Attached files
file | filename |
---|---|
8-K - FORM 8-K - KID BRANDS, INC | c24444e8vk.htm |
Exhibit 99.1
AT THE COMPANY
|
AT FTI CONSULTING | |
Marc S. Goldfarb
|
Jennifer Milan / Stephanie Rich | |
Senior Vice President & General Counsel
|
General Information | |
201-405-2454
|
212-850-5600 |
FOR IMMEDIATE RELEASE
KID BRANDS, INC. REPORTS THIRD QUARTER 2011 RESULTS
ANNOUNCES APPROVAL OF A $10 MILLION STOCK REPURCHASE PROGRAM
East Rutherford, N.J. November 9, 2011 Kid Brands, Inc. (NYSE: KID) today reported financial
results for the three months ended September 30, 2011 (Q3 2011) and announced the authorization
by its Board of Directors of a share repurchase program.
Summary Results
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||
% | % | |||||||||||||||||||||||
(in millions, except per share data) | 2011 | 2010 | Change | 2011 | 2010 | Change | ||||||||||||||||||
Net sales |
$ | 69.5 | $ | 71.1 | (2.3 | )% | $ | 189.6 | $ | 200.5 | (5.4 | )% | ||||||||||||
Net (loss) income |
($0.1 | ) | $ | 4.0 | | ($4.3 | ) | $ | 11.9 | | ||||||||||||||
Net (loss) income per diluted share |
($0.00 | ) | $ | 0.18 | | ($0.20 | ) | $ | 0.54 | | ||||||||||||||
Adjusted net income* |
$ | 2.1 | $ | 4.3 | (51.5 | )% | $ | 5.8 | $ | 12.1 | (52.4 | )% | ||||||||||||
Adjusted net income per diluted
share* |
$ | 0.10 | $ | 0.20 | (50.0 | )% | $ | 0.26 | $ | 0.55 | (52.7 | )% |
* | Adjusted net income and adjusted net income per diluted share for each of Q3 2011, the
three month period ended September 30, 2010 (Q3 2010) and each of the nine month periods ended
September 30, 2011 (the 2011 YTD Period) and September 30, 2010 (the 2010 YTD Period),
respectively, are non-GAAP financial measures, which are described in detail under the heading
Non-GAAP Information below and are reconciled to GAAP measures in the table at the end of this
release. |
Raphael Benaroya, Executive Chairman and acting CEO, commented, Our third quarter results
follow similarly unsatisfactory results of the prior two quarters. We have initiated decisive
actions designed to improve our performance, with a particular focus on fixing the core business.
Specifically, we are: refocusing design, packaging and pricing of our core products; addressing
selling practices; and making inventory management a top priority. We also intend to implement SKU
rationalization efforts. We believe that Kid Brands has greater earnings potential than the last
several quarters have demonstrated.
Third Quarter 2011 Results
Net sales for Q3 2011 decreased 2.3% to $69.5 million from $71.1 million for Q3 2010. This decrease
was primarily the result of lower sales at both LaJobi (down 12.4%) and Sassy (down 3.3%),
partially offset by growth at Kids Line (up 10.1%, largely as a result of lower markdown allowances
and increased sales). Net sales at CoCaLo were flat for Q3 2011 as compared to Q3 2010.
Gross profit was $18.6 million, or 26.7% of net sales, for Q3 2011, as compared to $20.6 million,
or 29.0% of net sales, for Q3 2010. The decline in gross profit was primarily the result of higher
product costs at Kids Line and LaJobi, additional inventory reserves related to certain
underperforming product lines at Kids Line ($0.2 million), additional warehouse expense as a result
of higher inventory levels ($0.2 million) and, on an absolute basis, lower net sales, partially
offset by lower markdown allowances ($2.3 million).
Selling, general and administrative expense totaled $16.3 million, or 23.5% of net sales, for Q3
2011, as compared to $13.7 million, or 19.3% of net sales, for Q3 2010. SG&A expense increased
primarily as a result of $1.4 million of professional fees related to U.S. Customs compliance,
related internal investigations at LaJobi, Kids Line and CoCaLo and related shareholder litigations
(collectively, Customs Investigation Costs), transition costs related to the resignation of the
Companys former CEO ($0.8 million, including a non-cash charge of $0.4 million related to certain
equity vesting acceleration) (CEO Transition Costs), trade show costs that were incurred in the
third quarter of fiscal 2011 compared to the fourth quarter of the prior year ($0.7 million) and,
on a percentage basis, a lower sales base.
Other expense was $2.1 million for Q3 2011 as compared to $0.8 million for Q3 2010. This increase
of approximately $1.3 million was primarily due to a $1.0 million non-cash write-off of deferred
financing costs originally incurred in connection with the Companys previous credit facility (the
Financing Write-Off), a $0.2 million foreign exchange loss in Q3 2011 compared to a $0.1 million
foreign exchange gain during Q3 2010, and an additional $0.1 million of interest recorded in Q3
2011 associated with anticipated customs duty payment requirements at LaJobi, Kids Line and CoCaLo,
all of which were offset by a reduction ($0.1 million) in interest expense due to lower borrowings
and lower borrowing costs in Q3 2011 compared to Q3 2010.
Net loss for Q3 2011 was $80,000, or ($0.00) per diluted share, compared to net income of $4.0
million, or $0.18 per diluted share, for Q3 2010.
Non-GAAP adjusted net income for Q3 2011 was $2.1 million, or $0.10 per diluted share, as compared
to non-GAAP adjusted net income of $4.3 million, or $0.20 per diluted share, for Q3 2010.
Non-GAAP adjusted net income for Q3 2011 reflects adjustments to net loss, as reported, to exclude
the effect of the following items and to apply an assumed tax rate of 39% to the resulting adjusted
pre-tax income (collectively, the Q3 2011 Charges): (i) the income tax provision; (ii) $1.4
million in Customs Investigation Costs; (iii) $0.8 million of CEO Transition Costs; (iv) the $1.0
million Financing Write-Off; and (v) $0.1 million of anticipated customs duty interest. Non-GAAP
adjusted net income for Q3 2010 reflects adjustments to net income, as reported, to exclude the
effect of the following items and to apply an assumed tax rate of 39% to the resulting
adjusted pre-tax income (collectively, the Q3 2010 Charges): (i) the income tax provision; (ii)
$0.7 million related to the discontinuance of the Companys sleep positioner product line (Sleep
Positioner Costs); and (iii) severance costs of approximately $0.3 million in connection with the
departure of the former President of CoCaLo (CoCaLo Severance).
2
2011 YTD Period
Net sales for the 2011 YTD Period decreased 5.4% to $189.6 million from $200.5 million for the 2010
YTD Period. This decrease was primarily the result of lower sales at LaJobi (down 15.7%),
partially offset by growth at each of CoCaLo (up 8.2%), Sassy (up 3.3%) and Kids Line (up 0.5%).
Net loss for the 2011 YTD Period was $4.3 million, or ($0.20) per diluted share, compared to net
income of $11.9 million, or $0.54 per diluted share, for the 2010 YTD period.
Non-GAAP adjusted net income for the 2011 YTD Period was $5.8 million, or $0.26 per diluted share,
as compared to non-GAAP adjusted net income of $12.1 million, or $0.55 per diluted share, for the
2010 YTD Period.
Non-GAAP adjusted net income for the 2011 YTD period reflects adjustments to net loss, as reported,
to exclude the effect of the following items and to apply an assumed tax rate of 39% to the
resulting adjusted pre-tax income (collectively, the 2011 YTD Charges): (i) the income tax
provision; (ii) $4.5 million of Customs Investigation Costs; (iii) $2.5 million in anticipated
customs duties at LaJobi, Kids Line and CoCaLo; (iv) $0.4 million in anticipated customs duty
interest; (v) $0.7 million in crib remediation costs at LaJobi; (vi) $0.1 million in fees for a
March 2011 amendment to the Companys previous credit facility; (vii) a $1.1 million accrual with
respect to obligations under a lease transferred to the buyer of the Companys former gift business
(the TRC Lease Accrual); (viii) $2.0 million of income resulting from the reduction of the
valuation reserve recorded in June 2009 against the note receivable pertaining to the sale of the
Companys former gift business; (ix) $0.8 million of CEO Transition Costs; and (x) the $1.0 million
Financing Write-Off. Non-GAAP adjusted net income for the 2010 YTD period reflects adjustments to
net income, as reported, to exclude the effect of the income tax provision, $0.7 million of Sleep
Positioner Costs and $0.3 million of CoCaLo Severance, and to apply an assumed tax rate of 39% to
the resulting adjusted pre-tax income (collectively, the 2010 YTD Charges).
2011 Outlook
Based on current business trends, the Company currently estimates that non-GAAP adjusted net income
per diluted share for the full year 2011 will be approximately $0.40. This outlook assumes an
effective tax rate of 39%.
The above outlook is contingent upon: the currently anticipated sales and performance of core
product lines and several new product launches during the final, critical months of 2011;
managements assumptions about the macroeconomic environment; specific retailer inventory policies;
and the actual shipment timing of key new and replenishment product programs.
3
Share Repurchase Program
Kid Brands also announced that on November 8, 2011, its Board of Directors authorized the
repurchase of up to $10 million of the Companys common stock, and in connection therewith,
terminated the repurchase program authorized by the Board in March of 1990. This new repurchase
program may be suspended or discontinued at any time without prior notice.
The Company intends to finance the repurchase program with available cash and/or proceeds under its
refinanced revolving credit facility, which, in addition to limits on revolver availability and a
stricter consolidated leverage ratio for this purpose (0.25x less than the maximum then permitted),
limits the aggregate amount that can be expended on share repurchases and dividends to $5.0 million
until the LaJobi focused assessment has been concluded and all related duty amounts have been paid.
The purchases may be made from time to time in the open market or through privately negotiated
transactions at managements discretion, depending on market conditions and other factors, in
accordance with securities laws and regulations. The Company currently has approximately 21.66
million shares of common stock outstanding.
Mr. Benaroya commented, We believe that we will have the financial resources available to fund
this stock repurchase program responsibly over time, while continuing to fund our operating
requirements. We will continue to evaluate the most prudent uses of capital as we seek to build
shareholder value over the long term.
Looking to the remainder of 2011 and beyond, we are committed to improving sales and margins by
addressing the core business in a comprehensive manner. We are demanding greater accountability
across all levels of the organization, and intend to improve the Companys performance despite
external challenges and margin pressure. With its strong and diverse portfolio of brands and solid
cash flow position, we continue to believe the future is promising for Kid Brands, concluded Mr.
Benaroya.
Conference Call Information
The conference call, which will be held at 10:00 a.m. ET today, November 9, 2011, may be accessed
by dialing 877-675-4750, or 719-325-4792, access code: 6499442. Additionally, a webcast of the call
can be accessed at www.kidbrands.com, www.earnings.com, or
http://www.media-server.com/m/p/3ib4o6qe, and will be archived online shortly after the conference
call for 90 days. A replay of the call will be available through November 16, 2011, by dialing
877-870-5176, or 858-384-5517, access code: 6499442.
Non-GAAP Information
In this release, certain financial measures for each of Q3 2011, Q3 2010, the 2011 YTD Period and
the 2010 YTD Period are presented both in accordance with United States generally accepted
accounting principles (GAAP) and also on a non-GAAP basis. In particular, adjusted net income
and adjusted net income per diluted share for each of such periods are non-GAAP financial
measures.
4
Adjusted net income is defined as the reported net (loss)/income, plus/minus certain items
(including reversal of the relevant income tax provision), and the application of an assumed tax
rate of 39% on the resulting adjusted pre-tax income. Adjusted net income and adjusted net income
per diluted share for Q3 2011 exclude the Q3 2011 Charges, and adjusted net income and adjusted net
income per diluted share for the 2011 YTD Period exclude the 2011 YTD Charges. Adjusted net income
and adjusted net income per diluted share for Q3 2010 exclude the Q3 2010 Charges, and adjusted net
income and adjusted net income per diluted share for the 2010 YTD Period exclude the 2010 YTD
Charges. In addition, adjusted net income per diluted share for Q3 2011 and the 2011 YTD Period
also includes an adjustment to reflect the weighted-average dilutive effect of certain shares
underlying in-the-money stock appreciation rights (such shares were excluded from the
weighted-average diluted share calculation used to determine net loss per diluted share, as
reported for such periods, because the Company was in a net loss position for such periods, and the
inclusion of such shares would have been anti-dilutive). In the computation of adjusted net income
per diluted share for each of Q3 2011 and the 2011 YTD Period, however, such shares were included.
These non-GAAP measures are not based on any comprehensive set of accounting rules or principles.
The Company believes that non-GAAP measures have limitations in that they do not reflect all of the
amounts associated with our results of operations as determined in accordance with GAAP. However,
the Company believes that the non-GAAP measures presented in this release are useful to investors
as they enable the Company and its investors to evaluate and compare the Companys results from
operations and cash resources generated from the Companys business in a more meaningful and
consistent manner (by excluding specific items which are not reflective of ongoing operating
results) and provide an analysis of operating results using the same measures used by the Companys
chief operating decision makers to measure performance. These non-GAAP financial measures result
largely from managements determination that the facts and circumstances surrounding the excluded
charges are not indicative of the ordinary course of the ongoing operation of the Companys
business. As a result, the non-GAAP financial measures presented in this release may not be
comparable to similarly titled measures reported by other companies, and are included only as
supplementary measures of financial performance. This data is furnished to provide additional
information and should not be considered in isolation as a substitute for measures of performance
prepared in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most
directly comparable financial measures calculated and presented in accordance with GAAP are
included in the tables attached to this press release.
Kid Brands, Inc.
Kid Brands, Inc. and its subsidiaries are leaders in the design, development and distribution of
infant and juvenile branded products. Its design-led products are primarily distributed through
mass market, baby super stores, specialty, food, drug, independent and e-commerce retailers
worldwide.
5
The Companys operating business is composed of four wholly-owned subsidiaries: Kids Line, LLC;
LaJobi, Inc; Sassy, Inc.; and CoCaLo, Inc. Through these subsidiaries, the Company designs and
markets branded infant and juvenile products in a number of complementary categories including,
among others: infant bedding and related nursery accessories and décor, food preparation and
nursery appliances, and diaper bags (Kids Line® and CoCaLo®); nursery furniture and related
products (LaJobi®); and developmental toys and feeding, bath and baby care items with features that
address the various stages of an infants early years (Sassy®). In
addition to the Companys branded products, the Company also markets certain categories of products
under various licenses, including Carters®, Disney®, Graco® and Serta®. Additional information
about the Company is available at www.kidbrands.com.
Note: This press release contains certain forward-looking statements. Additional
written and oral forward-looking statements may be made by the Company from time to time in
Securities and Exchange Commission (SEC) filings and otherwise. The Private Securities Litigation
Reform Act of 1995 provides a safe-harbor for forward-looking statements. These statements may be
identified by the use of forward-looking words or phrases including, but not limited to,
anticipate, believe, expect, project, intend, may, planned, potential, should,
will or would. The Company cautions readers that results predicted by forward-looking
statements, including, without limitation, those relating to the Companys future business
prospects, revenues, working capital, liquidity, capital needs, order backlog, interest costs and
income are subject to certain risks and uncertainties that could cause actual results to differ
materially from those indicated in the forward-looking statements. Specific risks and
uncertainties include, but are not limited to those set forth under Item 1A, Risk Factors, of the
Companys most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q,
each as filed with the SEC. The Company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information, future events or otherwise.
###
6
KID BRANDS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
Net sales |
$ | 69,475 | $ | 71,128 | $ | 189,603 | $ | 200,523 | ||||||||
Cost of sales |
50,914 | 50,490 | 140,438 | 140,511 | ||||||||||||
Gross profit |
18,561 | 20,638 | 49,165 | 60,012 | ||||||||||||
Selling, general and administrative expenses |
16,305 | 13,710 | 46,463 | 38,533 | ||||||||||||
TRC valuation reserve |
| | (2,000 | ) | | |||||||||||
Operating income |
2,256 | 6,928 | 4,702 | 21,479 | ||||||||||||
Other (expense) income: |
||||||||||||||||
Interest expense, including amortization
and
write-off of deferred financing costs |
(1,914 | ) | (887 | ) | (4,210 | ) | (2,951 | ) | ||||||||
Other, net |
(176 | ) | 108 | (73 | ) | 380 | ||||||||||
(2,090 | ) | (779 | ) | (4,283 | ) | (2,571 | ) | |||||||||
Income from operations before income tax
provision |
166 | 6,149 | 419 | 18,908 | ||||||||||||
Income tax provision |
246 | 2,189 | 4,674 | 7,004 | ||||||||||||
Net (loss) income |
$ | (80 | ) | $ | 3,960 | $ | (4,255 | ) | $ | 11,904 | ||||||
Basic (loss) earnings per share: |
$ | (0.00 | ) | $ | 0.18 | $ | (0.20 | ) | $ | 0.55 | ||||||
Diluted (loss) earnings per share: |
$ | (0.00 | ) | $ | 0.18 | $ | (0.20 | ) | $ | 0.54 | ||||||
Weighted average shares: |
||||||||||||||||
Basic |
21,653,000 | 21,546,000 | 21,646,000 | 21,545,000 | ||||||||||||
Diluted |
21,653,000 | 21,999,000 | 21,646,000 | 21,951,000 | ||||||||||||
7
KID BRANDS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(Dollars in Thousands)
(Unaudited)
September 30, | December 31, | |||||||
2011 | 2010 | |||||||
Cash and cash equivalents |
$ | 1,811 | $ | 1,075 | ||||
Accounts receivable, net |
49,187 | 55,270 | ||||||
Inventories, net |
47,420 | 48,564 | ||||||
Other current assets |
10,237 | 10,522 | ||||||
Long-term assets |
119,979 | 127,065 | ||||||
Total assets |
$ | 228,634 | $ | 242,496 | ||||
Short-term debt |
$ | | $ | 32,121 | ||||
Other current liabilities |
36,273 | 40,101 | ||||||
Long-term liabilities |
66,783 | 42,292 | ||||||
Total liabilities |
103,056 | 114,514 | ||||||
Shareholders equity |
125,578 | 127,982 | ||||||
Total liabilities and shareholders equity |
$ | 228,634 | $ | 242,496 | ||||
8
KID BRANDS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Dollars in Thousands, Except for Share and Per Share Data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
To arrive at Adjusted net income and
Adjusted net income per diluted share (1): |
||||||||||||||||
Net (loss) income, as reported |
$ | (80 | ) | $ | 3,960 | $ | (4,255 | ) | $ | 11,904 | ||||||
Less: tax provision |
246 | 2,189 | 4,674 | 7,004 | ||||||||||||
Income (from operations before income taxes) |
166 | 6,149 | 419 | 18,908 | ||||||||||||
Add: Customs Investigation Costs (included in SG&A) |
1,379 | | 4,497 | | ||||||||||||
Add: Customs duty/interest accruals |
||||||||||||||||
(portion included in cost of sales) |
| | 2,489 | | ||||||||||||
(portion included in interest expense) |
86 | | 387 | | ||||||||||||
Add: Crib Compliance Costs |
| | 677 | | ||||||||||||
Add: March 2011 Bank Amendment
(included in interest expense) |
| | 131 | | ||||||||||||
Add: TRC Lease Accrual |
| | 1,051 | | ||||||||||||
Less: TRC valuation reserve adjustment
(included in TRC Valuation Reserve) |
| | (2,000 | ) | | |||||||||||
Add: CEO Transition Costs |
805 | | 805 | | ||||||||||||
Add: Financing Write-Off |
1,007 | | 1,007 | | ||||||||||||
Add: Sleep Positioner Costs |
| 667 | | 667 | ||||||||||||
Add: Severance Costs |
| 286 | | 286 | ||||||||||||
Less: Tax impact of above items (using assumed 39%
effective rate) |
(1,343 | ) | (2,770 | ) | (3,691 | ) | (7,746 | ) | ||||||||
Adjusted net income |
$ | 2,100 | $ | 4,332 | $ | 5,772 | $ | 12,115 | ||||||||
Adjusted net income per diluted share |
$ | 0.10 | $ | 0.20 | $ | 0.26 | $ | 0.55 | ||||||||
Weighted-average diluted shares outstanding, as reported |
21,653,000 | 21,999,000 | 21,646,000 | 21,951,000 | ||||||||||||
Weighted-average diluted shares outstanding, as adjusted
(1) |
21,782,000 | 21,999,000 | 21,786,000 | 21,951,000 |
(1) | For Q3 2011 and the 2011 YTD Period, the Company was in a net loss position on a reported
(GAAP) basis and, accordingly, the weighted-average diluted shares outstanding excluded
certain shares underlying in-the-money stock appreciation rights because inclusion of such
shares would have been anti-dilutive. In the computation of Adjusted net income per diluted
share for Q3 2011 and the 2011 YTD Period, however, such shares were included. |
9