Cummer Infant Wrts (MM) (NASDAQ:SUMRW)
Historical Stock Chart
From May 2019 to May 2024
Summer Infant, Inc. (“Summer Infant”
or the “Company”)
(Nasdaq: SUMR, SUMRW) today announced financial results for the third
quarter and nine months ended September 30, 2008.
Third Quarter 2008 Results
Net revenues for the third quarter of 2008 were $35.6 million, a 68%
increase from $21.2 million in the third quarter of 2007, and an
increase from the $34.0 million reported in the second quarter of 2008.
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 38% 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 third quarter of 2008 was $12.5 million, a 56%
increase compared to $8.0 million in the third quarter of 2007. Gross
margin for the third quarter of 2008 was 35.0%, down from 37.6% in the
third quarter of 2007. Gross margins were negatively impacted year over
year by an increase in costs of goods sourced from China and higher
resin costs for products manufactured in the US. Gross margins decreased
on a sequential basis from the 36.2% reported in the second quarter of
2008 primarily due to a change in product mix, as sales were greater in
relatively lower margin product categories.
Selling, general and administrative (“SG&A”)
expenses excluding depreciation, amortization, and non-cash stock option
expense for the third quarter of 2008 were $8.7 million, or 24.5% of net
revenues, compared to $5.7 million, or 27.0% of net revenues, in the
third quarter of 2007. The 250 basis point year-over-year improvement as
a percentage of net revenues was primarily due to leveraging fixed costs
on higher sales. SG&A as a percentage of revenue improved 90 basis
points from the 25.4% reported in the second quarter of 2008.
Operating income was $2.9 million in the third quarter of 2008, compared
to $1.8 million in the third quarter of 2007. EBITDA (defined herein as
earnings before interest, taxes, depreciation and amortization, and
non-cash stock option expense) increased 67% to $3.8 million for the
third quarter of 2008 compared to $2.3 million for the third quarter of
2007. EBITDA margin in the third quarter of 2008 was 10.6%, flat
compared to the year-ago quarter, as higher product costs in China were
offset by leveraging fixed costs on higher sales.
Net income for the third quarter of 2008 was $1.6 million, or $0.11 per
share, compared to $1.1 million, or $0.08 per share, in the third
quarter of 2007.
“Despite a tough operating environment, Summer
Infant again delivered a solid quarter, continuing to reflect the
strength of the Summer Infant brand, the value proposition of our
products, and solid execution of our growth strategy,”
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, as well as expand our presence on retailer’s
shelves through the addition of new products from the Basic Comfort and
Kiddopotamus acquisitions. In addition, we acquired several product
lines from Dolly, Inc. in the third quarter that will further expand our
soft goods presence at several major retail customers beginning in the
fourth quarter of this year. Looking ahead, we are very excited about
our 2009 product lineup unveiled at the September industry tradeshow,
including a new licensing agreement with Carter’s,
Inc. in our baby gear and infant health categories. These new products
are already resonating with our retail partners and are generating
incremental shelf space for next year.”
Mr. Macari continued, “While we are very
pleased with our year-to-date financial results, the challenging
macroeconomic environment and uncertainty regarding consumer spending
leave us cautious heading into the fourth quarter. We continue to
believe that the value and quality of Summer Infant products will drive
customer demand going forward and that the infant health, safety, and
wellness category remains relatively non-discretionary compared to the
broader consumer market. Nevertheless, we are in very uncertain economic
times, and consistent with trends reported in the broader retail sector,
we have seen a slowdown in retail ordering early in the fourth quarter.
Despite this recent ordering softness, revenues for the first nine
months of 2008 tracked ahead of our expectations, and therefore, we now
expect to meet or exceed the high end of our previously issued revenue
guidance for 2008. However, in light of the continued pressure on gross
margins and uncertainty in the macroeconomic environment, we are
maintaining our full year EBITDA and EPS guidance at this time. This
outlook assumes no significant deterioration in consumer spending trends
from current levels.”
As of September 30, 2008, the Company had $1.5 million of cash and $43.6
million of debt on the balance sheet. The increase in debt from the end
of the second quarter 2008 was largely due to approximately $1.8 million
in borrowings used to fund the Dolly transaction and related costs. On a
pro forma basis, the ratio of net debt to EBITDA was 2.9 times as of
September 30, 2008. The majority of the debt matures in fiscal 2011. The
Company is in compliance with all debt covenants and continues to be
able to access its credit lines.
Nine Months Ended September 30, 2008
Results
For the nine months ended September 30, 2008, net revenues were $98.0
million, an increase of 72% compared to $57.0 million for the first nine
months of 2007. EBITDA (as defined herein above), excluding deal-related
fees, for the nine months ended September 30, 2008 was $10.1 million, or
10.3% of net revenues, a 75% increase from $5.8 million, or 10.1% of net
revenues, during the first nine months of 2007.
Pro Forma Results for the Nine Months
Ended September 30, 2008
Summer Infant is also presenting pro forma results for the first nine
months of 2008, which include the results of Basic Comfort and
Kiddopotamus for the entire nine-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 nine months ended September 30,
2008, the unaudited pro forma results of Summer Infant, including Basic
Comfort and Kiddopotamus, were as follows: net revenues totaled $103.9
million; EBITDA (as defined herein above), excluding deal-related fees,
totaled $11.1 million; and earnings per share totaled $0.30 per share
excluding deal-related fees.
2008 Pro Forma 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. Based on higher than expected
revenues for the first nine months of 2008, the Company now expects net
revenues for 2008 to exceed or be at the high end of the previously
issued guidance range of $129.0 to $133.0 million. In light of continued
pressure on gross margins and uncertainty in the macroeconomic
environment, the Company continues to expect EBITDA (as defined herein
above) for 2008 to be in the range of $13.8 to $14.4 million and expects
EPS to be in the range of $0.37 to $0.40. EBITDA and EPS guidance for
2008 excludes deal-related fees. This outlook assumes that consumer
spending does not significantly decline in the fourth quarter from
current levels.
Summer Infant, Inc. will host a conference call today, Thursday,
November 6, 2008 at 4:30 p.m. Eastern Time, to discuss financial results
for its third quarter ended September 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 (480)
629-9041 (pass code 3937347). In addition, a telephone replay will be
available by dialing (303) 590-3030 (pass code 3937347) through November
20, 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 EndedSeptember 30,
Nine Months EndedSeptember 30,
2008
2007
2008
2007
Net revenues
$
35,575
$
21,198
$
97,982
$
57,043
Cost of goods sold
23,109
13,224
63,263
35,246
Gross profit
12,466
7,974
34,719
21,797
Selling, general, and administrative expenses
8,706
5,717
24,648
16,038
Depreciation & amortization
741
372
1,866
1,002
Deal-related fees
-
-
214
-
Non-cash stock option expense
90
90
270
281
Income before interest
2,929
1,795
7,721
4,476
Interest income (expense)
(506)
(78)
(1,473)
7
Income before taxes
$
2,423
$
1,717
$
6,248
$
4,483
Provision for income taxes1
817
657
2,312
1,763
Net income
$
1,606
$
1,060
$
3,936
$
2,720
Earnings per share
$
0.11
$
0.08
$
0.27
$
0.21
Earnings per share, excluding deal-related fees
$
0.11
$
0.08
$
0.28
$
0.21
Shares used in fully diluted EPS
15,056,000
13,908,000
14,627,000
13,263,000
EBITDA Reconciliation:
Income before interest
2,929
1,795
7,721
4,476
Plus: depreciation & amortization
741
372
1,866
1,002
Plus: deal-related fees
-
-
214
-
Plus: non-cash stock option expense
90
90
270
281
EBITDA
$
3,760
$
2,257
$
10,071
$
5,759
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)
Nine Months EndedSeptember 30, 2008
Net revenues
$ 103,911
Gross profit
$ 37,176
Net income, excluding deal-related fees
$ 4,537
EBITDA, excluding deal-related fees and non- cash stock option
expense
$ 11,063
Earnings per share, excluding deal-related fees
$ 0.30
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)
UnauditedSeptember 30, 2008
AuditedDecember 31, 2007
Cash and cash equivalents
$ 1,451
$ 1,771
Trade receivables
29,402
21,245
Inventory
31,164
19,327
Property and equipment, net
10,407
9,279
Goodwill and other intangibles
55,629
40,099
Other assets
2,063
1,504
Total assets
$ 130,116
$ 93,225
Current portion of long-term debt
$ 2,312
$ 17,856
Accounts payable, accrued expenses and other liabilities
24,743
18,122
Long term debt, less current portion
41,315
3,977
Total liabilities
68,370
39,955
Total stockholders equity
61,746
53,270
Total liabilities & stockholders equity
$ 130,116
$ 93,225