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 30,
2019.
Recent Highlights
- Net sales were $42.5 million in the first quarter versus $42.1
million in the prior-year period, with growth across all major
customers and most key product categories offsetting the negative
impact from tariffs and approximately $3.0 million of lost sales
due to the liquidation of Toys “R” Us
- Additional streamlining actions – including an approximate 7%
reduction in the Company’s workforce – were taken during the
quarter
- The Company launched its new born freeTM brand in March
- Hired Scott Doerstling, who previously held senior roles at
Diono, Britax and Newell Brands, as Senior Vice President – North
America Sales
“During the first quarter we took additional
steps to position the Company for improving operating performance
this year and into the future and were pleased to see revenue
growth more than offset the impact from the loss of Toys “R” Us,”
said Mark Messner, President and CEO. “Net sales rose modestly
year-over-year and, during the period, we launched our ‘born free’
brand of innovative products and hired a new head of sales for
North America – Scott Doerstling. Scott brings over 20 years’
experience in the juvenile industry – across many premier consumer
products companies – and will spearhead efforts to increase market
penetration and better manage channel relationships, bringing
discipline to a distribution strategy that leads to higher sales
and improved overall results. We’re excited to have him on
board.
“At the same time, we further streamlined our
corporate structure by selectively reducing our workforce by
roughly 7% this quarter, to eliminate redundancies and focus on
core capabilities. While still facing some uncertainty due to
ongoing tariffs on Chinese goods, we ended the quarter with
increasing demand and strengthening point-of-sale trends – leaving
us cautiously optimistic regarding the outlook for the second
quarter and beyond.”
First Quarter Results
Net sales for the three months ended March 30,
2019 were $42.5 million compared with $42.1 million for the three
months ended March 31, 2018. The Company saw year-over-year growth
across all major customers and core product categories such as
gates, potties, bathers, and positioners, more than offsetting the
negative impact from a 10% tariff on goods imported into the United
States from China and approximately $3.0 million of lost sales due
to the liquidation of Toys “R” Us.
Gross profit for the first quarter of 2019 was
$13.5 million versus $13.6 million in 2018, while gross margin was
31.6% in 2019 versus 32.3% last year. The margin decline was
primarily due to product mix and the impact from tariffs on goods
imported from China, along with approximately $0.3 million of
demurrage expense in fiscal 2019 related to the inventory build-up
in advance of potential incremental tariffs.
Selling expense was $3.4 million in the first
quarter of 2019 versus $2.7 million in the prior-year period, and
selling expense as a percent of net sales was 7.9% in 2019 versus
6.4% last year. The increase in expense was primarily due to higher
cooperative advertising costs and freight costs, both related to
customer mix, as compared to the three months ended March 31, 2018,
which included a larger component of direct import sales.
General and administrative expenses (G&A)
were $9.4 million in the first quarter of 2019 versus $12.6 million
last year, decreasing to 22.0% of net sales in 2019 from 29.9% in
2018. The decline in dollars and as a percent of revenue was
attributable in large part to a $2.3 million bad debt charge
related to the Toys “R” Us bankruptcy in the first quarter of 2018
and $1.0 million of lower labor and other expenses in 2019,
reflecting the Company’s cost-reduction initiatives; this was
somewhat offset by $0.6 million of severance during the first
quarter of fiscal 2019 compared to $0.4 million of severance in the
prior-year period.
Interest expense was $1.2 million in the first
quarter of 2019 versus $0.8 million last year, with the
year-over-year change primarily due to the Company’s refinancing of
its bank agreements, increased debt levels, and higher interest
rates.
The Company reported a net loss of $1.4 million,
or $(0.07) per share, in the first quarter of 2019 compared with a
net loss of $2.7 million, or $(0.15) per share, in the prior-year
period.
Adjusted EBITDA, as defined in the Company’s
credit agreements, for the first quarter of 2019 was $1.5 million
versus $1.4 million for the first quarter of 2018, and Adjusted
EBITDA as a percent of net sales was 3.4% in the first quarter of
2019 versus 3.2% last year. Adjusted EBITDA in 2019 included $0.7
million in bank permitted add-back charges compared with $2.9
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 30, 2019, the Company had
approximately $0.9 million of cash and $56.6 million of bank debt
compared with $0.7 million of cash and $47.9 million of bank debt
as of December 29, 2018. The Company used approximately $7.5
million in cash from operations during the three months ended March
30, 2019 – primarily due to the paydown of accounts payable from
higher inventory purchases – compared to generating $3.7 million in
the prior-year period.
Inventory as of March 30, 2019 was $34.0 million
compared with $36.1 million as of December 29, 2018, both periods
including certain purchases made ahead of potentially higher
tariffs on China-sourced goods. Inventory is expected to return to
more normal levels in the third quarter of 2019. Trade receivables
at the end of the first quarter were $34.6 million compared with
$31.2 million at the end of fiscal 2018. Accounts payable and
accrued expenses were $30.6 million as of March 30, 2019 compared
with $37.1 million at the beginning of the fiscal year.
Conference Call Information
Management will host a conference call to
discuss the financial results tomorrow, May 8, 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 income/loss and adjusted earnings/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 income/loss and adjusted earnings/loss per diluted share
exclude unamortized financing write off, a nonrecurring tax charge
and other 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 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
improved results and operating performance in 2019 and higher
returns for shareholders. 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
recently imposed tariffs or new tariffs on the cost and pricing of
the Company’s products; the Company’s ability to meet its liquidity
requirements; 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 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 manage
inventory levels and meet customer demand; the Company’s ability to
grow sales with existing and new customers and in new channels; the
Company’s ability to maintain availability under its loan
agreements; 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 30, 2019 |
|
March 31, 2018 |
|
|
|
|
|
Net sales |
|
$ |
42,538 |
|
|
$ |
42,055 |
|
Cost of goods sold |
|
|
29,088 |
|
|
|
28,463 |
|
Gross profit |
|
$ |
13,450 |
|
|
$ |
13,592 |
|
General and administrative expenses(1) |
|
|
9,379 |
|
|
|
12,588 |
|
Selling expense |
|
|
3,353 |
|
|
|
2,678 |
|
Depreciation and
amortization |
|
|
937 |
|
|
|
1,001 |
|
Operating loss |
|
$ |
(219 |
) |
|
$ |
(2,675 |
) |
Interest expense |
|
|
1,249 |
|
|
|
773 |
|
Loss before taxes |
|
$ |
(1,468 |
) |
|
$ |
(3,448 |
) |
Income tax
(benefit)/provision |
|
|
(70 |
) |
|
|
(741 |
) |
Net loss |
|
$ |
(1,398 |
) |
|
$ |
(2,707 |
) |
Loss per diluted share |
|
$ |
(0.07 |
) |
|
$ |
(0.15 |
) |
|
|
|
|
|
Shares used in fully diluted EPS |
|
|
18,833,154 |
|
|
|
18,649,415 |
|
|
|
|
|
|
|
|
|
|
|
(1) Includes stock based
compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP to Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 30, 2019 |
|
March 31, 2018 |
|
|
|
|
|
Reconciliation of Adjusted
EBITDA |
|
|
|
|
Net loss (GAAP) |
|
$ |
(1,398 |
) |
|
$ |
(2,707 |
) |
Plus: interest expense |
|
|
1,249 |
|
|
|
773 |
|
Plus: benefit for income taxes |
|
|
(70 |
) |
|
|
(741 |
) |
Plus: depreciation and amortization |
|
|
937 |
|
|
|
1,001 |
|
Plus: non-cash stock based
compensation expense |
|
|
48 |
|
|
|
99 |
|
Plus: permitted add-backs
(a) |
|
|
684 |
|
|
|
2,931 |
|
Adjusted EBITDA (Non-GAAP)(b) |
|
$ |
1,450 |
|
|
$ |
1,356 |
|
|
|
|
|
|
Reconciliation of Adjusted EPS |
|
|
|
|
Net loss (GAAP) |
|
$ |
(1,398 |
) |
|
$ |
(2,707 |
) |
Plus: permitted add-backs(a) |
|
|
684 |
|
|
|
2,931 |
|
Tax impact of items impacting comparability(c) |
|
|
(192 |
) |
|
|
(616 |
) |
Adjusted Net (loss)/income (Non-GAAP) |
|
$ |
(906 |
) |
|
$ |
(392 |
) |
Adjusted (loss)/income per diluted share (Non-GAAP) |
|
$ |
(0.05 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
(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, 2019 include severance $563 ($158 tax
impact), board fees $100 ($28 tax impact), and special projects $21
($6 tax impact). Permitted addbacks for the three months
ended March 31, 2018 include bad debt allowance $2,340 ($492 tax
impact), severance $421 ($89 tax impact), board fees $97 ($20 tax
impact) and special projects $73 ($15 tax impact). |
|
(b) As defined by our credit facilities |
|
(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 30, 2019 |
|
|
December 29, 2018 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
916 |
|
$ |
721 |
Trade receivables, net |
|
|
34,624 |
|
|
31,223 |
Inventory, net |
|
|
34,033 |
|
|
36,066 |
Property and equipment, net |
|
|
9,717 |
|
|
9,685 |
Intangible assets, net |
|
|
13,179 |
|
|
13,300 |
Other assets(1) |
|
|
9,470 |
|
|
3,221 |
Total assets |
|
$ |
101,939 |
|
$ |
94,216 |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
23,132 |
|
$ |
28,120 |
Accrued expenses |
|
|
7,766 |
|
|
8,939 |
Current portion of long-term debt |
|
|
875 |
|
|
875 |
Long term debt, less current portion (2) |
|
|
53,313 |
|
|
44,641 |
Other liabilities(1) |
|
|
8,768 |
|
|
2,371 |
Total liabilities |
|
|
93,854 |
|
|
84,946 |
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
8,085 |
|
|
9,270 |
Total liabilities and stockholders’ equity |
|
$ |
101,939 |
|
$ |
94,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes the effect of the new lease accounting guidance under
U.S. GAAP for March 30, 2019 capitalizing Right of Return Assets
and Lease Liabilities relative to the company’s operating
leases. |
(2) Under U.S. GAAP, long term debt is reported net of unamortized
financing fees. As a result, reported long term debt is
reduced by $2,418 and $2,395 of unamortized financing fees in the
periods ending March 30, 2019 and December 29, 2018,
respectively. |
|
|
|
|
|
|
|
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