Summer Infant, Inc. Reports First Quarter 2014 Results

Summer Infant, Inc. Reports First Quarter 2014 Results 
Revenue Grows 14% From Prior Quarter 
Reports Profitable First Quarter as Bottom-Line Improves 
WOONSOCKET, RI -- (Marketwired) -- 05/13/14 --  Summer Infant, Inc.
("Summer Infant" or the "Company") (NASDAQ: SUMR), a global developer
and distributor of juvenile health, safety and wellness products,
today announced financial results for the first quarter ended March
31, 2014.  
Management Comments 
"We are encouraged by the sequential revenue growth we reported for
the first quarter of 2014," said President and Chief Executive
Officer Carol Bramson. "Total sales increased 14% from the fourth
quarter of 2013, driven by stronger demand from our retail partners,
particularly in our nursery, monitor, gear and safety product
categories.  
"Summer Infant today is a much more streamlined organization than it
was at the start of 2013. Although we reported lower year-over-year
revenues as expected, we improved gross margin by 94 basis points and
decreased our selling expenses by 21% from Q1 last year. Adjusted
EBITDA improved on a sequential basis. These results demonstrate that
our strategy to return to profitable growth by focusing on selling
more innovative and higher margin products that represent our core
brands is working.  
"We are confident that we have the right strategy in place to turn
around our overall performance. We expect our bottom-line to improve
on a sequential and year-over-year basis throughout the remainder of
2014 and we anticipate our top-line will begin to show year-over-year
growth in the second half of 2014. With our renewed focus on
innovation and enhancing our connection with the consumer, we are
committed to generating sales growth, improving margins and
increasing shareholder value." 
First-Quarter Results 
Net revenues for the first quarter ended March 31, 2014 were $50.8
million compared with $44.7 million in the sequential fourth quarter
of 2013 and $59.1 million for the first quarter of 2013.  
Gross profit for the first quarter of 2014 was $16.4 million compared
with $14.4 million in the sequential fourth quarter of 2013 and $18.6
million in the first quarter of 2013. The sequential improvement in
gross profit dollars is attributable to the mix of products sold,
primarily driven by the nursery and monitor product categories. The
year-over-year decline in gross profit dollars is attributable to
lower sales volume driven by the exiting of license agreements for
Disney and Carter's and the reduction of the Company's furniture
product line, as well as the effect of a $300,000 charge in the first
quarter of 2014 related to the battery recall.  
Gross profit as a percentage of net sales was 32.4% for the first
quarter of 2014 compared with 32.3% in the sequential fourth quarter
of 2013 and 31.4% in the first quarter of 2013. The year-over-year
improvement was the result of a favorable mix of higher margin
products. 
Selling expenses were $4.4 million for the first quarter of 2014
compared with $4.8 million in the sequential fourth quarter of 2013
and $5.6 million for the first quarter of 2013. The sequential and
year-over-year decrease was primarily attributable to reduced sales
and lower royalty costs due to the Company's strategy to discontinue
certain licensing agreements. 
The Company reported net income of $0.2 million, or $0.01 per diluted
share, in the first quarter of 2014, compared with a net loss of $1.7
million, or $0.09 per share, in the sequential fourth quarter of 2013
and net income of $0.4 million, or $0.02 per diluted share, in the
first quarter of 2013.  
Adjusted EBITDA for the first quarter of 2014 was $3.8 million
compared with $0.9 million in the sequential fourth quarter of 2013
and $3.9 million in the first quarter of 2013. Adjusted EBITDA for
the first quarter of 2014 includes $1.0 million in permitted add back
charges compared with $0.9 million in the fourth quarter of 2013 and
$0.4 million in the first quarter of 2013. 
Adjusted EBITDA is a non-GAAP metric that 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 March 31, 2014, the Company had approximately $2.6 million of
cash and $49.5 million of debt compared with $1.6 million of cash and
$49.7 million of debt on December 31, 2013.  
Inventory at March 31, 2014 was $33.7 million compared with $38.4
million at December 31, 2013. Due to higher sales in the first
quarter, the Company consumed safety inventory to satisfy customer
orders. Some replenishment of safety stock will occur in the second
quarter. Trade Receivables as of March 31, 2014 was $36.9 million
compared with $34.6 million as of December 31, 2013. Accounts Payable
and Accrued Expenses as of March 31, 2014 was $29.8 million compared
with $31.7 million as of December 31, 2013. The Company procures its
inventory on credit terms and its current practice is to submit
payments weekly. These working capital improvements reduced the
Company's year-over-year investment in working capital by $15.0
million.  
Conference Call Information 
Summer Infant, Inc. will host a conference call today, Tuesday, May
13, 2014 at 5:00 p.m. Eastern Time, to discuss financial results.
This live webcast can be accessed by visiting the "Investor
Relations" section of the Company's website at www.summerinfant.com.
Investors may also listen to the call via telephone by dialing (877)
407-5790 or (201) 689-8328. An archive of the webcast will be
available on the Company's website for approximately one year. 
Annual Meeting of Stockholders 
The Company also announced today that its 2014 annual meeting of
stockholders will be held on Wednesday, August 13, 2014. 
About Summer Infant, Inc. 
Based in Woonsocket, Rhode Island, the Company is a global designer,
marketer, and distributor of branded juvenile health, safety and
wellness products (for ages 0-3) which are sold principally to large
North American and European retailers. The Company currently markets
its products in several product categories such as monitors, safety,
nursery, feeding, gear and furniture. Most products are sold under
the core brand names of Summer(R) and Born Free(R). Significant
products include audio/video monitors, safety gates, bath tubs and
bathers, durable bath products, bed rails, swaddling blankets, baby
bottles, warming/sterilization systems, booster and potty seats,
bouncers, travel accessories, high chairs, swings, car seats,
strollers, and nursery furniture. Over the years, the Company has
completed several acquisitions and added products such as cribs,
swaddling, and feeding products. For more information about the
Company, please visit www.summerinfant.com.  
Use of Non-GAAP Financial Information 
This release and the referenced webcast include presentations of
non-GAAP financial measures, including adjusted EBITDA, adjusted net
income and adjusted earnings per share. (i) 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 and
(ii) adjusted net income and adjusted earnings per share mean net
income excluding certain items as detailed in the reconciliation
table included in this release. Such information is supplemental to
infor
mation 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
pay interest on 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 (i) developing and selling higher-margin
products, (ii) its strategy to drive top-line growth and improve
profitability, and (iii) its 2014 performance and profitability. 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; 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; 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 December 31, 2013, and subsequent filings with the
Securities and Exchange Commission. The Company assumes no obligation
to update the information contained in this release. 


 
                                                                            
                                                                            
Summer Infant, Inc.                                                         
Consolidated Statements of Operations                                       
(amounts in thousands of US dollars, except share and per share data)       
(unaudited)                                                                 
                                                                            
                                               Three Months Ended           
                                     -------------------------------------- 
                                       March 31,  December 31,   March 31,  
                                         2014         2013          2013    
                                     ------------ ------------  ----------- 
                                                                            
Net revenues                         $     50,814 $     44,738  $    59,118 
Cost of goods sold                         34,365       30,307       40,539 
                                     ------------ ------------  ----------- 
Gross profit                         $     16,449 $     14,431  $    18,579 
General & administrative expenses(1)        9,492        9,826        9,611 
Selling expense                             4,412        4,785        5,604 
Depreciation and amortization               1,393        1,364        1,790 
                                     ------------ ------------  ----------- 
Operating income (loss)              $      1,152 $     (1,544) $     1,574 
Interest expense                              867          871        1,255 
                                     ------------ ------------  ----------- 
Income (loss) before taxes           $        285 $     (2,415) $       319 
Provision (benefit) for income taxes           96         (737)        (125)
                                     ------------ ------------  ----------- 
  Net Income (loss)                  $        189 $     (1,678) $       444 
                                     ============ ============  =========== 
Earnings (loss) per diluted share    $       0.01 $      (0.09) $      0.02 
                                                                            
Shares used in fully diluted EPS       17,987,969   17,979,480   17,871,495 
                                                                            
Reconciliation of Non-GAAP EBITDA                                           
                                                                            
Net Income (loss)                    $        189 $     (1,678) $       444 
Plus: interest expense                        867          871        1,255 
Plus: provision (benefit) for income                                        
 taxes                                         96         (737)        (125)
Plus: depreciation and amortization         1,393        1,364        1,790 
Plus: non-cash stock based                                                  
 compensation expense                         254          164          178 
Plus: permitted add-backs(2)                  956          951          404 
                                     ------------ ------------  ----------- 
  Adjusted EBITDA                    $      3,755 $        935  $     3,946 
                                     ============ ============  =========== 
                                                                            
Reconciliation of Adjusted EPS                                              
Net Income (loss)                             189 $     (1,678) $       444 
Plus: permitted add-backs(3)                  635          648          266 
Plus: unamortized deferred financing                                        
 costs (4)                                      0            0          223 
Plus: loss on close-out sales in                                            
 January and February                           0            0           88 
                                     ------------ ------------  ----------- 
  Adjusted Net Income (loss)         $        824 $     (1,030) $     1,021 
         
                            ============ ============  =========== 
  Adjusted Earnings per diluted                                             
   share                             $       0.05 $      (0.06) $      0.06 
                                                                            
(1) Includes stock option expense                                           
                                                                            
                                                                            
(2) 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 March 31,    
    2014 include severance related costs ($681), Board Fees ($191), loss on 
    certain close-out sales ($69), and special projects ($15). Permitted    
    add-backs for the three months ended December 31, 2013 consisted of     
    severance ($624
), Board Fees ($119), special projects ($79), Carter's   
    related charges ($107), and losses on certain Carter's close-out sales  
    ($22). Permitted add-backs for the three months ended March 31, 2013    
    include consulting fees ($229), loss on certain close-out sales in March
    ($116), severance costs ($36), special projects ($15), and Board Fees   
    ($8).                                                                   
                                                                            
(3) 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 March 31,    
    2014 include severance related costs (Gross $681/Net $452), Board Fees  
    (Gross $191/Net $127), loss on certain close-out sales (Gross $69/Net   
    $46), and special projects (Gross $15/Net $10). Permitted add-backs for 
    the three months ended December 31, 2013 consisted of severance costs   
    (Gross $624/Net $425), Board Fees (Gross $119/Net $81), special projects
    (Gross $79/Net $54), Carter's related charges (Gross $107/Net $73), and 
    losses on certain Carter's close-out sales (Gross $22/Net $15).         
    Permitted add-backs for the three months ended March 31, 2013 include   
    consulting fees (Gross $229/Net $151), loss on certain close-out sales  
    in March (Gross $116/Net $76), severance costs (Gross $36/Net $24),     
    special projects (Gross $15/Net $10), and Board Fees (Gross $8/Net $5). 
                                                                            
(4) Write off of unamortized deferred financing costs for Bank of America   
    retired loan, (Gross $338/Net $223).                                    
                                                                            
                                                                            
                                                                            
Summer Infant, Inc                                                          
Consolidated Balance Sheet                                                  
(amounts in thousands)                                                      
                                                                            
                                                   March 31,    December 31,
                                                      2014          2013    
                                                 ------------- -------------
                                                  (unaudited)               
                                                                            
Cash and cash equivalents                        $       2,646 $       1,573
Trade receivables, net                                  36,932        34,574
Inventory, net                                          33,736        38,378
Property and equipment, net                             13,998        14,796
Other intangible assets, net                            21,510        21,575
Other assets                                             4,508         4,471
                                                 ------------- -------------
                                    Total assets $     113,330 $     115,367
                                                 ============= =============
                                                                            
Accounts payable and accrued expenses            $      29,816 $      31,730
Current portion of long-term debt                        1,859         1,962
Long term debt, less current portion                    47,604        47,756
Other long term liabilities                              3,225         3,289
Deferred tax liability                                   3,152         3,140
                                                 ------------- -------------
                               Total liabilities $      85,656 $      87,877
                                                                            
                      Total stockholders' equity        27,674        27,490
                                                 ------------- -------------
      Total liabilities and stockholders' equity $     113,330 $     115,367
                                                 ============= =============

  
Contact: 
Paul Francese 
Chief Financial Officer
Summer Infant, Inc.
(401) 671-6572 
or  
David Calusdian 
Sharon Merrill Associates, Inc. 
(617) 542-5300
SUMR@investorrelations.com 
 
 
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