Summer Infant, Inc. (the �Company�) (Nasdaq: SUMR, SUMRW) today
announced financial results for the first quarter ended March 31,
2008. First Quarter 2008 Results Prior to March 7, 2007, the
Company was known as KBL Healthcare Acquisition Corp. II (�KBL�).
With respect to the results for the first quarter of 2007, the
Company has included and refers below solely to the Pro Forma
operating performance of Summer Infant (USA), Inc., Summer Infant
Europe Limited and Summer Infant Asia Ltd (collectively, 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. The full year 2007 results
for the Company may be found in the Company�s 10-K for the year
ended December 31, 2007, which was filed on March 27, 2008. Net
revenues for the first quarter of 2008 were $28.43 million, a 65.6%
increase from $17.17 million in the first quarter of 2007. This
growth was driven primarily by an expanded product offering at
existing customers and penetration into a larger number of stores
within existing customers� networks. The Company benefited from
strong increases at all major existing customers as well as solid
growth from new customers, such as Wal-Mart and Lowe�s. The
increase in revenue was also driven by new product launches within
the soft goods and baby gear categories in addition to strong sales
of the 3 Stage Super Seat. In addition, sales momentum remains
strong in core categories, including baby monitors, which continues
to benefit from solid performance of the new flat screen monitor.
Gross profit for the first quarter of 2008 was $9.94 million, a
51.4% increase compared to $6.56 million in the first quarter of
2007. Gross margin for the first quarter of 2008 decreased to 35.0%
from 38.2% in the first quarter of 2007 and 37.0% in the fourth
quarter of 2007. As expected, gross margins continued to be
negatively impacted by an increase in costs for products sourced
from China, higher resin costs for products manufactured in the US
and a change in product mix. The Company continues to make progress
on implementing alternative sourcing strategies and price
increases. Selling, general and administrative (�SG&A�)
expenses excluding depreciation and amortization as well as stock
based compensation expense for the first quarter of 2008 were $7.33
million, or 25.8% of net revenues, compared to $4.90 million, or
28.6% of net revenues, in the first quarter of 2007. The
year-over-year decrease as a percentage of net revenues was
primarily due to leveraging fixed costs on higher sales. Operating
income was $2.05 million in the first quarter of 2008, compared to
$1.20 million in the first quarter of 2007. Earnings before
interest, taxes, depreciation and amortization (�EBITDA�) increased
57.5% to $2.61 million for the first quarter of 2008 compared to
the $1.66 million reported in the first quarter of 2007. EBITDA
margin in the first quarter of 2008 decreased to 9.2% of net
revenues from 9.6% in the year-ago quarter primarily due to
increased cost of goods sold, partially offset by the ability to
leverage fixed costs on higher sales. For the quarter ended March
31, 2008, net income was $1.00 million and earnings per share
totaled $0.07 compared to $0.76 million of net income and $0.05 per
share in the first quarter of 2007. As of March 31, 2008, the
Company had $2.2 million of cash and $32.5 million of debt on the
balance sheet. The debt consists of $28.2 million outstanding on
the Company�s line of credit with Bank of America and $4.3 million
of other debt primarily related to the mortgage on the new
corporate headquarters. On April 10, 2008, the Company secured a
new $50.0 million bank facility. Including the amounts borrowed to
fund the Kiddopotamus acquisition in April, the total unused
capacity of its borrowing facilities is now approximately $8.0
million. Acquisitions Basic Comfort On March 31, 2008, the Company
acquired substantially all of the assets of Basic Comfort, Inc.
(�Basic Comfort�), a leading manufacturer and supplier of infant
comfort and safety products, including infant sleep positioners,
infant head supports and portable changing pads. The acquisition
price was approximately $4.7 million in cash and 450,000 shares of
unregistered Summer Infant common stock, which were valued at
approximately $1.8 million using the $3.95 closing stock price on
March 31, 2008. The owners of Basic Comfort can receive additional
payments based on the achievement of certain EBITDA targets for the
twelve months ended March 31, 2009. Kiddopotamus On April�18, 2008,
the Company completed the acquisition of Kiddopotamus�& Company
(�Kiddopotamus�), a leading manufacturer and supplier of infant
nursery, travel and feeding accessories. The total purchase price
paid by the Company to the stockholders of Kiddopotamus, plus the
payment of various closing expenses, was approximately $12.5
million. Of the total purchase price, approximately $9.6 million
was paid in cash and $2.9 million was paid by the issuance of
697,890 unregistered shares of the Company�s common stock. 2008 Pro
Forma Guidance The company is also updating its 2008 revenue,
EBITDA and EPS guidance to reflect the impact of higher than
expected sales in addition to the Basic Comfort acquisition which
closed on March 31, 2008 and the acquisition of Kiddopotamus, which
closed on April 18, 2008. The following guidance assumes that the
transactions occurred on January 1, 2008, and therefore, is on a
pro forma basis. The Company now expects net revenues for 2008 to
be in the range of $129.0 to $133.0 million, up from the previous
guidance range of $95.0 to $100.0 million. The Company expects
EBITDA for 2008 to be in the range of $13.8 to $14.4 million, up
from the previous guidance range of $10.2 to $10.6 million. The
Company now expects earnings per share for 2008 to be in the range
of $0.37 to $0.40, up from the previous guidance range of $0.30 to
$0.32. This outlook assumes stable currency exchange rates and raw
material prices for the remainder of the fiscal year and, to the
extent there are further changes in currency valuation or raw
material prices, that the Company is successful in implementing
future select price increases to its customers. �We are very
pleased with our performance in the first quarter,� commented Jason
Macari, Chief Executive Officer of the Company. �While we continued
to face rising raw material, currency and labor cost headwinds in
China, we remain focused on growing our business and positioning it
for the long term. Our recently announced acquisitions of Basic
Comfort and Kiddopotamus complement our existing product offerings,
enable us to expand our brand presence at existing customers, and
provide access to new retailers. We are confident we can realize
significant sales and cost synergies, as we integrate these
operations into our existing platform. In addition, we are very
pleased with our ability to expand our bank facilities to a total
of $50.0 million in April, providing us with additional access to
capital despite the turbulent financial markets.� Mr. Macari
continued, �Looking ahead, we expect our sales momentum in 2008 to
remain healthy, as ordering rates and customer feedback continue to
suggest solid demand for 2008. While we anticipate raw material
inflation, higher labor costs and devaluation of the US dollar in
China to continue to pressure gross margins in the near-term, we
have been able to implement select price increases in order to pass
on some of the incremental costs we are experiencing in the
marketplace. We expect these price increases to begin to take
effect in the second half of 2008. In addition, we continue to
implement sourcing and supply chain initiatives to help offset some
of the cost pressures we are incurring.� Summer Infant is also
presenting pro forma results for the first quarter of 2008, which
include the results of Basic Comfort and Kiddopotamus, 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 part of Summer Infant, and therefore the results
going forward could differ materially from these results. For the
three months ended March 31, 2008, the consolidated pro forma
results of Summer Infant, including Basic Comfort and Kiddopotamus,
were as follows: a) net revenues totaled $34.4 million; b) EBITDA
totaled $3.6 million; and c) earnings per share totaled $0.10 per
share. These results are unaudited. Summer Infant, Inc. will host a
conference call today, Thursday, May 8, 2008 at 4:30 p.m. Eastern
Time, to discuss financial results for its first quarter ended
March 31, 2008. This call is being web cast 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) 312-0821 (pass code 2498037). In
addition, a telephone replay will be available by dialing (719)
457-0820 (pass code 2498037) through May 22, 2008, 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, strollers, travel
accessories, highchairs and swings. Use of Non-GAAP Financial
Information This release includes presentations of EBITDA, which is
defined as income before interest and taxes plus depreciation,
amortization 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 Operating Companies Consolidated Statement of
Income (unaudited) (in thousands of US dollars, except for share
and per share data) � � Three Months Ended March 31, 2008 2007(a) �
Net revenues $ 28,425 $ 17,170 Cost of goods sold � 18,490 � 10,607
� Gross profit 9,935 6,563 Selling, general, and administrative
expenses 7,326 4,907 Depreciation & amortization 471 305
Non-cash stock option expense � 90 � 153 � Income before interest
2,048 1,198 Interest expense (income) � 382 � (64 ) Income before
taxes 1,666 1,262 Provision for income taxes (b) � 662 � 505 � Net
income $ 1,004 $ 757 � � Earnings per share $ 0.07 $ 0.05 � Shares
used in fully diluted EPS 13,908,000 13,908,000 � � � EBITDA
Reconciliation: Income before interest 2,048 1,198 Plus:
depreciation & amortization 471 305 Plus: non-cash stock option
expense � 90 � 153 � EBITDA $ 2,609 $ 1,656 � � � (a) The above
condensed income statement reflects the unaudited operating
performance of Summer Operating Companies on a stand alone basis
for Q1 of 2008 versus 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).
� (b) Provision for income taxes assumes a pro forma income tax
rate of 40% for 2007. Summer Infant, Inc. Consolidated Pro Forma
Statement of Income (unaudited) (in thousands of US dollars, except
for share and per share data) � Three Months Ended March 31, 2008
Summer Infant � Acquired Companies (a) � Pro forma Total � Net
revenues $ 28,425 $ 5,929 $ 34,354 Cost of goods sold � 18,490 �
3,472 � 21,962 Gross profit 9,935 2,457 12,392 Selling, general,
and administrative expenses 7,326 1,465 8,791 Depreciation &
amortization 471 22 493 Non-cash stock option expense � 90 � 0 � 90
Income before interest 2,048 970 3,018 Interest expense (b) � 382 �
196 � 578 Income before taxes 1,666 774 2,440 Provision for income
taxes � 662 � 307 � 969 Net income $ 1,004 $ 467 $ 1,471 Earnings
per share $ 0.07 $ 0.10 � Shares used in fully diluted EPS (d)
13,908,000 15,056,000 � EBITDA reconciliation: � Income before
interest 2,048 970 3,018 plus: depreciation and amortization 471 22
493 plus: non-cash stock option expense � 90 � 0 � 90 � EBITDA $
2,609 $ 992 $ 3,601 (a) The results of Basic Comfort and
Kiddopotamus are unaudited, and reflect their performance for the
first three months of 2008 prior to their being acquired by Summer
Infant. The results are being presented to give the reader
additional information regarding these acquisitions and their
relative impact on Summer Infant. � (b) Interest expense is a pro
forma calculation which assumes a January 1, 2008 acquisition date,
and therefore it calculates the additional interest related to the
amounts borrowed to fund the acquisitions of Basic Comfort and
Kiddopotamus. � (c) Provision for income taxes is presented using a
39.7% effective rate for the acquired companies (comparable to the
rate used for Summer Infant on a stand alone basis in Q1). � (d)
Outstanding shares for EPS purposes assume that the 1,148,000
shares issued in conjunction with acquisitions were issued as of
January 1, 2008. Summer Infant, Inc. Consolidated Balance Sheet (in
thousands of US dollars) � � Unaudited March 31, 2008 Audited
December 31, 2007 � Cash and cash equivalents $ 2,283 $ 1,771 Trade
receivables 26,570 21,245 Inventory 22,251 19,327 Property and
equipment, net 9,657 9,279 Goodwill and other intangibles 45,581
40,099 Other assets � 1,303 � 1,504 Total assets $ 107,645 $ 93,225
� Line of credit $ 28,213 $ 17,591 Accounts payable, accrued
expenses and other liabilities 19,116 18,122 Current portion of
long term liabilities 273 265 Long term debt, less current portion
� 4,008 � 3,977 Total liabilities 51,610 39,955 � � Total
stockholders equity � 56,035 � 53,270 Total liabilities &
stockholders equity $ 107,645 $ 93,225 � The March 31, 2008 amounts
include the effects of the acquisition of Basic Comfort, which
occurred on March 31, 2008.
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