First Quarter Revenue Increases 33% Year-Over-Year to a Record $58.5 Million; Company Raises 2011 Outlook
May 11, 2011 (Marketwire) --
WOONSOCKET, RI -- (Marketwire) -- 05/11/11 -- Summer Infant, Inc. ("Summer Infant" or the
"Company") (NASDAQ: SUMR) today announced financial results for the first
quarter ended March 31, 2011.
First Quarter 2011 Income Statement
Please note that the income statement amounts for the first quarter of 2011
are for Summer Infant on a standalone basis and do not include the results
of BornFree Holdings Ltd. ("BornFree"), which was acquired on March 24,
2011, as the BornFree income statement activity for the last seven days of
March was immaterial to the overall Company results.
First quarter 2011 results include certain items that affect the
comparability between the corresponding period in 2010, including the
-- $0.2 million charge associated with re-labeling video monitors with new
warning labels -- this is in addition to the charge taken in the fourth
quarter of 2010 of $0.3 million, as more costs were incurred in
Q1 2011, and
-- $0.6 million in deal fees related to the acquisition of BornFree
Net revenues in the first quarter of 2011 increased 32.5% to $58.5 million
from $44.1 million in the first quarter of 2010. The increase was driven
by gains in most major product categories, with particular strength in the
furniture segment due to increased crib placements at several retailers.
Over 30% growth was realized both in the US market as well as in the
Company's international operations.
Gross profit in the first quarter of 2011 increased 16.2% to $19.7 million
from $16.9 million in the first quarter of 2010. Gross margin in the first
quarter of 2011 was 33.7%, compared with 38.4% in the first quarter of
2010. The decline in gross margin was primarily attributable to higher
commodity costs and a revenue mix shift toward furniture, which generally
carries a lower gross margin than other categories.
Selling, general and administrative ("SG&A") expenses were $15.3 million in
the first quarter of 2011, compared with $12.6 million in the first quarter
of 2010. The SG&A as a percentage of sales improved 260 basis points to
26.1% from 28.7% due to leveraging of fixed costs on higher revenue.
Non-GAAP adjusted EBITDA ("adjusted EBITDA", defined as earnings before
interest, taxes, depreciation and amortization, non-cash stock-based
compensation expense, $0.2 million relating to the aforementioned video
monitor charge, and BornFree deal fees), increased 8.1% to $4.6 million in
the first quarter of 2011 from $4.3 million in the first quarter of 2010.
Adjusted EBITDA margin in the first quarter of 2011 was 7.9%, compared with
9.7% in the first quarter of 2010.
Net income in the first quarter of 2011 was $1.2 million, or $0.07 per
share, compared with $1.8 million, or $0.11 per share, in the first quarter
of 2010. On a non-GAAP basis, after excluding $0.8 million of pre-tax
charges relating to the video monitor re-labeling and deal fees associated
with the BornFree acquisition, the Company's first quarter 2011 adjusted
net income was $1.8 million, or $0.11 per diluted share.
"We experienced robust organic growth to start the year," stated Jason
Macari, Chairman and Chief Executive Officer of Summer Infant. "The
investments in our product development platform over the past 12-months
have helped increase retail shelf space for several of our product
categories. As a result, our initial sell-in for 2011 was very strong
driven by large gains in furniture and other categories. We are also
pleased to report an improvement in our customer revenue concentration, as
we were able to gain shelf space in many different accounts both
domestically and internationally. Our top line performance during the first
quarter resulted in meaningful expense leverage and helped to offset much
higher product costs compared to the year ago period."
On March 24, 2011 the Company completed the acquisition of BornFree, a
leading BPA-free baby feeding brand. Founded in 2006, BornFree introduced
the first BPA-free nursing bottle and now distributes an innovative
portfolio of BPA-free feeding products through 19,000 retail doors
Mr. Macari continued, "We are very excited about our acquisition of
BornFree as it provides us with an immediate presence in the $1 billion
feeding category and helps solidify our leadership position within the
juvenile industry. We plan to leverage our product development strengths to
broaden the current feeding line and gain new placement within our account
base, while also taking advantage of their food and drug retail
relationships to expand distribution of the Summer Infant brand. We also
expect cost savings to be realized once our organizations have been fully
integrated later this year."
The balance sheet amounts at March 31, 2011 include the assets and
liabilities of both Summer Infant and BornFree. At March 31, 2011, the
Company had approximately $0.4 million of cash and $70.2 million of debt.
The increase in debt from December 31, 2010 is primarily attributable to
the acquisition of BornFree which included a $14 million cash payment as
part of the purchase price. In March 2011, the company signed an amended
loan deal with existing lenders that gives the Company up to $80 million of
borrowing capacity, with an additional $20 million available beginning in
October 2011 under an "accordion" feature. Consolidated inventory at March
31, 2011 totaled $45.0 million. Excluding BornFree, Summer Infant inventory
totaled $41.4 million, a decrease of $4.5 million from December 31, 2010.
"Based on our first quarter results and current revenue projections for the
remainder of the year, including the contribution from BornFree, we are
revising our outlook," said Mr. Macari. "We now expect full year 2011
revenue to be at least $235 million, up from our previous expectation of at
least $220 million. Diluted earnings per share are projected to be at least
$0.61, excluding deal fees and transition costs. We project that the third
and fourth quarters of this year will be more profitable than the second
quarter, as we expect the BornFree transition to be substantially complete
by the end of the second quarter. We are very pleased with our 33% top-line
growth in the first quarter and encouraged by current reorder rates.
However, as a reminder we are up against tougher revenue comparisons over
the remainder of the year.