EX-99.1 2 a09-21300_2ex99d1.htm EX-99.1

Exhibit 99.1

 

For Immediate Release

 

 

Summer Infant, Inc. Reports Solid Second Quarter 2009 Results

 

·                  Second quarter 2009 revenue increases 13% year over year to $38.4 million

 

·                  Second quarter 2009 EBITDA increases 8% year over year to $4.0 million

 

·                  Second quarter 2009 earnings per share of $0.11

 

·                  Positive cash flow of $6.0 million in the second quarter of 2009

 

Woonsocket, RI, August 6, 2009 — Summer Infant, Inc. (“Summer Infant” or the “Company”) (Nasdaq: SUMR) today announced financial results for the second quarter and six months ended June 30, 2009.

 

Second Quarter 2009 Results

 

Net revenues for the second quarter of 2009 were $38.4 million, a 13% increase from $34.0 million in the second quarter of 2008.  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.  The increase in revenue was also driven by strength in several key categories, including safety and convenience, infant bedding, and nursery.

 

Gross profit for the second quarter of 2009 was $13.6 million, an 11% increase compared to $12.3 million in the second quarter of 2008.  Gross margin for the second quarter of 2009 was 35.5%, a decrease from 36.2% in the second quarter of 2008, but an increase from the 33.5% reported in the first quarter of 2009.  Gross margins were negatively impacted year over year by a change in product mix, as sales were greater in relatively lower margin product categories, and an increase in the sales of closeout inventory.  Gross margin improved sequentially due to lower commodity prices, lower input costs related to re-engineered products and the implementation of alternative sourcing initiatives.

 

Selling, general and administrative (“SG&A”) expenses, excluding depreciation, amortization, and non-cash stock option expense, were $9.6 million for the second quarter of 2009 compared to $8.6 million, excluding deal-related fees, for the second quarter of 2008.  SG&A as a percentage of net revenues was 25.1% in the second quarter of 2009, a decrease compared to 25.4% in the second quarter of 2008 and the 26.7% reported in the first quarter of 2009.  SG&A expenses increased year over year due to higher variable costs combined with increased promotional programs with retailers.  The improvement as a percent of sales is due to the leveraging of fixed costs over a larger sales base.

 

EBITDA (defined herein as earnings before interest, taxes, depreciation and amortization, and non-cash stock option expense) was $4.0 million for the second quarter of 2009, an 8% increase compared to $3.7 million, excluding deal-related fees, for the second quarter of 2008.  EBITDA margin for the second quarter of 2009 was 10.4% compared to 10.9% for the second quarter of 2008.

 


 

Net income for the second quarter of 2009 was $1.6 million, or $0.11 per share, compared to $1.3 million, or $0.09 per share, for the second quarter of 2008.  Excluding deal-related fees, net income for the second quarter of 2008 was $1.5 million, or $0.10 per share.

 

As of June 30, 2009, the Company had approximately $2.5 million of cash and $37.8 million of debt on the balance sheet.  During the second quarter of 2009, the Company generated $6.0 million of cash, which was used to pay down debt and increase cash on hand.  On a pro forma basis, the ratio of net debt to EBITDA was 2.8 times as of June 30, 2009.  The majority of the debt matures in June 2011.  The Company is in compliance with all debt covenants and continues to be able to access its credit lines.

 

“We are very pleased with our strong financial performance in the second quarter,” commented Jason Macari, Chairman and Chief Executive Officer of Summer Infant.  “We generated sales of approximately $38.4 million and EBITDA of $4.0 million in the second quarter, representing solid increases both on a sequential and year-over-year basis.  While we are encouraged by the more stable retail ordering rates over the past several months, we continue to operate in a challenging environment and believe these results demonstrate our solid execution and competitive strengths.  As expected, our gross margin improved from the first quarter due to our recent efforts to refine our product mix, the implementation of alternative sourcing strategies, as well as the benefit of lower commodity costs.  We are also very pleased with the $6.0 million positive cash flow reported this quarter, which reflects better profitability, improved management of working capital, and more favorable vendor negotiations.  This positive cash flow enabled us to pay down $4.4 million of debt in the quarter in addition to increasing cash by $1.6 million.”

 

“We continue to implement initiatives that position Summer Infant for growth in order to strengthen our size and presence in the juvenile space,” continued Mr. Macari.  “We are very excited about the recent appointment of Jeff Hale as Chief Operating Officer.  We believe his operational experience in the juvenile industry will be instrumental as we work to build our business, streamline our operations, and improve profitability.  In addition, we recently completed the acquisition of Butterfly Living, an innovative manufacturer of cribs.  Infant cribs, which is a highly attractive segment of the juvenile market, represents an entirely new category for Summer Infant and will be a valuable addition to our product portfolio.”

 

“Looking ahead, we are very encouraged by ordering rates and POS trends so far in the third quarter despite the tough operating environment,” continued Mr. Macari.  “We believe that our current strong performance will continue for the balance of 2009.  While it is still a little early to forecast revenues for next year, early indications from retailers suggest very solid demand for 2010.”

 

Six Months Ended June 30, 2009 Results

 

For the six months ended June 30, 2009, net revenues were $73.2 million, an increase of 17% compared to $62.4 million for the first six months of 2008.  EBITDA (as defined herein above) for the six months ended June 30, 2009 was $6.3 million, or 8.7% of net revenues, equal to the $6.3 million, or 10.1% of net revenues, excluding deal-related fees, during the first six months of 2008.

 

Conference Call Information

 

Summer Infant, Inc. will host a conference call today, Thursday, August 6, 2009 at 4:30 p.m. Eastern Time, to discuss financial results for its second quarter and six months ended June 30, 2009.  This call is being webcast 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) 312-1477 (confirmation code: 2847368).  In addition, a telephone replay will be available by dialing (719) 457-0820 (confirmation code: 2847368) through August 20, 2009, 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, nursery products, booster and potty seats, infant bedding, bouncers, travel accessories, highchairs, swings and nursery furniture.

 

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 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, 2008, and subsequent filings with the Securities and Exchange Commission.  The Company assumes no obligation to update the information contained in this presentation.

 

Contact:

 

Joe Driscoll

Chief Financial Officer

Summer Infant, Inc.

(401) 671-6922

 

or

 

Devlin Lander

ICR

devlin.lander@icrinc.com

(415) 292-6855

 


 

Summer Infant, Inc.

Consolidated Statements of Operations (unaudited)

 (amounts in thousands of US dollars, except per share data)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

38,361

 

$

33,982

 

$

73,210

 

$

62,407

 

Cost of goods sold

 

24,744

 

21,665

 

47,936

 

40,154

 

Gross profit

 

13,617

 

12,317

 

25,274

 

22,253

 

Selling, general, and administrative expenses

 

9,633

 

8,615

 

18,927

 

15,942

 

Depreciation and amortization

 

1,028

 

654

 

2,029

 

1,125

 

Deal-related fees

 

0

 

214

 

0

 

214

 

Non-cash stock option expense

 

134

 

90

 

499

 

180

 

Income before interest

 

$

2,822

 

$

2,744

 

$

3,819

 

$

4,792

 

Interest expense

 

475

 

585

 

896

 

967

 

Income before taxes

 

$

2,347

 

$

2,159

 

$

2,923

 

$

3,825

 

Provision for income taxes

 

704

 

833

 

877

 

1,495

 

Net income

 

$

1,643

 

$

1,326

 

$

2,046

 

$

2,330

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

0.11

 

$

0.09

 

$

0.13

 

$

0.16

 

 

 

 

 

 

 

 

 

 

 

Earnings per share, excluding deal-related fees

 

$

0.11

 

$

0.10

 

$

0.13

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

Shares used in fully diluted EPS

 

15,393

 

15,056

 

15,393

 

14,482

 

 

 

 

 

 

 

 

 

 

 

EBITDA Reconciliation:

 

 

 

 

 

 

 

 

 

Income before interest

 

$

2,822

 

$

2,744

 

$

3,819

 

$

4,792

 

Plus: depreciation and amortization

 

1,028

 

654

 

2,029

 

1,125

 

Plus: deal-related fees

 

0

 

214

 

0

 

214

 

Plus: non-cash stock option expense

 

134

 

90

 

499

 

180

 

EBITDA

 

$

3,984

 

$

3,702

 

$

6,347

 

$

6,311

 

 

Note: Financial results for the six months ended June 30, 2008 do not include the full six month impact of the acquisitions of Basic Comfort, which closed on March 31, 2008, and Kiddopotamus, which closed on April 18, 2008.  If the acquisitions had occured on January 1, 2008, the results for the first six months of 2008 would have included approximately $5.9 million and $1.0 million of additional revenue and EBITDA, respectively, from the acquisitions of Basic Comfort and Kiddopotamus.

 


 

Summer Infant, Inc.

Consolidated Balance Sheet

(amounts in thousands of US dollars)

 

 

 

Unaudited
June 30, 2009

 

December 31, 2008

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,457

 

$

988

 

Trade receivables

 

31,502

 

29,358

 

Inventory

 

26,909

 

30,882

 

Property and equipment, net

 

11,224

 

11,212

 

Goodwill and other intangibles

 

55,466

 

55,582

 

Other assets

 

2,138

 

2,513

 

Total assets

 

$

129,696

 

$

130,535

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

2,300

 

$

1,654

 

Accounts payable, accrued expenses and other liabilities

 

26,542

 

24,393

 

Long term debt, less current portion

 

35,530

 

42,277

 

Total liabilities

 

64,372

 

68,324

 

 

 

 

 

 

 

Total stockholders’ equity

 

65,324

 

62,211

 

Total liabilities and stockholders’ equity

 

$

129,696

 

$

130,535