Summer Infant Reports Second Quarter Results
“Although having joined
Mark Messner, President and CEO. “Recent achievements reflect the hard work done this past year to execute a strategy which we now intend to take to the next level, leveraging the steps already taken to invest in core product categories, reduce expenses, strengthen the balance sheet and expand margins. So while I personally can’t take credit for the greatly improved results this quarter – including solid gross profit, lower G&A, reduced interest expense and our first positive EPS in over a year – I am proud to be part of such an incredible company in the juvenile space. I look forward to working with our team and the board to focus on new product development initiatives while strengthening our retail customer relationships as well as our direct connection with the parents who use and love our products. We will continue to transform
Second Quarter Results
Net sales for the three months ended
Gross profit for the second quarter of 2016 was
Selling expenses were
Interest expense decreased to
The Company reported net income of
Adjusted EBITDA is a non-GAAP metric. Adjusted EBITDA excludes various items that are detailed in the financial tables and accompanying footnotes reconciling GAAP to non-GAAP results contained in this release. An explanation of these measures also is included under the heading below "Use of Non-GAAP Financial Information."
Balance Sheet Highlights
As of
Inventory as of
Conference Call Information
Management will host a conference call to discuss the financial results tomorrow,
About
Based in
Use of Non-GAAP Financial Information
This release and the referenced webcast include presentations of non-GAAP financial measures, including Adjusted EBITDA, constant currency, adjusted net income and adjusted earnings per share. Adjusted EBITDA means earnings before interest and taxes plus depreciation, amortization, non-cash stock-based compensation expenses and other items added back as detailed in the reconciliation table included in this release. Constant currency sales are determined by applying a fixed exchange rate, calculated as the 12-month average in 2015, to the current local currency sales amounts, with the difference in reported sales being attributable to currency. Adjusted net income and adjusted earnings per share mean net income excluding certain items, and the tax impact of these items, as detailed in the reconciliation table included in this release. Such information is supplemental to information presented in accordance with GAAP and is not intended to represent a presentation in accordance with GAAP. The Company believes that the presentation of these non-GAAP financial measures provide useful information to investors to better understand, on a period-to-period comparable basis, financial amounts both including and excluding these identified items, and they indicate more clearly the ability of the Company's assets to generate cash sufficient to repay its indebtedness, meet capital expenditure and working capital requirements, comply with the financial covenants of its loan agreements and otherwise meet its obligations as they become due. These non-GAAP measures 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 the Company’s consolidated financial statements as an indicator of financial performance or liquidity. The Company provides reconciliations of these non-GAAP measures in its press releases of historical performance. Because these measures are not determined in accordance with GAAP and are susceptible to varying calculations, these non-GAAP measures, 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 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements be subject to the safe harbor created thereby. These statements are accompanied by words such as “anticipate,” “expect,” “project,” “will,” “believes,” “estimate” and similar expressions, and include statements regarding the Company’s expectations regarding new product introductions, top-line growth and improved operating results.. 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 ability to continue to control costs and expenses, including legal expenses; the Company’s dependence on key personnel; the Company’s reliance on foreign suppliers; the Company’s ability to develop, market and launch new products; the Company’s ability to grow sales with existing and new customers and in new channels; the Company’s ability to meet required financial covenants under its loan agreements; and other risks as detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended
Tables to Follow
| Summer Infant, Inc. | ||||||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||||||
| (amounts in thousands of US dollars, except share and per share data) | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||
| July 2, 2016 | July 4, 2015 | July 2, 2016 | July 4, 2015 | |||||||||||||||||
| Net sales | \\$ | 50,575 | \\$ | 51,807 | \\$ | 100,245 | \\$ | 104,820 | ||||||||||||
| Cost of goods sold | 34,374 | 38,036 | 68,318 | 74,074 | ||||||||||||||||
| Gross profit | \\$ | 16,201 | \\$ | 13,771 | \\$ | 31,927 | \\$ | 30,746 | ||||||||||||
| General and administrative expenses(1) | 9,981 | 11,972 | 20,734 | 22,282 | ||||||||||||||||
| Selling expense | 3,901 | 4,308 | 7,817 | 9,176 | ||||||||||||||||
| Depreciation and amortization | 1,160 | 1,318 | 2,316 | 2,652 | ||||||||||||||||
| Operating income/(loss) | \\$ | 1,159 | \\$ | (3,827 | ) | \\$ | 1,060 | \\$ | (3,364 | ) | ||||||||||
| Interest expense | 628 | 1,318 | 1,268 | 2,164 | ||||||||||||||||
| Income/(loss) before taxes | \\$ | 531 | \\$ | (5,145 | ) | \\$ | (208 | ) | \\$ | (5,528 | ) | |||||||||
| Income tax expense/(benefit) | 275 | (1,672 | ) | (131 | ) | (1,813 | ) | |||||||||||||
| Net income/(loss) | \\$ | 256 | \\$ | (3,473 | ) | \\$ | (77 | ) | \\$ | (3,715 | ) | |||||||||
| Income/(loss) per diluted share | \\$ | 0.01 | \\$ | (0.19 | ) | \\$ | (0.00 | ) | \\$ | (0.20 | ) | |||||||||
| Shares used in fully diluted EPS | 18,421,955 | 18,230,893 | 18,403,852 | 18,204,545 | ||||||||||||||||
| (1) Includes stock based compensation expense | ||||||||||||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures | ||||||||||||||||||||
| Reconciliation of Adjusted EBITDA | ||||||||||||||||||||
| Net income/(loss) (GAAP) | \\$ | 256 | \\$ | (3,473 | ) | \\$ | (77 | ) | \\$ | (3,715 | ) | |||||||||
| Plus: interest expense | 628 | 1,318 | 1,268 | 2,164 | ||||||||||||||||
| Plus: expense/(benefit) for income taxes | 275 | (1,672 | ) | (131 | ) | (1,813 | ) | |||||||||||||
| Plus: depreciation and amortization | 1,160 | 1,318 | 2,316 | 2,652 | ||||||||||||||||
| Plus: non-cash stock based compensation expense | 91 | 246 | 218 | 419 | ||||||||||||||||
| Plus: permitted add-backs (a) | 977 | 4,416 | 2,866 | 5,015 | ||||||||||||||||
| Adjusted EBITDA (Non-GAAP) | \\$ | 3,387 | \\$ | 2,153 | \\$ | 6,460 | \\$ | 4,722 | ||||||||||||
| Reconciliation of Adjusted EPS | ||||||||||||||||||||
| Net income/(loss) (GAAP) | \\$ | 256 | \\$ | (3,473 | ) | (77 | ) | (3,715 | ) | |||||||||||
| Plus: permitted add-backs(a) | 977 | 4,416 | 2,866 | 5,015 | ||||||||||||||||
| Plus: unamortized financing costs (b) | - | 685 | - | 685 | ||||||||||||||||
| Tax impact of items impacting comparability(c) | (342 | ) | (1,658 | ) | (1,003 | ) | (1,870 | ) | ||||||||||||
| Adjusted Net income/(loss) (Non-GAAP) | \\$ | 891 | \\$ | (30 | ) | \\$ | 1,786 | \\$ | 115 | |||||||||||
| Adjusted Earnings per diluted share (Non-GAAP) | \\$ | 0.05 | \\$ | (0.00 | ) | \\$ | 0.10 | \\$ | 0.01 | |||||||||||
| (a) Permitted add-backs consist of items that the Company is permitted to add-back to the calculation of consolidated EBITDA under its credit agreements. Permitted add-backs for the three months ended July 2, 2016 consisted of \\$838 in litigation fees (\\$293 tax impact) and \\$139 in board fees (\\$49 tax impact). Permitted add-backs for the three months ended July 4, 2015 consisted of \\$1,762 in litigation fees (\\$573 tax impact), \\$1,775 in losses from the inventory liquidation plan (\\$577 tax impact), \\$734 in losses from exiting the furniture category (\\$239 tax impact), and \\$145 in board fees (\\$47 tax impact). Permitted add-backs for the six months ended July 2, 2016 consisted of \\$2,276 in litigation fees (\\$797 tax impact), \\$267 in board fees (\\$93 tax impact), \\$224 in restructure fees (\\$78 tax impact), and \\$99 in severance related costs (\\$35 tax impact). Permitted add-backs for the six months ended July 4, 2015 consisted of \\$2,196 in litigation fees (\\$720 tax impact), \\$1,775 in losses from the inventory liquidation plan (\\$582 tax impact), \\$734 in losses from exiting the furniture category (\\$241 tax impact), and \\$310 in board fees (\\$102 tax impact). | ||||||||||||||||||||
| (b) Write off of unamortized deferred financing costs and termination fees associated with the Company's old credit facility, reflecting a \\$223 tax impact for the three months ending July 4, 2015 and \\$225 tax impact for the six months ending July 4, 2015. | ||||||||||||||||||||
| (c) Represents the aggregate tax impact of the adjusted items set forth above based on the applicable tax rate for the periods presented relevant to their jurisdictions and the nature of the adjustments. | ||||||||||||||||||||
| Summer Infant, Inc. | ||||||
| Consolidated Balance Sheet | ||||||
| (amounts in thousands of US dollars) | ||||||
| July 2, 2016 | January 2, 2016 | |||||
| (unaudited) | ||||||
| Cash and cash equivalents | \\$ | 1,147 | \\$ | 923 | ||
| Trade receivables, net | 38,329 | 40,514 | ||||
| Inventory, net | 36,633 | 36,846 | ||||
| Property and equipment, net | 11,311 | 12,007 | ||||
| Other intangible assets, net | 18,159 | 18,512 | ||||
| Other assets | 4,612 | 4,336 | ||||
| Total assets | \\$ | 110,191 | \\$ | 113,138 | ||
| Accounts payable | \\$ | 28,898 | \\$ | 29,541 | ||
| Accrued expenses | 8,975 | 9,584 | ||||
| Current portion of long-term debt | 4,519 | 3,318 | ||||
| Long term debt, less current portion (1) | 45,788 | 48,767 | ||||
| Other long term liabilities | 2,768 | 2,962 | ||||
| Total liabilities | 90,948 | 94,172 | ||||
| Total stockholders’ equity | 19,243 | 18,966 | ||||
| Total liabilities and stockholders’ equity | \\$ | 110,191 | \\$ | 113,138 | ||
| (1) Under new U.S. GAAP, long term debt is reported net of unamortized financing fees. As a result, reported long term debt is reduced by \\$1,415 and \\$1,489 of unamortized financing fees in the periods ending July 2, 2016 and January 2, 2016, respectively. | ||||||
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