Summer Infant, Inc. (NASDAQ: SUMR) (NASDAQ: SUMRW)
-- 2008 revenue grew over 64% year over year; organic revenue growth
totaled 41%; EBITDA increased 60% year over year
-- 2008 pro forma revenues of $138.3 million exceeded high end of revenue
guidance range; 2008 pro forma EBITDA and EPS in line with guidance
-- Reports substantial double-digit sales and EBITDA growth in the fourth
quarter of 2008
-- Total revenues increased 46% year over year; organic revenue up
19% year over year
-- EBITDA increased 21% year over year; EPS totaled $0.06
Summer Infant, Inc. ("Summer Infant" or the "Company") (NASDAQ:
SUMR) (NASDAQ: SUMRW) today announced financial results for the
fourth quarter and year ended December 31, 2008.
Fourth Quarter 2008 Results
Net revenues for the fourth quarter of 2008 were $34.4 million,
a 46% increase from $23.5 million in the fourth quarter of 2007.
Excluding the impact of the Basic Comfort and Kiddopotamus
acquisitions, organic revenue growth was approximately 19% versus
the prior year. This growth was driven by a variety of factors,
including new product introductions, new customers in 2008, and
continued growth in the Company's core categories.
Gross profit for the fourth quarter of 2008 was $12.1 million, a
40% increase compared to $8.7 million in the fourth quarter of
2007. Gross margin for the fourth quarter of 2008 was 35.3%, a
decrease from 37.0% in the fourth quarter of 2007, but an increase
from 35.0% in the third quarter of 2008. Gross margins were
negatively impacted year over year by an increase in costs of goods
sourced from China and higher resin costs for products manufactured
in the US, although costs have recently stabilized due to lower
commodity prices.
Selling, general and administrative ("SG&A") expenses,
excluding depreciation, amortization, and non-cash stock option
expense, were $9.4 million for the fourth quarter of 2008 compared
to $6.4 million, excluding deal-related fees, for the fourth
quarter of 2007. SG&A as a percentage of net revenues was 27.3%
in the fourth quarter of 2008, flat as compared to the year-ago
quarter. SG&A as a percentage of net revenues increased
sequentially due to higher freight costs related to expedited
shipments in December, increased promotional programs with
retailers, and higher product quality testing costs.
Operating income was $1.6 million in the fourth quarter of 2008,
compared to $1.5 million in the fourth quarter of 2007. EBITDA
(defined herein as earnings before interest, taxes, depreciation
and amortization, and non-cash stock option expense) increased 21%
to $2.7 million for the fourth quarter of 2008 compared to $2.3
million, excluding deal-related fees, for the fourth quarter of
2007.
Net income for the fourth quarter of 2008 was $1.0 million, or
$0.06 per share, compared to $0.7 million, or $0.05 per share, in
the fourth quarter of 2007. Excluding deal-related fees, net income
for the fourth quarter of 2007 was $0.9 million, or $0.07 per
share. The fourth quarter tax rate reflects a cumulative adjustment
to bring the full year 2008 effective tax rate to 32.65%.
As of December 31, 2008, the Company had approximately $1.0
million of cash and $43.9 million of debt on the balance sheet. On
a pro forma basis, the ratio of net debt to EBITDA was 2.9 times as
of December 31, 2008. The majority of the debt matures in fiscal
2011. The Company is in compliance with all debt covenants and
continues to be able to access its credit lines.
Full Year 2008 Results
For the twelve months ended December 31, 2008, net revenues were
$132.4 million, an increase of 64% compared to $80.5 million in
2007. Note that for 2007, the Company has included and refers
solely to the operating performance of the Summer Operating
Companies on a stand alone basis (excluding the combination with
KBL), as this is the clearest comparison of the underlying
operations year over year. Organic revenues, excluding the impact
of the Basic Comfort acquisition, which closed on March 31, 2008,
and the Kiddopotamus acquisition, which closed on April 18, 2008,
increased approximately 41% year over year. EBITDA (as defined
herein above), excluding deal-related fees, for the twelve months
ended December 31, 2008 was $12.8 million, or 9.7% of net revenues,
a 60% increase from $8.0 million, or 10.0% of net revenues, in
2007.
Pro Forma Results for Year Ended December 31, 2008
Summer Infant is also presenting pro forma results for the full
year 2008, which include the results of Basic Comfort and
Kiddopotamus for the entire year, in order to provide additional
information to investors as to the relative impact of these
companies on the overall Summer Infant business. Note that these
results reflect the performance of the companies prior to being
acquired by Summer Infant, and therefore the results going forward
could differ materially from these results. For the year ended
December 31, 2008, the unaudited pro forma results of Summer
Infant, including Basic Comfort and Kiddopotamus, were as follows:
net revenues totaled $138.3 million; EBITDA (as defined herein
above), excluding deal-related fees, totaled $13.8 million; and
earnings per share totaled $0.37, excluding deal-related fees.
"We are very pleased with our strong financial performance in
2008, as we generated organic revenue growth of 41%, despite the
challenging macroeconomic environment," commented Jason Macari,
Chairman and Chief Executive Officer of Summer Infant. "Our full
year 2008 revenue exceeded the high end of the pro forma guidance
range that we issued on our first quarter earnings call following
our two acquisitions, continuing to demonstrate the strength of the
Summer Infant brand, the value proposition of our products, and the
solid execution of our growth strategy. In addition, despite facing
higher commodity and input cost headwinds, we were able to meet our
pro forma EBITDA and EPS guidance for the year."
Outlook
"Given the lack of visibility in consumer spending and recent
volatility in ordering rates over the past several months, we are
refraining from issuing full year guidance at this time," stated
Mr. Macari. "We have seen a solid increase in point of sale data
over the past two months relative to the fourth quarter. The
improvement in point of sale data has led to increased orders from
our customers in February and March. However, shipments in January
were relatively light due to the sharp reduction of inventory
levels at our major retail customers heading into their January
fiscal year-end. Based on these early 2009 results, we expect our
first quarter revenue and earnings to be flat to slightly down
relative to the fourth quarter. Looking ahead, our 2009 product
lineup has been performing well at the retail level and we are
encouraged by the solid momentum in current ordering rates."
"We continue to focus on cost-cutting measures in all areas of
our business and identifying ways to streamline our business
without sacrificing the quality of our products or the service we
provide for our customers," added Mr. Macari. "We expect gross
margins to benefit from re-engineering products, favorable
negotiations with vendors, and lower commodity costs, which will
begin to positively impact margins by the second quarter. We
continue to believe that the value and quality of Summer Infant
products will support customer demand in 2009 and that the infant
health, safety, and wellness category remains relatively
non-discretionary compared to other consumer segments."
Conference Call Information
Summer Infant, Inc. will host a conference call today,
Wednesday, March 11, 2009 at 4:30 p.m. Eastern Time, to discuss
financial results for its fourth quarter and full year ended
December 31, 2008. This call is being webcast and can be accessed
by visiting the Investor section of our website at
www.summerinfant.com. Investors may also listen to the call via
telephone by dialing (913) 312-1233 (pass code 9120949). In
addition, a telephone replay will be available by dialing (719)
457-0820 (pass code 9120949) through March 25, 2009, at 11:59 p.m.
Eastern Time.
About Summer Infant, Inc.
Based in Woonsocket, 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 sells
proprietary products in a number of different categories, including
nursery audio/video monitors, safety gates, durable bath products,
bed rails, infant thermometers and related nursery, health and
safety products, booster and potty seats, soft goods, bouncers,
travel accessories, highchairs and swings.
Use of Non-GAAP Financial Information
This release includes presentations of EBITDA, which is defined
herein as income before interest and taxes plus depreciation,
amortization, deal-related fees and non-cash stock option expense.
The Company believes that the presentation of EBITDA provides
useful information to investors as it indicates more clearly the
ability of the Company'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. EBITDA is commonly used as a measure of leverage
capacity, debt service ability and liquidity. EBITDA is not
considered a measure of financial performance under U.S. generally
accepted accounting principles (GAAP), and the items excluded from
EBITDA are significant components in understanding and assessing
our financial performance. EBITDA 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 our
consolidated financial statements as an indicator of financial
performance or liquidity. The Company provides reconciliations of
EBITDA and any other non-GAAP financial measures in its press
releases of historical performance. However, reconciliation for
forward-looking EBITDA projections presented in this release is not
being provided due to the number of variables in the projected
range of EBITDA. The EBITDA range in this release is calculated in
accordance with the Company's past practices. Since EBITDA is not a
measure determined in accordance with GAAP and is susceptible to
varying calculations, EBITDA, 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
the Private Securities Litigation Reform Act of 1995, and the
Company intends that such forward-looking statements be subject to
the safe harbor created thereby. These forward-looking statements
relate to information or assumptions about the acquisitions of
Basic Comfort, Inc. and Kiddopotamus and Company, benefits and
synergies of these transactions, future opportunities for the
combined company and products and any other statements regarding
the future expectations, beliefs, goals or prospects of the
Company. These statements are accompanied by words such as
"anticipate," "expect," "project," "will," "believes," "estimate"
and similar expressions. 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 dependence on key personnel;
the Company's reliance on foreign suppliers; the costs associated
with pursuing and integrating strategic acquisitions; and other
risks as detailed in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2007, and subsequent filings
with the Securities and Exchange Commission. The Company assumes no
obligation to update the information contained in this
presentation.
Summer Infant, Inc.
Consolidated Statements of Operations (unaudited)
(in thousands of US dollars, except for per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
--------- --------- --------- ---------
Net revenues $ 34,387 $ 23,474 $ 132,369 $ 80,517
Cost of goods sold 22,250 14,792 85,513 50,037
--------- --------- --------- ---------
Gross profit 12,137 8,682 46,856 30,480
Selling, general, and
administrative expenses 9,391 6,419 34,039 22,458
Depreciation & amortization 1,038 376 2,904 1,378
Deal-related fees 0 305 214 305
Non-cash stock option expense 90 95 360 376
--------- --------- --------- ---------
Income before interest 1,618 1,487 9,339 5,963
Interest income (expense) (586) (246) (2,059) (239)
--------- --------- --------- ---------
Income before taxes $ 1,032 $ 1,241 $ 7,280 $ 5,724
Provision for income taxes 66 496 2,378 2,259
--------- --------- --------- ---------
Net income $ 966 $ 745 $ 4,902 $ 3,465
========= ========= ========= =========
Earnings per share $ 0.06 $ 0.05 $ 0.33 $ 0.26
Earnings per share, excluding
deal-related fees $ 0.06 $ 0.07 $ 0.34 $ 0.27
Shares used in fully diluted
EPS 15,056 13,908 14,734 13,507
EBITDA Reconciliation:
Income before interest 1,618 1,487 9,339 5,963
Plus: depreciation &
amortization 1,038 376 2,904 1,378
Plus: deal-related fees 0 305 214 305
Plus: non-cash stock option
expense 90 95 360 376
--------- --------- --------- ---------
EBITDA $ 2,746 $ 2,263 $ 12,817 $ 8,022
--------- --------- --------- ---------
The above condensed income statement reflects the unaudited operating
performance of Summer Operating Companies on a stand alone basis for
2007. This is the clearest comparison of the underlying operations year
over year, as it excludes the impacts of the combination with KBL. This
is a pro forma comparison for informational purposes only. The actual
reporting in Form 10-K for the year ended December 31, 2007 contains the
twelve months of activity of KBL Healthcare plus the Summer operating
performance subsequent to the merger (March 6, 2007 through December 31,
2007).
Summer Infant, Inc.
Pro Forma Summary Statement of Operations
Including Results of the Acquired Companies (unaudited)
(in thousands of US dollars, except for per share data)
Twelve Months
Ended
December 31, 2008
Net revenues $ 138,298
Gross profit $ 49,313
Net income, excluding deal-related fees $ 5,513
EBITDA, excluding deal-related fees and non-cash stock
option expense $ 13,809
Earnings per share, excluding deal-related fees $ 0.37
Shares used in fully diluted EPS 15,056
Note: the above presentation summarizes the full year 2008 statement of
operations for Summer Infant on a pro forma basis assuming that the
acquisitions of Basic Comfort and Kiddopotamus occurred on January 1, 2008.
These unaudited results are being presented to give the reader additional
information regarding these acquisitions and their relative impact on
Summer Infant.
Summer Infant, Inc.
Consolidated Balance Sheet
(in thousands of US dollars)
Unaudited
December 31, December 31,
2008 2007
Cash and cash equivalents $ 988 $ 1,771
Trade receivables 29,358 21,245
Inventory 30,882 19,327
Property and equipment, net 11,212 9,279
Goodwill and other intangibles 55,582 40,283
Other assets 2,513 1,320
------------- -------------
Total assets $ 130,535 $ 93,225
============= =============
Current portion of long-term debt $ 1,654 $ 17,856
Accounts payable, accrued expenses and other
liabilities 24,393 18,122
Long term debt, less current portion 42,277 3,977
------------- -------------
Total liabilities 68,324 39,955
Total stockholders equity 62,211 53,270
------------- -------------
Total liabilities & stockholders equity $ 130,535 $ 93,225
============= =============
Contact: Joe Driscoll Chief Financial Officer Summer Infant,
Inc. (401) 671-6922 Devlin Lander Integrated Corporate Relations
(415) 292-6855
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