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 third
quarter ended September 30, 2017.
“As was previously announced, the Company was
negatively affected by the Toys ‘R’ Us bankruptcy filing this
quarter, with revenue lighter than expected due to delayed
shipments to Babies ‘R’ Us as well as ongoing weak monitor
performance,” said Mark Messner, President and CEO. “In addition,
it was necessary to take a $2.1 million charge to write-down
certain receivables that were outstanding prior to the bankruptcy
filing – impacting Summer Infant’s bottom line results. However, we
currently do not anticipate post-bankruptcy-filing receivables from
Toys ‘R’ Us to be at risk in the short term and are shipping
product to this customer in a prudent and appropriate manner.
“Looking ahead, we expect fourth quarter
shipments to be more positive – reflecting restocking of customer
inventory as well as some exciting brand extensions and product
introductions, including within the monitor space. We do not
believe the third quarter is indicative of the progress we’ve made
in streamlining our operations, bolstering the balance sheet,
refocusing our channel strategy, and investing for growth, all of
which we anticipate will positively impact our financial
performance in the years to come.”
Third Quarter Results
Net sales for the three months ended September
30, 2017 were $43.1 million compared with $48.6 million for the
three months ended October 1, 2016. Revenue declined approximately
$2.3 million due to the impact of the Toys “R” Us (“TRU”)
bankruptcy and related order delays, primarily due to a reduction
in sales to Babies “R” Us, and was also negatively impacted by
sluggish monitor sales. By contrast, initial orders for the fourth
quarter indicate a more healthy level of sales activity, including
Company shipments to TRU.
Gross profit for the third quarter of 2017 was
$13.6 million compared with $15.5 million for the third quarter of
2016, and gross margin was 31.6% in fiscal 2017 versus 32.0% in the
prior year, primarily due to higher inventory obsolescence and
demurrage costs. Selling expenses fell to $3.1 million in the third
quarter of 2017 versus $3.7 million in 2016, primarily due to lower
sales and customer mix in cooperative advertisement. General and
administrative expenses (G&A) were $10.5 million in fiscal 2017
versus $9.7 million in 2016, with the year-over-year increase
primarily due to a $2.1 million bad debt charge recorded as a
result of the TRU bankruptcy filing, partially offset by a $0.5
million reversal in compensation expense for the Company’s
management incentive plan previously recorded during the three
months ended July 1, 2017. G&A as a percent of sales rose to
24.4% from 20.1% in the prior-year period. Interest expense was
$0.7 million in the third quarter of 2017 versus $0.6 million last
year.
The Company reported a net loss of $1.2 million,
or $(0.07) per share, in the third quarter of 2017 compared with
net income of $0.2 million, or $0.01 per share, in the third
quarter of 2016. Adjusted EBITDA for the third quarter was $2.6
million versus $2.8 million for the third quarter of 2016. Adjusted
EBITDA for the third quarter of 2017 included $2.6 million in bank
permitted add-back charges compared with $0.5 million for the third
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 September 30, 2017, Summer Infant had
approximately $0.8 million of cash and $49.5 million of debt
compared with $1.0 million of cash and $46.9 million of debt on
December 31, 2016. Inventory as of September 30, 2017 was $37.3
million compared with $36.1 million as of December 31, 2016.
Trade receivables at the end of the third
quarter were $31.2 million compared with $34.1 million as of
December 31, 2016. Accounts payable and accrued expenses were $31.8
million as of September 30, 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, November 2, 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
InformationThis release and the referenced webcast include
presentations of non-GAAP financial measures, including Adjusted
EBITDA, 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. 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 fourth
quarter 2017 shipments, orders and product rollouts, the impact of
the TRU bankruptcy on its business with Babies R Us in the fourth
quarter 2017and into 2018, anticipated future growth and 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.
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 |
|
Nine Months Ended |
|
|
|
September 30, 2017 |
|
October 1, 2016 |
|
September 30, 2017 |
|
October 1, 2016 |
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
43,134 |
|
|
$ |
48,552 |
|
|
$ |
143,053 |
|
|
$ |
148,797 |
|
|
Cost
of goods sold |
|
|
29,502 |
|
|
|
33,026 |
|
|
|
96,816 |
|
|
|
101,344 |
|
|
Gross profit |
|
$ |
13,632 |
|
|
$ |
15,526 |
|
|
$ |
46,237 |
|
|
$ |
47,453 |
|
|
General
and administrative expenses(1) |
|
|
10,536 |
|
|
|
9,735 |
|
|
|
30,060 |
|
|
|
30,469 |
|
|
Selling expense |
|
|
3,117 |
|
|
|
3,667 |
|
|
|
11,248 |
|
|
|
11,484 |
|
|
Depreciation and
amortization |
|
|
1,023 |
|
|
|
1,127 |
|
|
|
3,120 |
|
|
|
3,443 |
|
|
Operating
(loss)/income |
|
$ |
(1,044 |
) |
|
$ |
997 |
|
|
$ |
1,809 |
|
|
$ |
2,057 |
|
|
Interest expense |
|
|
748 |
|
|
|
633 |
|
|
|
2,206 |
|
|
|
1,901 |
|
|
(Loss)/income before
taxes |
|
$ |
(1,792 |
) |
|
$ |
364 |
|
|
$ |
(397 |
) |
|
$ |
156 |
|
|
Income tax
(benefit)/provision |
|
|
(549 |
) |
|
|
131 |
|
|
|
135 |
|
|
|
- |
|
|
Net
(loss)/income |
|
$ |
(1,243 |
) |
|
$ |
233 |
|
|
$ |
(532 |
) |
|
$ |
156 |
|
|
(Loss)/income per diluted share |
|
$ |
(0.07 |
) |
|
$ |
0.01 |
|
|
$ |
(0.03 |
) |
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in fully diluted EPS |
|
|
18,606,427 |
|
|
|
18,581,824 |
|
|
|
18,557,175 |
|
|
|
18,454,926 |
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes stock based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP to Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
|
September 30, 2017 |
|
October 1, 2016 |
|
September 30, 2017 |
|
October 1, 2016 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Adjusted EBITDA |
|
|
|
|
|
|
|
|
|
Net
(loss)/income (GAAP) |
|
$ |
(1,243 |
) |
|
$ |
233 |
|
|
$ |
(532 |
) |
|
$ |
156 |
|
|
Plus:
interest expense |
|
|
748 |
|
|
|
633 |
|
|
|
2,206 |
|
|
|
1,901 |
|
|
Plus:
(benefit)/provision for income taxes |
|
|
(549 |
) |
|
|
131 |
|
|
|
135 |
|
|
|
- |
|
|
Plus:
depreciation and amortization |
|
|
1,023 |
|
|
|
1,127 |
|
|
|
3,120 |
|
|
|
3,443 |
|
|
Plus: non-cash stock
based compensation expense |
|
|
101 |
|
|
|
176 |
|
|
|
375 |
|
|
|
394 |
|
|
Plus: permitted
add-backs (a) |
|
|
2,552 |
|
|
|
536 |
|
|
|
3,177 |
|
|
|
3,847 |
|
|
Adjusted
EBITDA (Non-GAAP) |
|
$ |
2,632 |
|
|
$ |
2,836 |
|
|
$ |
8,481 |
|
|
$ |
9,741 |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EPS |
|
|
|
|
|
|
|
|
|
Net
(loss)/income (GAAP) |
|
$ |
(1,243 |
) |
|
$ |
233 |
|
|
$ |
(532 |
) |
|
$ |
156 |
|
|
Plus:
permitted add-backs(a) |
|
|
2,552 |
|
|
|
536 |
|
|
|
3,177 |
|
|
|
3,847 |
|
|
Tax
impact of items impacting comparability(b) |
|
|
(893 |
) |
|
|
(188 |
) |
|
|
(1,112 |
) |
|
|
(1,346 |
) |
|
Adjusted Net income (Non-GAAP) |
|
$ |
416 |
|
|
$ |
581 |
|
|
$ |
1,533 |
|
|
$ |
2,657 |
|
|
Adjusted Earnings per diluted share (Non-GAAP) |
|
$ |
0.02 |
|
|
$ |
0.03 |
|
|
$ |
0.08 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 September 30, 2017 include bad debt allowance
$2,120 ($742 tax impact), special projects $113 ($40 tax impact),
restructuring fees $113 ($40 tax impact), severance related fees
$115 ($40 tax impact), and board fees $91 ($31 tax impact).
Permitted add-backs for the three months ended October 1, 2016
include excess production costs $209 ($73 tax impact), special
projects, primarily litigation fees $132 ($46 tax impact), board
fees $101 ($35 tax impact), and restructuring fees $94 ($34 tax
impact). Permitted add-backs for the nine months ended
September 30, 2017 include bad debt allowance $2,120 ($742 tax
impact), severance related costs $578 ($202 tax impact), board fees
$278 ($97 tax impact), restructuring fees $238 ($84 tax impact),
less a credit to special projects, primarily litigation fees ($37)
($13 tax impact). Permitted add-backs for the nine months
ended October 1, 2016 include special projects, primarily
litigation fees $2,408 ($843 tax impact), excess production costs
$654 ($229 tax impact), board fees $368 ($129 tax impact),
restructuring costs $318 ($111 tax impact), and severance related
costs $99 ($34 tax impact). For comparison purposes, the permitted
add-backs for the three month and nine month periods ended October
1, 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) |
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
|
December 31, 2016 |
|
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
761 |
|
$ |
999 |
|
Trade
receivables, net |
|
|
31,230 |
|
|
34,137 |
|
Inventory, net |
|
|
37,344 |
|
|
36,140 |
|
Property and equipment, net |
|
|
9,439 |
|
|
9,965 |
|
Intangible assets,
net |
|
|
14,237 |
|
|
14,813 |
|
Other assets |
|
|
5,454 |
|
|
5,683 |
|
Total
assets |
|
$ |
98,465 |
|
$ |
101,737 |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
25,111 |
|
$ |
30,684 |
|
Accrued expenses |
|
|
6,683 |
|
|
7,757 |
|
Current portion of long-term debt |
|
|
4,500 |
|
|
4,500 |
|
Long
term debt, less current portion (1) |
|
|
43,930 |
|
|
41,206 |
|
Other
long term liabilities |
|
|
2,856 |
|
|
2,770 |
|
Total
liabilities |
|
|
83,080 |
|
|
86,917 |
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity |
|
|
15,385 |
|
|
14,820 |
|
Total
liabilities and stockholders’ equity |
|
$ |
98,465 |
|
$ |
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 $1,032 and $1,242 of unamortized financing fees
in the periods ending September 30, 2017 and December 31, 2016,
respectively. |
|
|
|
|
|
|
|
|
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