Summer Infant, Inc. ("Summer Infant" or the "Company")
(NASDAQ:SUMR), a global leader in premium infant and juvenile
products, today announced financial results for the fiscal first
quarter ended April 1, 2017.
“We began fiscal 2017 with strong margins while
focusing on initiatives to further improve top line growth and
overall operating performance,” said Mark Messner, President and
CEO. “We posted a third quarter of positive EPS within the last
twelve months and, given current demand trends, are optimistic
about the quarters to come. While revenue was negatively impacted
by a challenging brick and mortar retail environment, we saw
double-digit sales expansion both online and internationally and
took additional strategic measures to streamline our product
development efforts. We feel confident that steps already taken
will positively impact financial results through the remainder of
2017 and beyond.”
First Quarter Results
Net sales for the three months ended April 1,
2017 were $47.3 million compared with $49.7 million for the three
months ended April 2, 2016. Revenue declined due to lower sales of
BornFree® products, swaddles, and certain Summer® monitors,
partially offset by increased sales of safety and gear
products.
Gross profit for the first quarter of 2017 was
$15.3 million compared with $15.7 million for the first quarter of
2016, and gross margin was 32.3% in fiscal 2017 versus 31.7% in the
prior year. The three months ended April 2, 2016 included $0.3
million in temporary demurrage charges and $0.2 million in foreign
exchange losses, with no similar items in the current fiscal year
period.
Selling expenses were $3.9 million in the first
quarter of 2017, essentially flat compared with the first quarter
of 2016. General and administrative expenses (G&A) were $9.3
million in fiscal 2017 versus $10.8 million in 2016, with the
year-over-year decline due in part to the resolution, in December
2016, of outstanding litigation; G&A as a percent of sales
declined to 19.6% from 21.6% in the prior year period. Interest
expense was $0.7 million in the first quarter of 2017 versus $0.6
million last year.
The Company reported net income of $0.2 million,
or $0.01 per share, in the first quarter of 2017 compared with a
net loss of $0.3 million, or $(0.02) per share, in the first
quarter of 2016. Adjusted EBITDA for the first quarter was $2.4
million versus $3.2 million for the first quarter of 2016. Adjusted
EBITDA for the first quarter of 2017 includes $0.2 million in bank
permitted add-back charges compared with $2.0 million for the first
quarter of 2016.
Adjusted EBITDA is a non-GAAP metric. 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 April 1, 2017, Summer Infant had
approximately $0.7 million of cash and $47.9 million of debt
compared with $1.0 million of cash and $46.9 million of debt on
December 31, 2016. Inventory as of April 1, 2017 was $36.8 million
compared with $36.1 million as of December 31, 2016.
Trade receivables at the end of the first
quarter were $34.4 million compared with $34.1 million as of
December 31, 2016. Accounts payable and accrued expenses were $37.1
million as of April 1, 2017 compared with $38.4 million at the
beginning of the fiscal year.
Conference Call Information
Management will host a conference call to
discuss the financial results tomorrow, May 4, at 9:00 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
844-834-0642 or 412-317-5188. An archive of the webcast will be
available on the Company's website.
About Summer Infant, Inc.Based
in Woonsocket, Rhode Island, the Company is a global leader of
premium infant and juvenile products 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, constant currency, 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. Constant currency sales are determined by applying a
fixed exchange rate, calculated as the 12-month average, to the
current local currency sales amounts, with the difference in
reported sales being attributable to currency. Non-GAAP adjusted
net income/loss and adjusted earnings/loss per share exclude
certain items, and 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 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, as they indicate more clearly the Company’s
operations and its ability to meet capital expenditure and working
capital requirements and comply with the financial covenants of its
loan agreements. 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
StatementsCertain 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 future
operating performance and the impact of its brand strategy for 2017
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 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, including legal 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 December 31, 2016,
and subsequent filings with the Securities and Exchange
Commission. The Company assumes no obligation to update the
information contained in this release.
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 |
|
|
|
April 1, 2017 |
|
April 2, 2016 |
|
|
|
|
|
|
|
Net
sales |
|
$ |
47,340 |
|
|
$ |
49,670 |
|
|
Cost
of goods sold |
|
|
32,051 |
|
|
|
33,944 |
|
|
Gross profit |
|
$ |
15,289 |
|
|
$ |
15,726 |
|
|
General
and administrative expenses(1) |
|
|
9,272 |
|
|
|
10,753 |
|
|
Selling expense |
|
|
3,911 |
|
|
|
3,916 |
|
|
Depreciation and
amortization |
|
|
1,056 |
|
|
|
1,156 |
|
|
Operating
income/(loss) |
|
$ |
1,050 |
|
|
$ |
(99 |
) |
|
Interest expense |
|
|
724 |
|
|
|
640 |
|
|
Income/(loss) before
taxes |
|
$ |
326 |
|
|
$ |
(739 |
) |
|
Income tax
provision/(benefit) |
|
|
156 |
|
|
|
(406 |
) |
|
Net
income/(loss) |
|
$ |
170 |
|
|
$ |
(333 |
) |
|
Income/(loss) per diluted share |
|
$ |
0.01 |
|
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
Shares used in fully diluted EPS |
|
|
18,599,386 |
|
|
|
18,386,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes stock
based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP to Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
April 1, 2017 |
|
April 2, 2016 |
|
|
|
|
|
|
|
Reconciliation of
Adjusted EBITDA |
|
|
|
|
|
Net
income/(loss) (GAAP) |
|
$ |
170 |
|
|
$ |
(333 |
) |
|
Plus:
interest expense |
|
|
724 |
|
|
|
640 |
|
|
Plus:
provision/(benefit) for income taxes |
|
|
156 |
|
|
|
(406 |
) |
|
Plus:
depreciation and amortization |
|
|
1,056 |
|
|
|
1,156 |
|
|
Plus: non-cash stock
based compensation expense |
|
|
85 |
|
|
|
127 |
|
|
Plus: permitted
add-backs (a) |
|
|
169 |
|
|
|
1,984 |
|
|
Adjusted
EBITDA (Non-GAAP) |
|
$ |
2,360 |
|
|
$ |
3,168 |
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EPS |
|
|
|
|
|
Net
income/(loss) (GAAP) |
|
$ |
170 |
|
|
$ |
(333 |
) |
|
Plus:
permitted add-backs(a) |
|
|
169 |
|
|
|
1,984 |
|
|
Tax
impact of items impacting comparability(b) |
|
|
(57 |
) |
|
|
(675 |
) |
|
Adjusted Net income/(loss) (Non-GAAP) |
|
$ |
282 |
|
|
$ |
976 |
|
|
Adjusted Earnings per diluted share (Non-GAAP) |
|
$ |
0.02 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
(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 April 1, 2017 include severance $326 ($111 tax
impact), restructuring fees $90 ($30 tax impact), board fees $88
($30 tax impact) less a credit to special projects, primarily
litigation $335 ($114 tax impact). Permitted add-backs for
the three months ended April 2, 2016 include special projects,
primarily litigation fees $1,439 ($489 tax impact), restructuring
costs $224 ($76 tax impact), board fees $127 ($43 tax impact),
severance costs $99 ($34 tax impact) and excess production costs
$95 ($33 tax impact). For comparison purposes, the permitted
add-backs for the three-month period ended April 2, 2016 have been
restated to conform to the definition of Adjusted EBITDA as set
forth in the Company's credit facility as amended in February
2017. |
|
|
|
|
(b) 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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2017 |
|
|
|
December 31, 2016 |
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
$ |
724 |
|
|
$ |
999 |
|
|
Trade
receivables, net |
|
34,369 |
|
|
|
34,137 |
|
|
Inventory, net |
|
36,839 |
|
|
|
36,140 |
|
|
Property
and equipment, net |
|
9,811 |
|
|
|
9,965 |
|
|
Intangible assets, net |
|
14,621 |
|
|
|
14,813 |
|
|
Other
assets |
|
5,288 |
|
|
|
5,683 |
|
|
Total
assets
|
$ |
101,652 |
|
|
$ |
101,737 |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
$ |
28,359 |
|
|
$ |
30,684 |
|
|
Accrued expenses |
|
8,724 |
|
|
|
7,757 |
|
|
Current portion of long-term debt |
|
4,500 |
|
|
|
4,500 |
|
|
Long term debt, less current portion (1) |
|
42,176 |
|
|
|
41,206 |
|
|
Other long term liabilities |
|
2,728 |
|
|
|
2,770 |
|
|
Total
liabilities
|
|
86,487 |
|
|
|
86,917 |
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
15,165 |
|
|
|
14,820 |
|
|
Total
liabilities and stockholders’ equity
|
$ |
101,652 |
|
|
$ |
101,737 |
|
|
|
|
|
|
|
|
|
|
|
(1) Under new U.S. GAAP, long term debt is reported net of
unamortized financing fees. As a result, reported long term
debt is reduced by $1,242 and $1,226 of unamortized financing fees
in the periods ending April 1, 2017 and December 31, 2016,
respectively. |
|
|
|
|
|
|
|
|
|
|
Company Contact:
Chris Witty
Investor Relations
646-438-9385
cwitty@darrowir.com
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