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 second
quarter ended July 1, 2017.
“As expected, the steps we’ve taken this past year
to streamline and focus the Company are beginning to bear fruit,”
said Mark Messner, President and CEO. “Second quarter revenue rose
4% to $52.6 million – the highest level in two years – and we
posted EPS of $0.03, reflecting sound operating discipline and
increased demand for many seasonal products. Overall gross margins
also expanded to 32.9%, as we continued our relentless drive
towards bringing new products to market and better managing our
channel partnerships. Even in a tough industry environment, Summer
Infant has proven that product innovation, streamlined operations,
and dedication to our customers can result in positive, improving
financial results.”
Second Quarter Results
Net sales for the three months ended July 1, 2017
were $52.6 million compared with $50.6 million for the three months
ended July 2, 2016. Revenue rose primarily due to higher safety and
gear product sales, including seasonal merchandise, partially
offset by a decrease in monitor sales.
Gross profit for the second quarter of 2017 was
$17.3 million compared with $16.2 million for the second quarter of
2016, and gross margin was 32.9% in fiscal 2017 versus 32.0% in the
prior year, reflecting reduced program costs. Selling expenses rose
slightly to $4.2 million in the second quarter of 2017 versus $3.9
million in the second quarter of 2016, primarily due to increased
consumer advertising. General and administrative expenses (G&A)
were $10.3 million in fiscal 2017 versus $10.0 million in 2016,
with the year-over-year increase primarily due to $0.5 million of
additional compensation expense under the Company’s annual
incentive plan. G&A as a percent of sales declined to 19.5%
from 19.7% in the prior year period. Interest expense was $0.7
million in the second quarter of 2017 versus $0.6 million last
year.
The Company reported net income of $0.5 million, or
$0.03 per share, in the second quarter of 2017 compared with net
income of $0.3 million, or $0.01 per share, in the second quarter
of 2016. Adjusted EBITDA for the second quarter was $3.5 million
versus $3.7 million for the second quarter of 2016. Adjusted EBITDA
for the second quarter of 2017 included $0.5 million in bank
permitted add-back charges compared with $1.3 million for the
second 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 July 1, 2017, Summer Infant had approximately
$1.4 million of cash and $45.7 million of debt compared with $1.0
million of cash and $46.9 million of debt on December 31, 2016.
Inventory as of July 1, 2017 was $37.6 million compared with $36.1
million as of December 31, 2016.
Trade receivables at the end of the second quarter
were $36.6 million compared with $34.1 million as of December 31,
2016. Accounts payable and accrued expenses were $41.1 million as
of July 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, August 3, 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 |
|
Six Months Ended |
|
|
|
July 1, 2017 |
|
July 2, 2016 |
|
July 1, 2017 |
|
July 2, 2016 |
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
52,579 |
|
|
$ |
50,575 |
|
|
$ |
99,919 |
|
|
$ |
100,245 |
|
|
Cost
of goods sold |
|
|
35,263 |
|
|
|
34,374 |
|
|
|
67,314 |
|
|
|
68,318 |
|
|
Gross profit |
|
$ |
17,316 |
|
|
$ |
16,201 |
|
|
$ |
32,605 |
|
|
$ |
31,927 |
|
|
General
and administrative expenses(1) |
|
|
10,252 |
|
|
|
9,981 |
|
|
|
19,524 |
|
|
|
20,734 |
|
|
Selling expense |
|
|
4,220 |
|
|
|
3,901 |
|
|
|
8,131 |
|
|
|
7,817 |
|
|
Depreciation and
amortization |
|
|
1,041 |
|
|
|
1,160 |
|
|
|
2,097 |
|
|
|
2,316 |
|
|
Operating income |
|
$ |
1,803 |
|
|
$ |
1,159 |
|
|
$ |
2,853 |
|
|
$ |
1,060 |
|
|
Interest expense |
|
|
734 |
|
|
|
628 |
|
|
|
1,458 |
|
|
|
1,268 |
|
|
Income/(loss) before
taxes |
|
$ |
1,069 |
|
|
$ |
531 |
|
|
$ |
1,395 |
|
|
$ |
(208 |
) |
|
Income tax
provision/(benefit) |
|
|
528 |
|
|
|
275 |
|
|
|
684 |
|
|
|
(131 |
) |
|
Net
income/(loss) |
|
$ |
541 |
|
|
$ |
256 |
|
|
$ |
711 |
|
|
$ |
(77 |
) |
|
Income/(loss) per diluted share |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
|
$ |
0.04 |
|
|
$ |
(0.00 |
) |
|
|
|
|
|
|
|
|
|
|
|
Shares used in fully diluted EPS |
|
|
18,600,949 |
|
|
|
18,421,955 |
|
|
|
18,599,899 |
|
|
|
18,403,852 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes stock
based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP to Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
July 1, 2017 |
|
July 2, 2016 |
|
July 1, 2017 |
|
July 2, 2016 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
Net
income/(loss) (GAAP) |
|
$ |
541 |
|
|
$ |
256 |
|
|
$ |
711 |
|
|
$ |
(77 |
) |
|
Plus:
interest expense |
|
|
734 |
|
|
|
628 |
|
|
|
1,458 |
|
|
|
1,268 |
|
|
Plus:
provision/(benefit) for income taxes |
|
|
528 |
|
|
|
275 |
|
|
|
684 |
|
|
|
(131 |
) |
|
Plus:
depreciation and amortization |
|
|
1,041 |
|
|
|
1,160 |
|
|
|
2,097 |
|
|
|
2,316 |
|
|
Plus: non-cash stock
based compensation expense |
|
|
189 |
|
|
|
91 |
|
|
|
274 |
|
|
|
218 |
|
|
Plus: permitted
add-backs (a) |
|
|
456 |
|
|
|
1,327 |
|
|
|
625 |
|
|
|
3,311 |
|
|
Adjusted
EBITDA (Non-GAAP) |
|
$ |
3,489 |
|
|
$ |
3,737 |
|
|
$ |
5,849 |
|
|
$ |
6,905 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EPS |
|
|
|
|
|
|
|
|
|
Net
income/(loss) (GAAP) |
|
$ |
541 |
|
|
$ |
256 |
|
|
$ |
711 |
|
|
$ |
(77 |
) |
|
Plus:
permitted add-backs(a) |
|
|
456 |
|
|
|
1,327 |
|
|
|
625 |
|
|
|
3,311 |
|
|
Tax
impact of items impacting comparability(b) |
|
|
(160 |
) |
|
|
(465 |
) |
|
|
(219 |
) |
|
|
(1,159 |
) |
|
Adjusted
Net income (Non-GAAP) |
|
$ |
837 |
|
|
$ |
1,118 |
|
|
$ |
1,117 |
|
|
$ |
2,075 |
|
|
Adjusted
Earnings per diluted share (Non-GAAP) |
|
$ |
0.05 |
|
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 July 1, 2017 include special projects $186 ($65
tax impact), severance related costs $136 ($48 tax impact), board
fees $99 ($35 tax impact) and restructuring fees $35 ($12 tax
impact). Permitted add-backs for the three months ended July
2, 2016 include special projects, primarily litigation fees $838
($293 tax impact), excess production costs $350 ($123 tax impact)
and board fees $139 ($49 tax impact). Permitted add-backs for
the six months ended July 1, 2017 include severance related costs
$463 ($162 tax impact), board fees $187 ($65 tax impact),
restructuring fees $125 ($44 tax impact), less a credit to special
projects, primarily litigation fees ($150) ($52 tax impact).
Permitted add-backs for the six months ended July 2, 2016 include
special projects, primarily litigation fees $2,276 ($797 tax
impact), excess production costs $445 ($156 tax impact), board fees
$267 ($93 tax impact), restructuring costs $224 ($78 tax impact),
and severance related costs $99 ($35 tax impact). For comparison
purposes, the permitted add-backs for the three month and six month
periods ended July 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) |
|
|
|
|
|
|
|
|
|
|
July 1, 2017 |
|
|
December 31, 2016 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
$ |
1,414 |
|
$ |
999 |
|
Trade
receivables, net |
|
36,574 |
|
|
34,137 |
|
Inventory, net |
|
37,638 |
|
|
36,140 |
|
Property and equipment, net |
|
9,539 |
|
|
9,965 |
|
Intangible assets,
net |
|
14,429 |
|
|
14,813 |
|
Other assets |
|
4,922 |
|
|
5,683 |
|
Total
assets |
$ |
104,516 |
|
$ |
101,737 |
|
|
|
|
|
|
|
|
Accounts payable |
$ |
30,291 |
|
$ |
30,684 |
|
Accrued expenses |
|
10,759 |
|
|
7,757 |
|
Current portion of long-term debt |
|
4,500 |
|
|
4,500 |
|
Long
term debt, less current portion (1) |
|
40,037 |
|
|
41,206 |
|
Other
long term liabilities |
|
2,790 |
|
|
2,770 |
|
Total
liabilities |
|
88,377 |
|
|
86,917 |
|
|
|
|
|
|
|
|
Total
stockholders’ equity |
|
16,139 |
|
|
14,820 |
|
Total
liabilities and stockholders’ equity |
$ |
104,516 |
|
$ |
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 $1,138 of unamortized financing fees
in the periods ending December 31, 2016 and July 1, 2017,
respectively. |
|
|
|
|
|
|
|
|
Company Contact:
Chris Witty
Investor Relations
646-438-9385
cwitty@darrowir.com
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