UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): May 11, 2020  

SUMMER INFANT, INC.
(Exact Name of Registrant as Specified in Charter)

DELAWARE001-3334620-1994619
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

 

1275 PARK EAST DRIVE, WOONSOCKET, RHODE ISLAND 02895
(Address of Principal Executive Offices) (Zip Code)

(401) 671-6550
(Registrant's telephone number, including area code)


(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 [   ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 [   ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 [   ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 [   ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001SUMRNasdaq Capital Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On May 12, 2020, Summer Infant, Inc. (the “Company”) announced its financial results for the first quarter ended March 28, 2020.  The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K.

The information in this Item 2.02 and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On May 11, 2020, Paul Francese, the Company’s Chief Financial Officer, notified the Company’s Board of Directors that he intends to retire from the Company.  Mr. Francese will remain in his position of Chief Financial Officer until June 15, 2020, when he will be succeeded by Edmund J. Schwartz.  Mr. Francese will work with Mr. Schwartz in support of the transition, and his last day of employment will be July 17, 2020.

Mr. Schwartz will join the Company as a consultant in May, subject to the terms of a consulting agreement between the Company and Mr. Schwartz, to work with the Company’s finance team during the transition with Mr. Francese.  The Company’s Board of Directors approved the appointment of Mr. Schwartz as the Company’s Chief Financial Officer, effective June 15, 2020.  Under the terms of the consulting agreement, Mr. Schwartz will receive compensation of $5,000 for the month of May, and thereafter $20,000 per month, plus living and commuting expenses that will be reimbursed by the Company. Mr. Schwartz may terminate the consulting agreement upon 30 days’ prior written notice to the Company, and the Company may terminate the consulting agreement upon 14 days’ prior written notice to Mr. Schwartz.

Mr. Schwartz, 70, is a finance professional with extensive experience with acquisitions, organizational restructuring, implementing cost reducing process improvement initiatives and developing cash management discipline in a variety of industries, including consumer products, manufacturing, distribution and retail.  Since December 2017, Mr. Schwartz has worked with Winter Harbor, LLC, as a consultant to various companies on financial matters.  From August 2015 until September 2016, he served as interim chief financial officer of LRI Holdings. Inc. Mr. Schwartz previously served as a consultant to the Company, and acted as the Company’s Interim Chief Financial Officer from March 2012 through September 2012.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits. 
   
 Exhibit NumberDescription
   
 99.1Press release dated May 12, 2020.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 SUMMER INFANT, INC.
   
  
Date: May 12, 2020By: /s/ Paul Francese        
  Paul Francese
  Chief Financial Officer
  

EdgarFiling

EXHIBIT 99.1

SUMR Brands Reports First Quarter Results

Restructuring Exceeding Expectations; Company Managing Well Through COVID-19

WOONSOCKET, R.I., May 12, 2020 (GLOBE NEWSWIRE) -- SUMR Brands ("SUMR Brands" or the "Company") (NASDAQ: SUMR), a global leader in premium infant and juvenile products, today announced financial results for the first quarter ended March 28, 2020.

Recent Highlights

“A great deal has certainly changed since the start of 2020 due to the COVID-19 pandemic, but SUMR Brands has steadfastly continued to execute a plan designed for the turnaround of the Company,” said Stuart Noyes, Interim CEO. “Taking every precaution appropriate to safeguard our employees and customers, we are rapidly adapting to at-home working conditions as well as a surge in online demand. While some of our specialty retailers are closed, most of our channel partners remain open, and our suppliers in China are, generally speaking, back producing at near-normal levels.

“We continued to take steps to streamline the Company this quarter – adjusting our headquarters’ lease, closing our UK operations, and subleasing a portion of our California warehouse, as previously announced. At the same time, we have rolled out new products, invested in eCommerce initiatives, and reduced working capital, resulting in improved cash flow and lower debt.

“I’d like to thank Paul Francese, our CFO, for his many years of service to SUMR Brands. He has elected to retire at the end of June, and we are sincerely grateful for his stewardship through several unexpected challenges – including COVID-19 and a trade war with China. He will be replaced by Ed Schwartz, a seasoned financial professional with turnaround experience, whose expertise will be crucial as we navigate the coming months on our path to profitability.”

First Quarter Results

Net sales for the three months ended March 28, 2020 were $40.3 million compared with $42.5 million for the three months ended March 30, 2019. The Company’s results reflected softness within certain markets, including Canada, and lower sales at several brick & mortar chains, particularly specialty retailers, due to COVID-19 restrictions, partially offset by higher revenue year-over-year across several product categories including specialty blankets, strollers, boosters and playards, driven by double-digit growth within its eCommerce channels.

Gross profit for the first quarter of 2020 was $12.5 million versus $13.5 million in 2019, while gross margin was 31.0% in 2020 versus 31.6% last year. The lower gross margin largely reflected product mix and the impact of closeout sales. Selling expense was $3.4 million in the first quarters of both 2020 and 2019, and selling expense as a percent of net sales was 8.5% in 2020 versus 7.9% last year. The increase year-over-year as a percent of sales was primarily due to higher cooperative advertising expenses and freight costs.

General and administrative expenses (G&A) were $8.1 million in the first quarter of 2020 versus $9.4 million last year, declining to 20.2% of net sales in 2020 from 22.0% in 2019. The year-over-year change reflects lower labor and other costs due to streamlining actions taken by the Company in the quarter and over the past year, partially offset by severance and restructuring costs. Interest expense was $1.4 million in the first quarter of 2020 versus $1.2 million in 2019.

The Company reported a net loss of $1.2 million, or $(0.57) per share, in the first quarter of 2020 compared with a net loss of $1.4 million, or $(0.67) per share, in the prior-year period.  

Adjusted EBITDA, as defined in the Company’s credit agreements, for the first quarter of 2020 was $1.8 million versus $1.5 million for the first quarter of 2019, and Adjusted EBITDA as a percent of net sales was 4.6% in the first quarter of 2020 versus 3.4% last year. Adjusted EBITDA in 2020 included $0.9 million in bank permitted add-back charges compared with $0.7 million during the prior-year period. Adjusted EBITDA, adjusted net loss, and adjusted loss per share are non-GAAP metrics. An explanation is included under the heading below "Use of Non-GAAP Financial Information," and reconciliations to GAAP measures can be found in the tables at the end of this release.

Balance Sheet Highlights

As of March 28, 2020, the Company had approximately $0.7 million of cash and $44.5 million of bank debt compared with $0.4 million of cash and $48.6 million of bank debt as of December 28, 2019. Inventory as of March 28, 2020 was $25.2 million versus $28.1 million at the beginning of the fiscal year. Trade receivables as of the end of the first quarter were $30.5 million compared with $32.8 million as of December 28, 2019, while accounts payable and accrued expenses were $33.0 million compared with $32.7 million at the beginning of the fiscal year.

Annual Stockholders’ Meeting

In light of the COVID-19 pandemic, the Company plans to hold its Annual Stockholders’ Meeting on September 9, 2020.  While the Company currently expects that the meeting will be held in person, the Company will monitor the COVID-19 pandemic and may, for the health and safety of stockholders, directors, officers and employees, hold the meeting in a virtual format. See the Company’s proxy filing for additional information, when available.

Conference Call Information

Management will host a conference call to discuss the financial results tomorrow, May 13, at 9:00 a.m. Eastern. To listen to the live call, visit the Investor Relations section of the Company's website at www.sumrbrands.com or dial 844-834-0642 or 412-317-5188. An archive of the webcast will be available on the Company's website.  

About SUMR Brands, Inc.

Based in Woonsocket, Rhode Island, the Company is a global leader of premium juvenile brands driven by a commitment to people, products, and purpose. The Company is made up of a diverse group of experts with a passion to make family life better by selling proprietary, innovative products across several core categories. For more information about the Company, please visit www.sumrbrands.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 loss and adjusted loss per diluted 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. Non-GAAP adjusted net loss and adjusted loss per diluted share means net (loss) plus unamortized financing fees and other items added back, as well as 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 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, as they indicate more clearly the Company’s operations and its ability to meet capital expenditure and working capital requirements. 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 with respect to impact of its streamlining measures and other initiatives to reduce costs, including expected savings of $6.0 million in 2020 and annualized savings of $7.5 million, and to position the Company to improve profitability; and the potential short-term and long-term impact of the COVID-19 pandemic on its business. 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 impact of the COVID-19 pandemic on the Company’s supply chain, U.S. operations and sales in the U.S; increased tariffs, additional tariffs or import or export taxes on the cost of its products and therefore demand for its products, or the suspension, non-renewal or revocation of any exclusion from tariffs on its products; the Company’s ability to meet its liquidity requirements; the Company’s ability to comply with the covenants in its loan agreements and to maintain availability under its loan agreements; the Company’s ability to implement and to achieve the expected benefits and savings of its restructuring initiatives; 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 reliance on foreign suppliers; the Company’s ability to develop, market and launch new products; the Company’s ability to manage inventory levels and meet customer demand; the Company’s ability to grow sales with existing and new customers and in new channels; and other risks as detailed in the Company’s most recent Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission.  The Company assumes no obligation to update the information contained in this release.

Company Contact:
Chris Witty
Investor Relations
646-438-9385
cwitty@darrowir.com

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 
  March 28, 2020 March 30, 2019 
      
Net sales $40,338  $42,538  
Cost of goods sold  27,835   29,088  
Gross profit $12,503  $13,450  
General and administrative expenses(1)  8,147   9,379  
Selling expense  3,444   3,353  
Depreciation and amortization  967   937  
Operating loss $(55) $(219) 
Interest expense  1,410   1,249  
Loss before taxes $(1,465) $(1,468) 
Income tax benefit  (255)  (70) 
Net loss $(1,210) $(1,398) 
Loss per diluted share $(0.57) $(0.67) 
      
Shares used in fully diluted EPS  2,109,264   2,092,574  
      
(1) Includes stock based compensation expense     
      
Reconciliation of GAAP to Non-GAAP Financial Measures 
      
  Three Months Ended 
  March 28, 2020 March 30, 2019 
      
Reconciliation of Adjusted EBITDA     
Net loss (GAAP) $(1,210) $(1,398) 
Plus: interest expense  1,410   1,249  
Plus: benefit for income taxes  (255)  (70) 
Plus: depreciation and amortization  967   937  
Plus: non-cash stock based compensation expense  (11)  48  
Plus: permitted add-backs (a)   936   684  
Adjusted EBITDA (Non-GAAP) $1,837  $1,450  
      
Reconciliation of Adjusted EPS     
Net loss (GAAP) $(1,210) $(1,398) 
Plus: permitted add-backs(a)   936   684  
Plus: unamortized financing fees(b)  266   -  
Tax impact of items impacting comparability(c)  (336)  (192) 
Adjusted Net (loss) (Non-GAAP) $(344) $(906) 
Adjusted (loss) per diluted share (Non-GAAP) $(0.02) $(0.05) 
      
(a) Permitted addbacks consist of items that the Company is permitted to add-back to the calculation of consolidated EBITDA under its credit agreements.  Permitted addbacks for the three months ended March 30, 2020 include severance $249 ($70 tax impact), special projects $521 ($146 tax impact), board fees $83 ($23 tax impact) and restructuring costs $83 ($23 tax impact). Permitted addbacks for the three months ended March 30, 2019 include severance $563 ($158 tax impact), board fees $100 ($28 tax impact), and special projects $21 ($6 tax impact). 
  
(b) Write off of unamortized financing costs associated with the reduction in Company's Bank of America credit facility, reflecting a $266 ($74 tax impact) charge for the three months ending March 28, 2020. 
  
(c) Represents the aggregate tax impact of the adjusted items set forth above based on the statutory tax rate for the periods presented relevant to their jurisdictions. 


Summer Infant, Inc
Consolidated Balance Sheet
(amounts in thousands of US dollars)
      
  March 28, 2020  December 28, 2019
  (unaudited)   
      
Cash and cash equivalents$693 $395
Trade receivables, net 30,471  32,787
Inventory, net 25,170  28,056
Property and equipment, net 8,118  8,788
Intangible assets, net 12,799  12,896
Other assets 8,330  8,621
Total assets$85,581 $91,543
      
Accounts payable$25,530 $25,396
Accrued expenses 7,446  7,289
Current portion of long-term debt 219  875
Long term debt, less current portion (1) 41,759  45,359
Other liabilities 6,320  7,041
Total liabilities 81,274  85,960
      
Total stockholders’ equity 4,307  5,583
Total liabilities and stockholders’ equity$85,581 $91,543
      
(1) Long term debt is reported net of unamortized financing fees.  As a result, reported long term debt is reduced by $2,491 and $2,398 of unamortized financing fees in the periods ending March 28, 2020 and December 28, 2019, respectively.