SUMR Brands ("SUMR Brands" or the "Company") (NASDAQ: SUMR), a
global leader in premium infant and juvenile products, today
announced financial results for the first quarter ended March 28,
2020.
Recent Highlights
- Net sales were $40.3 million in the first quarter versus $42.5
million in the prior-year period, reflecting the impact of the
COVID-19 pandemic, partially offset by higher eCommerce sales
- The Company is ahead of schedule with regard to realizing
savings of at least $7.5 million annually – with over $6.0 million
expected in 2020 – based on streamlining initiatives already
enacted or underway; G&A declined 13.1% year-over-year to $8.1
million in the first quarter versus $9.4 million last year
- Adjusted EBITDA rose to $1.8 million versus $1.5 million in the
first quarter of 2019, and Adjusted EBITDA as a percent of net
sales was 4.6% in 2020 versus 3.4% last year
- SUMR Brands generated $4.9 million in operating cash during the
first quarter, compared to a $7.5 million use of cash in the
prior-year period, reflecting improved working capital management;
debt was reduced by $4.1 million, to $44.5 million, with further
paydown anticipated in the second quarter
- The Company successfully subleased a portion of its California
warehouse, saving over $1.0 million per year, and, in addition, its
Woonsocket lease was amended to reduce space – expected to save
approximately $0.3 million annually
- Paul Francese, SUMR Brands’ Chief Financial Officer (“CFO”),
will be retiring from the Company at the end of June; Ed Schwartz,
an experienced turnaround professional who previously served as the
Company’s Interim CFO from March through September, 2012, will
become the new CFO effective June 15, 2020
- SUMR Brands has elected to hold its Annual Stockholders’
Meeting on September 9, 2020 due to current restrictions on travel
and group meetings related to the COVID-19 pandemic
“A great deal has certainly changed since the
start of 2020 due to the COVID-19 pandemic, but SUMR Brands has
steadfastly continued to execute a plan designed for the turnaround
of the Company,” said Stuart Noyes, Interim CEO. “Taking every
precaution appropriate to safeguard our employees and customers, we
are rapidly adapting to at-home working conditions as well as a
surge in online demand. While some of our specialty retailers are
closed, most of our channel partners remain open, and our suppliers
in China are, generally speaking, back producing at near-normal
levels.
“We continued to take steps to streamline the
Company this quarter – adjusting our headquarters’ lease, closing
our UK operations, and subleasing a portion of our California
warehouse, as previously announced. At the same time, we have
rolled out new products, invested in eCommerce initiatives, and
reduced working capital, resulting in improved cash flow and lower
debt.
“I’d like to thank Paul Francese, our CFO, for
his many years of service to SUMR Brands. He has elected to retire
at the end of June, and we are sincerely grateful for his
stewardship through several unexpected challenges – including
COVID-19 and a trade war with China. He will be replaced by Ed
Schwartz, a seasoned financial professional with turnaround
experience, whose expertise will be crucial as we navigate the
coming months on our path to profitability.”
First Quarter Results
Net sales for the three months ended March 28,
2020 were $40.3 million compared with $42.5 million for the three
months ended March 30, 2019. The Company’s results reflected
softness within certain markets, including Canada, and lower sales
at several brick & mortar chains, particularly specialty
retailers, due to COVID-19 restrictions, partially offset by higher
revenue year-over-year across several product categories including
specialty blankets, strollers, boosters and playards, driven by
double-digit growth within its eCommerce channels.
Gross profit for the first quarter of 2020 was
$12.5 million versus $13.5 million in 2019, while gross margin was
31.0% in 2020 versus 31.6% last year. The lower gross margin
largely reflected product mix and the impact of closeout sales.
Selling expense was $3.4 million in the first quarters of both 2020
and 2019, and selling expense as a percent of net sales was 8.5% in
2020 versus 7.9% last year. The increase year-over-year as a
percent of sales was primarily due to higher cooperative
advertising expenses and freight costs.
General and administrative expenses (G&A)
were $8.1 million in the first quarter of 2020 versus $9.4 million
last year, declining to 20.2% of net sales in 2020 from 22.0% in
2019. The year-over-year change reflects lower labor and other
costs due to streamlining actions taken by the Company in the
quarter and over the past year, partially offset by severance and
restructuring costs. Interest expense was $1.4 million in the first
quarter of 2020 versus $1.2 million in 2019.
The Company reported a net loss of $1.2 million,
or $(0.57) per share, in the first quarter of 2020 compared with a
net loss of $1.4 million, or $(0.67) per share, in the prior-year
period.
Adjusted EBITDA, as defined in the Company’s
credit agreements, for the first quarter of 2020 was $1.8 million
versus $1.5 million for the first quarter of 2019, and Adjusted
EBITDA as a percent of net sales was 4.6% in the first quarter of
2020 versus 3.4% last year. Adjusted EBITDA in 2020 included $0.9
million in bank permitted add-back charges compared with $0.7
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 March 28, 2020, the Company had
approximately $0.7 million of cash and $44.5 million of bank debt
compared with $0.4 million of cash and $48.6 million of bank debt
as of December 28, 2019. Inventory as of March 28, 2020 was $25.2
million versus $28.1 million at the beginning of the fiscal year.
Trade receivables as of the end of the first quarter were $30.5
million compared with $32.8 million as of December 28, 2019, while
accounts payable and accrued expenses were $33.0 million compared
with $32.7 million at the beginning of the fiscal year.
Annual Stockholders’ Meeting
In light of the COVID-19 pandemic, the Company
plans to hold its Annual Stockholders’ Meeting on September 9,
2020. While the Company currently expects that the meeting
will be held in person, the Company will monitor the COVID-19
pandemic and may, for the health and safety of stockholders,
directors, officers and employees, hold the meeting in a virtual
format. See the Company’s proxy filing for additional information,
when available.
Conference Call Information
Management will host a conference call to
discuss the financial results tomorrow, May 13, 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
improve profitability; and the potential short-term and long-term
impact of the COVID-19 pandemic on its business. 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 COVID-19 pandemic 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) |
|
(unaudited) |
|
|
|
Three Months Ended |
|
|
|
March 28, 2020 |
|
March 30, 2019 |
|
|
|
|
|
|
|
Net sales |
|
$ |
40,338 |
|
|
$ |
42,538 |
|
|
Cost of goods sold |
|
|
27,835 |
|
|
|
29,088 |
|
|
Gross profit |
|
$ |
12,503 |
|
|
$ |
13,450 |
|
|
General and administrative
expenses(1) |
|
|
8,147 |
|
|
|
9,379 |
|
|
Selling expense |
|
|
3,444 |
|
|
|
3,353 |
|
|
Depreciation and
amortization |
|
|
967 |
|
|
|
937 |
|
|
Operating loss |
|
$ |
(55 |
) |
|
$ |
(219 |
) |
|
Interest expense |
|
|
1,410 |
|
|
|
1,249 |
|
|
Loss before taxes |
|
$ |
(1,465 |
) |
|
$ |
(1,468 |
) |
|
Income tax benefit |
|
|
(255 |
) |
|
|
(70 |
) |
|
Net loss |
|
$ |
(1,210 |
) |
|
$ |
(1,398 |
) |
|
Loss per diluted share |
|
$ |
(0.57 |
) |
|
$ |
(0.67 |
) |
|
|
|
|
|
|
|
Shares used in fully diluted EPS |
|
|
2,109,264 |
|
|
|
2,092,574 |
|
|
|
|
|
|
|
|
(1) Includes stock based
compensation expense |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP to Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 28, 2020 |
|
March 30, 2019 |
|
|
|
|
|
|
|
Reconciliation of Adjusted
EBITDA |
|
|
|
|
|
Net loss (GAAP) |
|
$ |
(1,210 |
) |
|
$ |
(1,398 |
) |
|
Plus: interest expense |
|
|
1,410 |
|
|
|
1,249 |
|
|
Plus: benefit for income taxes |
|
|
(255 |
) |
|
|
(70 |
) |
|
Plus: depreciation and amortization |
|
|
967 |
|
|
|
937 |
|
|
Plus: non-cash stock based
compensation expense |
|
|
(11 |
) |
|
|
48 |
|
|
Plus: permitted add-backs
(a) |
|
|
936 |
|
|
|
684 |
|
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
1,837 |
|
|
$ |
1,450 |
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EPS |
|
|
|
|
|
Net loss (GAAP) |
|
$ |
(1,210 |
) |
|
$ |
(1,398 |
) |
|
Plus: permitted add-backs(a) |
|
|
936 |
|
|
|
684 |
|
|
Plus: unamortized financing fees(b) |
|
|
266 |
|
|
|
- |
|
|
Tax impact of items impacting comparability(c) |
|
|
(336 |
) |
|
|
(192 |
) |
|
Adjusted Net (loss) (Non-GAAP) |
|
$ |
(344 |
) |
|
$ |
(906 |
) |
|
Adjusted (loss) per diluted share (Non-GAAP) |
|
$ |
(0.02 |
) |
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
(a) Permitted
addbacks consist of items that the Company is permitted to add-back
to the calculation of consolidated EBITDA under its credit
agreements. Permitted addbacks for the three months ended
March 30, 2020 include severance $249 ($70 tax impact), special
projects $521 ($146 tax impact), board fees $83 ($23 tax impact)
and restructuring costs $83 ($23 tax impact). Permitted addbacks
for the three months ended March 30, 2019 include severance $563
($158 tax impact), board fees $100 ($28 tax impact), and special
projects $21 ($6 tax impact). |
|
|
|
(b) Write off of
unamortized financing costs associated with the reduction in
Company's Bank of America credit facility, reflecting a $266 ($74
tax impact) charge for the three months ending March 28, 2020. |
|
|
|
(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) |
|
|
|
|
|
|
|
|
March 28, 2020 |
|
|
December 28, 2019 |
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
693 |
|
$ |
395 |
Trade receivables, net |
|
30,471 |
|
|
32,787 |
Inventory, net |
|
25,170 |
|
|
28,056 |
Property and equipment, net |
|
8,118 |
|
|
8,788 |
Intangible assets, net |
|
12,799 |
|
|
12,896 |
Other assets |
|
8,330 |
|
|
8,621 |
Total assets |
$ |
85,581 |
|
$ |
91,543 |
|
|
|
|
|
|
Accounts payable |
$ |
25,530 |
|
$ |
25,396 |
Accrued expenses |
|
7,446 |
|
|
7,289 |
Current portion of long-term debt |
|
219 |
|
|
875 |
Long term debt, less current portion (1) |
|
41,759 |
|
|
45,359 |
Other liabilities |
|
6,320 |
|
|
7,041 |
Total liabilities |
|
81,274 |
|
|
85,960 |
|
|
|
|
|
|
Total stockholders’ equity |
|
4,307 |
|
|
5,583 |
Total liabilities and stockholders’ equity |
$ |
85,581 |
|
$ |
91,543 |
|
|
|
|
|
|
(1) Long term debt is
reported net of unamortized financing fees. As a result,
reported long term debt is reduced by $2,491 and $2,398 of
unamortized financing fees in the periods ending March 28, 2020 and
December 28, 2019, respectively. |
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