Cummer Infant Wrts (MM) (NASDAQ:SUMRW)
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`Summer Infant, Inc. (the “Company”)
(Nasdaq: SUMR, SUMRW) today announced financial results for the second
quarter and six months ended June 30, 2008.
Second Quarter 2008 Results
Net revenues for the second quarter of 2008 were $33.98 million, an 82%
increase from $18.68 million in the second quarter of 2007. Organic
revenues, excluding the impact of the Basic Comfort acquisition, which
closed on March 31, 2008, and the acquisition of Kiddopotamus, which
closed on April 18, 2008, increased approximately 50% year over year.
This growth was driven by a variety of factors, including new product
introductions, new customers in 2008, and continued growth in the Company’s
core categories.
Gross profit for the second quarter of 2008 was $12.32 million, a 70%
increase compared to $7.26 million in the second quarter of 2007. Gross
margin for the second quarter of 2008 was 36.2%, down from 38.9% in the
second quarter of 2007, but up from 35.0% in the first quarter of 2008.
As expected, gross margins continued to be impacted by an increase in
costs for products sourced from China and higher resin costs for
products manufactured in the US. These factors were offset by price
increases, a reduction in product returns, and the change in mix as a
result of the acquired businesses, all of which contributed to the
increase in margins from the first quarter.
Selling, general and administrative (“SG&A”)
expenses excluding depreciation and amortization, deal-related fees, and
non-cash stock option expense for the second quarter of 2008 were $8.62
million, or 25.4% of net revenues, compared to $5.41 million, or 29.0%
of net revenues, in the second quarter of 2007. The 360 basis point
year-over-year decrease as a percentage of net revenues was primarily
due to leveraging fixed costs on higher sales.
Operating income was $2.74 million in the second quarter of 2008,
compared to $1.48 million in the second quarter of 2007. EBITDA (defined
herein as earnings before interest, taxes, depreciation and
amortization, non-cash stock option expense and deal-related fees)
increased 101% to $3.70 million for the second quarter of 2008 compared
to the $1.85 million reported in the second quarter of 2007. EBITDA
margin in the second quarter of 2008 increased to 10.9% from 9.9% in the
year-ago quarter, and increased from 9.2% in the first quarter of 2008,
primarily due to leveraging fixed costs on higher sales.
Excluding deal-related fees, net income for the second quarter of 2008
was $1.46 million, or $0.10 per share, compared to $0.93 million, or
$0.07 per share, in the second quarter of 2007.
“Summer Infant delivered another quarter of
substantial growth in sales and profits, particularly given the
challenges facing the broader retail sector,”
commented Jason Macari, Chief Executive Officer of Summer Infant. “We
continued to gain sales momentum across all of our retail channels and
core product lines. In addition, we are very pleased to announce that we
have completed the integration of Basic Comfort and Kiddopotamus into
the Summer Infant platform.”
Mr. Macari continued, “Looking ahead, we
continue to believe our strong performance at the retail level
demonstrates the value and quality that our infant health, wellness, and
safety products bring to our customers in a consumer sector that is
relatively non-discretionary. We do expect raw material inflation,
higher labor costs and devaluation of the US dollar in China to
potentially pressure gross margins in the second half of the year.
Nevertheless, the recent implementation of price increases, which
commenced at the end of the second quarter, should offset some of the
cost pressure in the marketplace. While we are very pleased with our
year-to-date financial results, we are maintaining our sales, EBITDA and
EPS guidance at this time given the challenging macroeconomic
environment and the uncertainty surrounding raw material prices.”
As of June 30, 2008, the Company had $37.6 million of net debt (total
debt net of cash). During the quarter, the Company’s
net debt increased by $7.4 million. This consisted of $10.0 million of
new borrowings to fund the Kiddopotamus acquisition, net of $2.6 million
of positive cash flow from operations. On a trailing twelve-month basis,
consolidated pro forma EBITDA totaled $13.9 million; the ratio of net
debt to EBITDA is therefore 2.7 times as of June 30, 2008. The majority
of the debt matures in fiscal 2011.
Six Months Ended June 30, 2008 Results
For the six months ended June 30, 2008, net revenues were $62.41
million, an increase of 74% compared to $35.85 million for the first six
months of 2007. EBITDA (as defined herein above) for the six months
ended June 30, 2008 was $6.31 million, or 10.1% of net revenues, an 80%
increase from $3.50 million, or 9.8% of net revenues, during the first
six months of 2007.
Pro Forma Results for the Six Months
Ended June 30, 2008
Summer Infant is also presenting pro forma results for the first six
months of 2008, which include the results of Basic Comfort and
Kiddopotamus for the entire six-month period, 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 acquired by
Summer Infant, and therefore the results going forward could differ
materially from these results. For the six months ended June 30, 2008,
the unaudited pro forma results of Summer Infant, including Basic
Comfort and Kiddopotamus, were as follows: net revenues totaled $68.34
million; EBITDA (as defined herein above) totaled $7.30 million; and
earnings per share totaled $0.19 per share excluding deal-related fees.
2008 Pro Forma Guidance
The company is reiterating its 2008 revenue, EBITDA and EPS guidance.
The following guidance assumes that both the Basic Comfort acquisition,
which closed on March 31, 2008, and the acquisition of Kiddopotamus,
which closed on April 18, 2008, occurred on January 1, 2008, and
therefore, is on a pro forma basis. In addition, EBITDA and EPS guidance
for 2008 also excludes deal-related fees. The Company continues to
expect net revenues for 2008 to be in the range of $129.0 to $133.0
million and EBITDA (as defined herein above) for 2008 to be in the range
of $13.8 to $14.4 million. The Company expects earnings per share for
2008 to be in the range of $0.37 to $0.40. 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.
Summer Infant, Inc. will host a conference call today, Thursday, August
7, 2008 at 8:30 a.m. Eastern Time, to discuss financial results for its
second quarter ended June 30, 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)
312-9303 (pass code 4991740). In addition, a telephone replay will be
available by dialing (719) 457-0820 (pass code 4991740) through August
21, 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 herein
as income before interest and taxes plus depreciation, amortization,
deal-related fees 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 Infant, Inc.
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,
2008
2007
2008
2007
Net revenues
$
33,982
$
18,675
$
62,407
$
35,845
Cost of goods sold
21,665
11,415
40,154
22,022
Gross profit
12,317
7,260
22,253
13,823
Selling, general, and administrative expenses
8,615
5,414
15,942
10,321
Depreciation & amortization
654
325
1,125
630
Deal-related fees
214
-
214
-
Non-cash stock option expense
90
38
180
191
Income before interest
2,744
1,483
4,792
2,681
Interest income (expense)
(585
)
20
(967
)
84
Income before taxes
$
2,159
$
1,503
$
3,825
$
2,765
Provision for income taxes1
833
574
1,495
1,106
Net income
$
1,326
$
929
$
2,330
$
1,659
Earnings per share
$
0.09
$
0.07
$
0.16
$
0.12
Earnings per share, excluding deal-related fees
$
0.10
$
0.07
$
0.17
$
0.12
Shares used in fully diluted EPS
14,918,000
14,269,000
14,416,000
13,302,000
EBITDA Reconciliation:
Income before interest
2,744
1,483
4,792
2,681
Plus: depreciation & amortization
654
325
1,125
630
Plus: deal-related fees
214
-
214
-
Plus: non-cash stock option expense
90
38
180
191
EBITDA
$
3,702
$
1,846
$
6,311
$
3,502
Summer Infant, Inc.
Pro Forma Summary Statement of Operations
Including Results of the Acquired Companies (unaudited)
(in thousands of US dollars, except for share and per share
data)
Six Months Ended
June 30, 2008
Net revenues
$
68,336
Gross profit
$
24,710
Net income, excluding deal-related fees
$
2,927
EBITDA, excluding deal-related fees and non-cash stock option
expense
$
7,303
Earnings per share, excluding deal-related fees
$
0.19
Shares used in fully diluted EPS
15,056,000
Note: the above presentation summarizes the year to date statement of
operations for Summer Infant on a pro forma basis assuming that the
acquisitions of Basic Comfort and Kiddopotamus occurred on January 1,
2008. These unaudited results are being presented to give the reader
additional information regarding these acquisitions and their relative
impact on Summer Infant.
Summer Infant, Inc.
Consolidated Balance Sheet
(in thousands of US dollars)
Unaudited
June 30, 2008
Audited
December 31, 2007
Cash and cash equivalents
$
2,876
$
1,771
Trade receivables
27,719
21,245
Inventory
26,868
19,327
Property and equipment, net
9,974
9,279
Goodwill and other intangibles
53,944
40,099
Other assets
1,731
1,504
Total assets
$
123,112
$
93,225
Current portion of long-term debt
$
1,044
$
17,856
Accounts payable, accrued expenses and other liabilities
22,326
18,122
Long term debt, less current portion
39,442
3,977
Total liabilities
62,812
39,955
Total stockholders equity
60,300
53,270
Total liabilities & stockholders equity
$
123,112
$
93,225
Note: the June 30, 2008 balance sheet includes the effects of the
Basic Comfort and Kiddopotamus acquisitions, which occurred on March
31, 2008 and April 18, 2008, respectively.