Cummer Infant Wrts (MM) (NASDAQ:SUMRW)
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Summer Infant, Inc. (the “Company”)
(Nasdaq: SUMR, SUMRU, SUMRW), formerly KBL Healthcare Acquisition Corp.
II (“KBL”), today
announced financial results for the fourth quarter and full year ended
December 31, 2007 for Summer Infant (USA), Inc., Summer Infant Europe
Limited and Summer Infant Asia Ltd (collectively, the “Summer
Operating Companies”). The Company has
included and refers below solely to the Pro Forma operating performance
of the Summer Operating Companies on a stand alone basis (excluding the
combination with KBL) for the fourth quarter of 2007 and for the fourth
quarter of 2006, as this is the clearest comparison of the underlying
operations year over year. The full year 2006 results for both the
Summer Operating Companies and KBL may be found in the Form 8-K filed by
the Company on March 12, 2007. The full year 2007 results for the Summer
Operating Companies will be contained in the Company’s
10-K for the year ended December 31, 2007, expected to be filed on or
before March 31, 2008.
Fourth Quarter 2007 Results
The Summer Operating Companies’ net revenues
for the fourth quarter of 2007 were $23.47 million, an 89.6% increase
from $12.38 million in the fourth quarter of 2006. 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. New product introductions within the new soft goods and baby
gear categories, continued growth in core categories, and the addition
of new customers contributed to the revenue growth in the quarter.
The Summer Operating Companies’ gross profit
for the fourth quarter of 2007 was $8.68 million, a 72.8% increase
compared to $5.02 million in the fourth quarter of 2006. Gross margin
for the fourth quarter of 2007 decreased approximately 360 basis points
to 37.0% from 40.6% in the fourth quarter of 2006. This decrease is
primarily attributable to 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 is implementing alternative sourcing
strategies and will selectively increase prices to improve gross margins
over time.
The Summer Operating Companies’ selling,
general and administrative (“SG&A”)
expenses excluding depreciation and amortization as well as stock based
compensation expense for the fourth quarter of 2007 were $6.42 million,
or 27.3% of net revenues, compared to $4.50 million, or 36.4% of net
revenues, in the fourth quarter of 2006. The year-over-year decrease as
a percentage of net revenues was primarily due to leveraging fixed costs
on higher sales.
The Summer Operating Companies’ operating
income was $1.49 million in the fourth quarter of 2007, compared to a
loss of $0.12 million in the fourth quarter of 2006. Operating income
included litigation and deal-related expenses of $0.31 million and $0.45
million in the fourth quarters of 2007 and 2006, respectively.
Excluding these non-recurring items, the Summer Operating Companies’
adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”)
was $2.26 million for the fourth quarter of 2007 compared to the $0.52
million reported in the fourth quarter of 2006. Adjusted EBITDA margin
in the fourth quarter of 2007 increased to 9.6% of net revenues compared
to 4.2% in the year-ago quarter. For the quarter ended December 31,
2007, net income was $0.74 million and earnings per share were $0.05.
Excluding non-recurring items in both the fourth quarter of 2007 and
2006, earnings per share were $0.07 and breakeven, respectively.
Full Year 2007 Results
For the twelve months ended December 31, 2007, net revenues were $80.52
million, an increase of 54.3% compared to $52.20 million for the twelve
months of 2006. This increase reflects solid growth and expanded product
lineups at key retail customers. Product introductions in the new baby
gear and soft goods categories, in addition to strength in core product
categories, contributed to the strong revenue growth.
For the twelve months ended December 31, 2007, Summer Operating Companies’
gross profit was $30.48 million, an increase of 50.0% compared to $20.32
million for 2006. Gross margin for the full year 2007 decreased
approximately 100 basis points to 37.9% from 38.9% in 2006. The decrease
is primarily attributable to a change in product mix, in addition to
higher commodity costs and continued devaluation of the US dollar.
The Summer Operating Companies’ SG&A expenses
excluding depreciation and amortization as well as stock based
compensation expense for the twelve months ended December 31, 2007, were
$22.46 million, or 27.9% of net revenues, compared to $15.27 million, or
29.3% of net revenues, for 2006. The year-over-year decrease as a
percentage of net revenues was primarily due to leveraging fixed costs
on higher sales.
For the twelve months ended December 31, 2007, Summer Operating Companies’
operating income was $5.96 million, or 7.4% of net revenues, compared to
$3.15 million, or 6.0% of net revenues, for the twelve months ended
December 31, 2006. Operating income included $0.31 million and $1.23
million of litigation and deal-related expenses in 2007 and 2006,
respectively.
Excluding these non-recurring items, adjusted EBITDA was $8.02 million
for the twelve months ended December 31, 2007, a 58.9% increase compared
to $5.05 million for 2006. Adjusted EBITDA margin for the twelve months
ended December 31, 2007 increased approximately 30 basis points to 10.0%
compared to 9.7% for the twelve months ended December 31, 2006.
“2007 was a milestone year for Summer Infant,”
commented Jason Macari, Chief Executive Officer of the Company. “We
successfully completed the transaction with KBL, which allowed us to
become a public company and provided us the necessary capital for our
next stage of growth. We also successfully completed a tender offer for
the majority of our outstanding warrants, which simplified our capital
structure and eliminated a significant amount of overhang in the
marketplace. In addition, we continued to execute on our operational
plan, including the introduction of our new soft goods category, the
addition of several key retailers to our customer portfolio, and
continued penetration within our existing customer base. Most
importantly, we delivered solid financial performance throughout the
year, generating revenue well above our expectations, and despite the
impact of rising raw material, currency and labor costs, EBITDA at the
high end of our previously announced guidance range.”
Mr. Macari continued, “Looking ahead, we
continue to see solid demand at our retail customers and we remain
confident in our sales forecast for 2008. As we anticipate raw material
inflation, higher labor costs and devaluation of the US dollar in China,
we are implementing sourcing and supply chain initiatives to help offset
these near-term price pressures. In addition, we believe we have built a
solid brand name and industry-leading product quality levels, and thus,
remain confident in our ability to implement select price increases to
pass on some of the incremental costs we are experiencing in the
marketplace.”
Based on customer commitments to date and sales data at the retail
level, the Company continues to expect net revenues for 2008 to be in
the range of $95.0 to $100.0 million and EBITDA for 2008 to be in the
range of $10.2 to $10.6 million, excluding the impact of any
acquisitions. The Company reiterates its expected earnings per share
guidance for 2008 to be in the 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.
As of December 31, 2007, the Company had $1.8 million of cash and $21.8
million of debt on the balance sheet. The debt consists of $17.6 million
outstanding on the Company’s line of credit
and $4.2 million of other debt primarily related to the construction of
the new corporate headquarters. In January 2008, the Company increased
its working capital line of credit to $25.0 million from $22.0 million.
Summer Infant, Inc will host a conference call today, Tuesday March 4,
2008 at 4:30 p.m. Eastern Time, to discuss financial results for its
fourth quarter and full year ended December 31, 2007. 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 (913) 312-0410
(pass code 4736323). In addition, a telephone replay will be available
by dialing (719) 457-0820 (pass code 4736323) through March 18, 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
health and safety products, booster and potty seats, soft goods,
bouncers, strollers, highchairs and swings.
Use of Non-GAAP Financial Information
This release includes certain financial information (EBITDA) not derived
in accordance with generally accepted accounting principles (“GAAP”).
The Company believes that the presentation of this non-GAAP measure
provides information that is useful to investors as it indicates more
clearly the ability of Summer’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. This presentation of this additional
information should not be considered in isolation or as a substitute for
results prepared in accordance with GAAP. The Company has included a
reconciliation of this information to the most comparable GAAP measures
in a table below the Statement of Operations.
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. Such forward-looking
statements include statements regarding expected operating performance
in fiscal 2008, and expected customer commitments for 2008. 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 the industry; the
Company’s dependence on key personnel; the
Company’s reliance on foreign suppliers; and
other risks as detailed in the Company’s
Annual Report on Form 10-KSB for the fiscal year ended December 31,
2006, Definitive Proxy filed February 13, 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
Pro Forma Consolidated Statements of Operations (unaudited)
(in thousands of US dollars, except for share and per share
data)
Three Months Ended December 31,
Twelve Months Ended December 31,
2007
2006
2007
2006
Net revenues
$
23,474
$
12,384
$
80,517
$
52,197
Cost of goods sold
14,792
7,361
50,037
31,873
Gross profit
8,682
5,023
30,480
20,324
Selling, general, and administrative expenses
6,419
4,502
22,458
15,274
Depreciation & amortization
376
197
1,378
668
Non-cash stock option expense
95
0
376
0
Litigation and deal-related expenses
305
446
305
1,230
Income (loss) before interest
1,487
(122)
5,963
3,152
Interest expense
246
285
239
938
Income (loss) before taxes
$
1,241
$
(407)
$
5,724
$
2,214
Provision for income taxes1
496
(163)
2,259
886
Net income (loss)
$
745
$
(244)
$
3,465
$
1,328
Earnings (loss) per share
$
0.05
$
(0.02)
$
0.26
$
0.12
Shares used in fully diluted EPS
13,908,000
11,200,000
13,507,097
11,200,000
Pro forma net income:
Reported net income (loss)
$
745
$
(244)
$
3,465
$
1,328
Pro forma adjustment--after-tax litigation and deal-related expenses
183
268
183
738
Pro forma net income
$
928
$
24
$
3,648
$
2,066
Pro forma earnings per share
$
0.07
$
0.00
$
0.27
$
0.18
EBITDA Reconciliation:
Income (loss) before interest
1,487
(122)
5,963
3,152
Plus: depreciation & amortization
376
197
1,378
668
Plus: non-cash stock option expense
95
0
376
0
Plus: litigation and deal-related expenses
305
446
305
1,230
EBITDA
$
2,263
$
521
$
8,022
$
5,050
1Provision for income taxes assumes a pro
forma income tax rate of 40% for 2006.
The above condensed income statement reflects the unaudited
operating performance of Summer Operating Companies on a stand
alone basis for Q4 of 2007 versus 2006. 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 year
reporting in Form 10-K will contain the twelve months of activity
of KBL Healthcare plus the Summer operating performance subsequent
to the merger (March 6, 2007 through December 31, 2007).
Summer Infant, Inc.
Consolidated Balance Sheet
(in thousands of US dollars)
Unaudited
December 31, 2007
Cash and cash equivalents
$ 1,771
Trade receivables
21,245
Inventory
19,327
Property and equipment, net
9,279
Goodwill and other intangibles
40,283
Other assets
808
Total assets
$ 92,713
Line of credit
$ 17,591
Accounts payable and accrued expenses
17,609
Current portion of long term liabilities
293
Long term liabilities, less current portion
3,950
Total liabilities
39,443
Total stockholders equity
53,270
Total liabilities & stockholders equity
$ 92,713
The December 31, 2007 amounts include the effects of the merger
between KBL Healthcare and Summer Infant which occurred on March 6,
2007.