Summer Infant, Inc. (formerly KBL Healthcare Acquisition Corp. II) Announces Year-End 2006 Results for Recently Acquired Compani
March 12 2007 - 8:00AM
Business Wire
Summer Infant, Inc.(�Company�)(Nasdaq: SUMR, SUMRU, SUMRW), today
announced financial results for the year ended December 31, 2006
for Summer Infant (USA), Inc., Summer Infant Europe Limited and
Summer Infant Asia Ltd (collectively, the �Summer Operating
Companies�). The Company consummated its acquisition of the Summer
Operating Companies on March 6, 2007. Accordingly, the financial
results set forth herein do not include the financial results of
the Company for 2006. Further, the financial results of the Summer
Operating Companies for 2006 were not included in the financial
results for 2006 reported in the Company�s Annual Report on Form
10-KSB that was filed with the Securities and Exchange Commission
on March 5, 2007. The Company and the Summer Operating Companies
will being reporting combined financial results for the fiscal
quarter ending March 31, 2007. The Summer Operating Companies� net
revenues for the year were $52.197 million, a 47% increase from
$35.535 million in 2005. This growth was driven primarily by
additional penetration at existing customers due to increased
product listings and penetration into larger numbers of stores
within our customers� networks. New product introductions, the
addition of new customers and international growth also contributed
to the revenue growth in the quarter. The Summer Operating
Companies� gross profit for 2006 was $20.324 million, a 62%
increase as compared to $12.527 million in 2005. Gross margins for
2006 increased approximately 360 basis points to 38.9% from 35.3%
in 2005. This increase is primarily attributable to the
implementation of cost reduction programs, a number of quality
improvement initiatives that resulted in reduced product returns
and a shift in the product mix towards higher margin products. The
Summer Operating Companies� selling, general and administrative
(�SG&A�) expenses for 2006 were $17.172 million, or 32.9% of
net revenues, as compared to $10.559 million, or 29.7% of net
revenues, in 2005. During 2006, the company hired additional
senior-level employees to support future growth, added a team to
develop products in the Soft Goods division, continued to invest
heavily in new product development and experienced higher selling
costs as a result of the rapid growth in sales. In addition, the
Summer Operating Companies incurred significant professional fees
in connection with their acquisition by the Company and litigation
related to the hiring of certain employees for the Soft Goods
division. These professional fees are considered to be
non-recurring. Excluding these non-recurring items, the Summer
Operating Companies� adjusted SG&A expenses were $15.942
million, or 30.5% of net revenues, in 2006. The Company expects to
reduce SG&A as a percent of sales in 2007 and beyond by
leveraging its fixed cost structure over a larger sales base. The
Summer Operating Companies� earnings before interest, taxes,
depreciation and amortization (�EBITDA�) for 2006 was $3.820
million, representing more than a 60% increase from the $2.379
million reported in 2005. After adjusting for the non-recurring
items mentioned above, adjusted EBITDA was $5.050 million, which
represents over a 110% increase from 2005. Net income for the year
ended December 31, 2006 increased 46% to $1.929 million as compared
to $1.325 million for the same period in 2005. �The Summer
Operating Companies� growth continued to be strong in 2006,�
commented, Jason Macari, Chief Executive Officer of the Company and
the Summer Operating Companies. �We have organically grown revenues
from just over $20 million in 2004 to more than $52 million in 2006
by continuing to develop innovative products in all our core
categories and broaden our relationships with existing and new
customers. We experienced solid sales performance across all
product categories and all customer classes. Thanks to our
expanding product line and increasing mindshare among consumers, we
believe Summer Infant is rapidly becoming a critical supplier to a
larger group of retail customers.� The Summer Operating Companies�
balance sheet as of December 31, 2006 reflects the increased
working capital requirements associated with the significant growth
in net revenues. The investment in working capital was funded
through increased borrowings on an existing line of credit as well
as cash generated from operations. The balance sheet also reflects
an investment of approximately $2.7 million related to the
construction of the previously announced new headquarters and
distribution center scheduled to be completed in March 2007, all of
which was financed by the Summer Operating Companies� primary
lender. Based on customer commitments to date and updated budget
assumptions, the Company is affirming previously issued guidance
for the full year 2007, which calls for net revenues of $70 to $75
million and EBITDA of $7.5 to $8.0 million, before acquisitions.
Mr. Macari stated, �We expect to continue our track record of
strong organic growth during 2007. In addition, the acquisition of
the Summer Operating Companies by the Company provides the capital
to expand even more aggressively, including pursuing attractive
acquisition opportunities. I�ve never been more excited about the
opportunities available to us.� About Summer Infant, Inc. Based in
North Smithfield, Rhode Island, the Company is a designer, marketer
and distributor of branded durable juvenile health, safety and
wellness products (for ages 0-3 years), which are sold principally
to large U.S. retailers. The Company currently has over sixty
proprietary products, including nursery audio/video monitors,
safety gates, durable bath products, bed rails, infant thermometers
and related health and safety products, booster and potty seats,
bouncers, soft goods, bedding, strollers and large furniture. This
release includes certain financial information (EBITDA) not derived
in accordance with generally accepted accounting principles
(�GAAP�). The Company believes that the presentation of this
non-GAAP measure provides information that is useful to investors
as it indicates more clearly the ability of Summer�s assets to
generate cash sufficient to pay interest on its indebtedness, meet
capital expenditure and working capital requirements and otherwise
meet its obligations as they become due. We have included a
reconciliation of this information to the most comparable GAAP
measures in a table below the Statement of Operations. Forward
Looking Statements This press release includes forward-looking
statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 that involve risks
and uncertainties. Forward-looking statements are statements that
are not historical facts. Such forward-looking statements, based
upon the current beliefs and expectations of the Company�s
management, are subject to risks and uncertainties, which could
cause actual results to differ from the forward-looking statements.
Summer Infant, Inc. Consolidated Statements of Operations (in
thousands of US dollars) � For the year ended December 31, 2006�
2005� � Net revenues $ 52,197� $ 35,535� Cost of goods sold 31,873�
23,008� Gross profit 20,324� 12,527� Selling, general &
administrative expenses 17,172� 10,559� Income before interest
3,152� 1,968� Interest expense 938� 451� Income before taxes and
minority interest 2,214� 1,517� Income tax expense 26� 31� Net
income before minority interest $ 2,188� $ 1,486� Minority Interest
in net income of affiliates 259� 161� Net income $ 1,929� $ 1,325�
� EBITDA Reconciliation: Income before interest 3,152� 1,968� Plus:
depreciation & amortization 668� 411� EBITDA � $ 3,820� $
2,379� � Plus: deal-related fees 731� 0� Plus: litigation fees 499�
0� Adjusted EBITDA $ 5,050� $ 2,379� Summer Infant, Inc. and
Affiliates Consolidated Balance Sheets (in thousands of US dollars)
� December 31, 2006 December 31, 2005 � Cash and cash equivalents $
715� $ 1,115� Trade receivables 8,915� 6,210� Inventory 11,075�
7,860� Prepaids and other current assets 252� 199� Total current
assets 20,957� 15,384� Property and equipment, net 6,139� 2,440�
Goodwill 92� 92� Goodwill and intangibles, net 75� 91� Total assets
$ 27,263� $ 18,007� � Line of credit $ 11,342� $ 7,087� Accounts
payable 6,959� 6,713� Accrued expenses 1,574� 902� Current portion
of long term liabilities 3,211� 280� Total current liabilities
23,086� 14,982� Long term liabilities, less current portion 195�
560� Total liabilities 23,281� 15,542� � Minority interest 629�
370� � Common stock & paid in capital 220� 220� Retained
earnings 3,008� 1,884� Accumulated other comprehensive income
(loss) 125� (9) Total stockholders equity 3,353� 2,095� Total
liabilities & stockholders equity $ 27,263� $ 18,007�
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