Cummer Infant Wrts (MM) (NASDAQ:SUMRW)
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Summer Infant, Inc. (“Company”)(Nasdaq:
SUMR, SUMRU, SUMRW), formerly KBL Healthcare Acquisition Corp. II (“KBL”),
today announced financial results for the second quarter ended June 30,
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 second quarter of 2007 and for the second
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 filing
of Summer Infant, Inc. dated March 12, 2007.
The Summer Operating Companies’ net revenues
for the second quarter of 2007 were $18.68 million, a 45.4% increase
from $12.85 million in the second quarter of 2006. This growth was
driven primarily by expanded product listings at existing customers and
penetration into a larger number of stores within customers’
networks. New product introductions, including initial shipments from
the soft goods division, and the addition of new customers also
contributed to the revenue growth in the quarter. Video monitors
continue to be the strongest growth category.
The Summer Operating Companies’ gross profit
for the second quarter of 2007 was $7.26 million, a 46.6% increase
compared to $4.95 million in the second quarter of 2006. Gross margins
for the second quarter of 2007 increased approximately 40 basis points
to 38.9% from 38.5% in the second quarter of 2006. This increase is
primarily attributable to improved product mix, the continued emphasis
on cost reduction programs related to the best selling items and a
number of quality improvement initiatives that resulted in reduced
product returns.
The Summer Operating Companies’ selling,
general and administrative (“SG&A”)
expenses excluding depreciation and amortization as well as stock based
compensation expense for the second quarter of 2007 were $5.41 million,
or 29.0% of net revenues, compared to $3.79 million, or 29.5% of net
revenues, in the second 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’ earnings
before interest, taxes, depreciation and amortization (“EBITDA”)
for the second quarter of 2007 was $1.85 million, representing a 58.6%
increase from the $1.16 million reported in the second quarter of 2006.
The EBITDA margin in the quarter increased to 9.9% of net revenues
compared to 9.1% in the year ago quarter.
For the six months ended June 30, 2007, net revenues were approximately
$35.85 million, an increase of 37.2% as compared to $26.13 million for
the first six months of 2006. EBITDA for the six months ended June 30,
2007 were approximately $3.50 million, or 9.8% of net revenues, a 45.3%
increase from $2.41 million, or 9.2% of net revenues, during the first
six months of 2006.
“Our sales performance this quarter
highlights the success and growth opportunity of our business model,”
commented Jason Macari, Chief Executive Officer of the Company and the
Summer Operating Companies. “We continue to
drive sales by developing innovative products and improved designs in
both new and core product categories, expanding shelf space at our key
retail customers, and forming new retail partnerships to help build out
the Summer Infant brand. In addition, we were encouraged by the decrease
in SG&A as a percent of sales in the quarter, as we begin to see the
benefits of leveraging our fixed cost structure over a larger sales base.”
Based on customer commitments to date and updated sales data at the
retail level, the Company is affirming previously issued guidance for
the full year 2007, which calls for net revenues of $70 to $75 million
and EBITDA of $7.5 to $8.0 million, before any acquisitions.
Mr. Macari stated, “We are very pleased to
report solid performance for the first half of the year and remain on
track to hit our year end guidance. Specifically, we expect sales in the
third quarter to increase slightly from the second quarter due to the
continued benefit of mid-year product introductions, including shipments
of soft goods, as well as the addition of new customers. While retailer
commitments for 2008 product placements will not be finalized until the
end of the summer, initial customer feedback has been very positive
regarding our product line up this season.”
As of June 30, 2007, the Company had approximately $4.2 million of cash
and $4.2 million of debt on the balance sheet. The debt is primarily
related to the construction of the new corporate headquarters.
Summer Infant, Inc will host a conference call today to discuss
financial results for its second quarter ended June 30, 2007 at 4:30
p.m. Eastern Time on Thursday August 9, 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 dialing (913)
981-5584 (pass code 3415134). In addition, a telephone replay will be
available by dialing (719) 457-0820 (pass code 3415134) through August
23, 2007, 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 sales, expected net
revenues and EBITDA for fiscal 2007, expected operating performance in
the remainder of fiscal 2007, 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 EndedJune 30,
Six Months EndedJune 30,
2007
2006
2007
2006
Net revenues
$
18,675
$
12,845
$
35,845
$
26,133
Cost of goods sold
11,415
7,894
22,022
16,254
Gross profit
7,260
4,951
13,823
9,879
Selling, general, and administrative expenses
5,414
3,787
10,321
7,468
Depreciation & amortization
325
184
630
314
Non-cash stock option expense
38
0
191
0
Income before interest
1,483
980
2,681
2,097
Interest income (expense)
20
(236
)
84
(405
)
Income before taxes
$
1,503
$
744
$
2,765
$
1,692
Provision for income taxes1
574
298
1,106
677
Net income
$
929
$
446
$
1,659
$
1,015
Earnings per share
$
0.07
$
0.04
$
0.12
$
0.09
Shares used in fully diluted EPS
14,269,000
11,200,000
13,302,000
11,200,000
EBITDA Reconciliation:
Income before interest
1,483
980
2,681
2,097
Plus: depreciation & amortization
325
184
630
314
Plus: non-cash stock option expense
38
0
191
0
EBITDA
$
1,846
$
1,164
$
3,502
$
2,411
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 Q2 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
to date reporting in Form 10Q will contain the six months of
activity of KBL Healthcare plus the Summer operating performance
subsequent to the merger (March 6, 2007 through June 30, 2007).
Summer Infant, Inc.
Consolidated Balance Sheet
(in thousands of US dollars)
Unaudited
June 30, 2007
Cash and cash equivalents
$
4,211
Trade receivables
15,693
Inventory
13,547
Prepaids and other current assets
553
Total current assets
34,004
Property and equipment, net
8,377
Goodwill and other intangibles
39,178
Other assets
509
Total assets
$
82,068
Line of credit
$
0
Accounts payable and accrued expenses
11,771
Current portion of long term liabilities
205
Total current liabilities
11,976
Long term liabilities, less current portion
3,965
Total liabilities
15,941
Total stockholders equity
66,127
Total liabilities & stockholders equity
$
82,068
The June 30, 2007 amounts include the effects of the merger between
KBL Healthcare and Summer Infant which occurred on March 6, 2007.