. As a result, the Company recorded a
$1.8 million tariff refund receivable (classified as “other assets”
on the balance sheet) and a $1.5 million reduction to cost of sales
in the fourth quarter of 2019; there will be a $0.3 million
decrease in first quarter cost of goods sold.
Selling expense was $3.6 million in the fourth
quarter of 2019 versus $3.0 million in the prior-year period, and
selling expense as a percent of net sales was 8.3% in 2019 versus
7.5% last year. The increase year-over-year was primarily due to
increased cooperative and digital marketing costs, primarily for
new product launches, as well as greater online marketing
initiatives versus fiscal 2018, which included a larger component
of direct import sales.
General and administrative expenses (G&A)
were $8.6 million in the fourth quarter of 2019 versus $9.3 million
last year, decreasing to 20.1% of net sales in 2019 from 23.2% in
2018. The year-over-year change reflects lower labor and other
costs due to streamlining actions taken by the Company. Interest
expense was $1.1 million in the fourth quarter of both 2019 and
2018.
The Company reported a net loss of $0.9 million,
or $(0.42) per share, in the fourth quarter of 2019 compared with a
net loss of $2.0 million, or $(0.94) per share, in the prior-year
period.
Adjusted EBITDA, as defined in the Company’s
credit agreements, for the fourth quarter of 2019 was $2.4 million
versus $0.8 million for the fourth quarter of 2018, and Adjusted
EBITDA as a percent of net sales was 5.6% in the fourth quarter of
2019 versus 2.1% last year. Adjusted EBITDA in 2019 included $0.4
million in bank permitted add-back charges compared with $0.5
million during the prior-year period. Adjusted EBITDA, adjusted net
loss, and adjusted loss per share are non-GAAP metrics. An
explanation is included under the heading below "Use of Non-GAAP
Financial Information," and reconciliations to GAAP measures can be
found in the tables at the end of this release.
Balance Sheet Highlights
As of December 28, 2019, the Company had
approximately $0.4 million of cash and $48.6 million of bank debt
compared with $0.7 million of cash and $47.9 million of bank debt
as of December 29, 2018. Inventory as of the end of fiscal 2019 was
$28.1 million versus $36.1 million in the prior-year period. Trade
receivables as of December 28, 2019 were $32.8 million compared
with $31.2 million as of December 29, 2018, while accounts payable
and accrued expenses were $32.7 million at the end of the 2019
fourth quarter compared with $37.1 million at the beginning of the
fiscal year.
Conference Call Information
Management will host a conference call to
discuss the financial results tomorrow, March 19, at 9:00 a.m.
Eastern. To listen to the live call, visit the Investor Relations
section of the Company's website at www.sumrbrands.com or dial
844-834-0642 or 412-317-5188. An archive of the webcast will be
available on the Company's website.
About SUMR Brands, Inc.
Based in Woonsocket, Rhode Island, the Company
is a global leader of premium juvenile brands driven by a
commitment to people, products, and purpose. The Company is made up
of a diverse group of experts with a passion to make family life
better by selling proprietary, innovative products across several
core categories. For more information about the Company, please
visit www.sumrbrands.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 loss and adjusted loss per diluted
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. Non-GAAP adjusted
net loss and adjusted loss per diluted share means net (loss) plus
unamortized financing fees and other items added back, as well as
the tax impact of these 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 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, as they indicate more clearly
the Company’s operations and its ability to meet capital
expenditure and working capital requirements. 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 with respect to
impact of its streamlining measures and other initiatives to reduce
costs, including expected savings of $6.0 million in 2020 and
annualized savings of $7.5 million, and to position the Company to
grow, de-lever and improve profitability; the improving tariff
environment; its intent to use cash generation to reduce debt; the
potential impact of the coronavirus outbreak on its business; and
the Company’s outlook on its operating performance in 2020 and
beyond. 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 impact of the coronavirus outbreak on the
Company’s supply chain, U.S. operations and sales in the U.S;
increased tariffs, additional tariffs or import or export taxes on
the cost of its products and therefore demand for its products, or
the suspension, non-renewal or revocation of any exclusion from
tariffs on its products; the Company’s ability to meet its
liquidity requirements; the Company’s ability to comply with the
covenants in its loan agreements and to maintain availability under
its loan agreements; the Company’s ability to implement and to
achieve the expected benefits and savings of its restructuring
initiatives; 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 reliance on foreign suppliers; the
Company’s ability to develop, market and launch new products; the
Company’s ability to manage inventory levels and meet customer
demand; the Company’s ability to grow sales with existing and new
customers and in new channels; and other risks as detailed in the
Company’s most recent Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q and other filings with the Securities and
Exchange Commission. The Company assumes no obligation to
update the information contained in this release.
Company Contact:Chris WittyInvestor
Relations646-438-9385cwitty@darrowir.com
Tables to Follow
Summer
Infant, Inc. |
|
Consolidated
Statements of Operations |
|
(amounts in
thousands of US dollars, except share and per share
data) |
|
(all share
and per share data adjusted for a 1-9 reverse stock split in March
2020) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Twelve
Months Ended |
|
|
|
December 28, 2019 |
|
December 29, 2018 |
|
December 28, 2019 |
|
December 29, 2018 |
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
42,695 |
|
|
$ |
40,048 |
|
|
$ |
173,181 |
|
|
$ |
173,619 |
|
|
Cost of
goods sold |
|
|
28,697 |
|
|
|
27,526 |
|
|
|
118,296 |
|
|
|
118,500 |
|
|
Gross
profit |
|
$ |
13,998 |
|
|
$ |
12,522 |
|
|
$ |
54,885 |
|
|
$ |
55,119 |
|
|
General and
administrative expenses(1) |
|
|
8,568 |
|
|
|
9,293 |
|
|
|
34,823 |
|
|
|
38,880 |
|
|
Selling
expense |
|
|
3,559 |
|
|
|
3,003 |
|
|
|
14,540 |
|
|
|
12,430 |
|
|
Depreciation
and amortization |
|
|
912 |
|
|
|
1,095 |
|
|
|
3,720 |
|
|
|
4,182 |
|
|
Operating
income/(loss) |
|
$ |
959 |
|
|
$ |
(869 |
) |
|
$ |
1,802 |
|
|
$ |
(373 |
) |
|
Interest
expense |
|
|
1,138 |
|
|
|
1,142 |
|
|
|
4,871 |
|
|
|
4,442 |
|
|
(Loss)
before taxes |
|
$ |
(179 |
) |
|
$ |
(2,011 |
) |
|
$ |
(3,069 |
) |
|
$ |
(4,815 |
) |
|
Income tax
provision/(benefit) |
|
|
703 |
|
|
|
(51 |
) |
|
|
1,095 |
|
|
|
(564 |
) |
|
Net
(loss) |
|
$ |
(882 |
) |
|
$ |
(1,960 |
) |
|
$ |
(4,164 |
) |
|
$ |
(4,251 |
) |
|
(Loss)
per diluted share |
|
$ |
(0.42 |
) |
|
$ |
(0.94 |
) |
|
$ |
(1.98 |
) |
|
$ |
(2.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
Shares
used in fully diluted EPS |
|
|
2,106,594 |
|
|
|
2,089,671 |
|
|
|
2,100,730 |
|
|
|
2,082,714 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes
stock based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP to Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Twelve
Months Ended |
|
|
|
December 28, 2019 |
|
December 29, 2018 |
|
December 28, 2019 |
|
December 29, 2018 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
Net
(loss) (GAAP) |
|
$ |
(882 |
) |
|
$ |
(1,960 |
) |
|
$ |
(4,164 |
) |
|
$ |
(4,251 |
) |
|
Plus:
interest expense |
|
|
1,138 |
|
|
|
1,142 |
|
|
|
4,871 |
|
|
|
4,442 |
|
|
Plus:
provision/(benefit) for income taxes |
|
|
703 |
|
|
|
(51 |
) |
|
|
1,095 |
|
|
|
(564 |
) |
|
Plus:
depreciation and amortization |
|
|
912 |
|
|
|
1,095 |
|
|
|
3,720 |
|
|
|
4,182 |
|
|
Plus:
non-cash stock based compensation expense |
|
|
95 |
|
|
|
90 |
|
|
|
319 |
|
|
|
523 |
|
|
Plus:
permitted add-backs (a) |
|
|
425 |
|
|
|
530 |
|
|
|
1,263 |
|
|
|
3,209 |
|
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
2,391 |
|
|
$ |
846 |
|
|
$ |
7,104 |
|
|
$ |
7,541 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EPS |
|
|
|
|
|
|
|
|
|
Net
(loss) (GAAP) |
|
$ |
(882 |
) |
|
$ |
(1,960 |
) |
|
$ |
(4,164 |
) |
|
$ |
(4,251 |
) |
|
Plus:
permitted add-backs(a) |
|
|
425 |
|
|
|
530 |
|
|
|
1,263 |
|
|
|
3,209 |
|
|
Plus:
unamortized financing fees(b) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
518 |
|
|
Tax
impact of items impacting comparability(c) |
|
|
(119 |
) |
|
|
(149 |
) |
|
|
(354 |
) |
|
|
(1,044 |
) |
|
Adjusted net (loss) (Non-GAAP) |
|
$ |
(576 |
) |
|
$ |
(1,579 |
) |
|
$ |
(3,255 |
) |
|
$ |
(1,568 |
) |
|
Adjusted (loss) per diluted share (Non-GAAP) |
|
$ |
(0.27 |
) |
|
$ |
(0.76 |
) |
|
$ |
(1.55 |
) |
|
$ |
(0.75 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) 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 December
28, 2019 include severance $256 ($72 tax impact), special projects
$87 ($24 impact), and board fees $82 ($23 tax impact). Permitted
add-backs for the three months ended December 29, 2018 include
severance related costs $422 ($118 tax impact) and board fees $108
($31 tax impact). Permitted add-backs for the twelve months ended
December 28, 2019 include severance related costs $767 ($215),
board fees $381 ($107 tax impact) and special projects $115 ($32
tax impact). Permitted add-backs for the twelve months ended
December 29, 2018 include bad debt allowance $1,780 ($499 tax
impact), severance related costs $863 ($242 tax impact), board fees
$400 ($112 impact), and special projects $166 ($46 tax impact) |
|
(b) Write off of
unamortized financing costs and termination fees associated with
the Company's old credit facility, reflecting a $518 ($145 tax
impact) charge for the twelve months ending December 29, 2018. |
|
(c) Represents the
aggregate tax impact of the adjusted items set forth above based on
the statutory tax rate for the periods presented relevant to their
jurisdictions. |
|
Summer
Infant, Inc |
|
|
Consolidated
Balance Sheet |
|
|
(amounts in
thousands of US dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
December 28, 2019 |
|
|
December 29, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
395 |
|
$ |
721 |
|
|
Trade receivables, net |
|
32,787 |
|
|
31,223 |
|
|
Inventory, net |
|
28,056 |
|
|
36,066 |
|
|
Property and equipment, net |
|
8,788 |
|
|
9,685 |
|
|
Intangible assets, net |
|
12,896 |
|
|
13,300 |
|
|
Other
assets(1) |
|
8,621 |
|
|
3,221 |
|
|
Total
assets |
$ |
91,543 |
|
$ |
94,216 |
|
|
|
|
|
|
|
|
|
|
Accounts payable |
$ |
25,396 |
|
$ |
28,120 |
|
|
Accrued expenses |
|
7,289 |
|
|
8,939 |
|
|
Current portion of long-term debt |
|
875 |
|
|
875 |
|
|
Long term
debt, less current portion (2) |
|
45,359 |
|
|
44,641 |
|
|
Other
liabilities(1) |
|
7,041 |
|
|
2,371 |
|
|
Total
liabilities |
|
85,960 |
|
|
84,946 |
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity |
|
5,583 |
|
|
9,270 |
|
|
Total
liabilities and stockholders’ equity |
$ |
91,543 |
|
$ |
94,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes the effect of the new lease accounting guidance under
U.S. GAAP for December 28, 2019 capitalizing Right of Return Assets
and Lease Liabilities relative to the company’s operating
leases. |
|
|
|
|
|
|
|
|
|
|
(2) Long term debt is reported net of unamortized financing fees.
As a result, reported long term debt is reduced by $2,398 and
$2,395 of unamortized financing fees in the periods ending December
28, 2019 and December 29, 2018, respectively. |
|
|
|
|
|
|
|
|
|
|
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