OAKLAND, N.J., Aug. 19 /PRNewswire-FirstCall/ -- Russ Berrie and Company,
Inc. (NYSE: RUS) today reported results for the quarter ended June 30, 2008.
For the second quarter of 2008, consolidated net sales were $87.7 million,
including $22.2 million of sales generated from the acquisitions of LaJobi and
CoCaLo consummated on April 2, 2008. The Company reported a consolidated net
loss of $12.1 million, or ($0.57) per basic and diluted share. The 2008
results include certain unusual, primarily non-cash, charges totaling
approximately $10.4 million (pre-tax) related to the following items:
(i) non-cash charge of $7.0 million related to the write-down of the value
of long-lived fixed assets related to the Company's Gift segment, of which
$6.7 million was recorded in selling, general and administrative (SG&A)
expenses and $0.3 million was recorded in cost of sales;
(ii) $1.6 million inventory charge in connection with unfavorable results
of a voluntary quality test on certain gift segment product which impacts
gross profit;
(iii) $1.0 million non-cash charge recorded in cost of sales related to
the write-off of certain previously capitalized Shining Stars website
development expenses in connection with a revised licensing arrangement that
improves future operating economics; and
(iv) 0.7 million of certain financing expenses recorded in other expense
in connection with the Company's amended and restated Infant & Juvenile credit
facilities, of which $0.3 million relates to the non-cash write-off of
previously deferred financing expenses.
Excluding these unusual charges, adjusted consolidated pre-tax income for
the second quarter of 2008 was $0.3 million, as compared to consolidated
pre-tax income of $1.5 million in the comparable prior year period.
Bruce G. Crain, Chief Executive Officer and President, commented, "We are
pleased that our two new acquisitions, as well as strong organic growth at
Kids Line and Sassy, drove top-line growth in our Infant & Juvenile segment in
the second quarter of 2008. However, we recognize there are cost increases as
well as pricing and consumer challenges within these businesses, and we are
focused on implementing appropriate strategies for each of them to continue
growing both market share and profits. We completed the initial phase of
integrating LaJobi and CoCaLo after acquiring both companies early in the
second quarter, and each was accretive to our results in the quarter.
Overall, we are rigorously focused on offsetting higher costs through various
price optimization and cost management measures, maximizing sales
opportunities across all four businesses and strategically executing our
international expansion strategy. We are confident we have the right business
model to continue advancing our leadership position in this attractive
industry that has favorable demographic trends, recession-resistant products
and little seasonality."
Mr. Crain continued, "Our Gift segment results reflect continuing weak
industry trends as well as difficult comparisons against the strong Shining
Stars product line launch in the second quarter of last year. We recently
received a positive reception from retailers to the introduction of a wide
range of new seasonal and non-seasonal products at major tradeshows, although
much lower attendance at the domestic gift tradeshows and ongoing weak demand
for discretionary consumer goods indicate we may continue to see pressure on
this business near-term. At the same time, we continue to implement and
execute strategies to return this business to a profitable industry leadership
position."
Second Quarter 2008
Consolidated net sales for the second quarter of 2008 increased 24.0% to
$87.7 million, compared to $70.7 million for the second quarter of 2007, as a
result of the LaJobi and CoCaLo acquisitions and organic sales growth at Sassy
and Kids Line, partially offset by softness in the gift segment. Net sales
for the Company's Infant & Juvenile segment increased 68.8% in the second
quarter of 2008 to $62.2 million, compared to $36.9 million in the second
quarter of 2007, driven by aggregate 8.7% sales growth from Sassy and Kids
Line related to new product introductions and growth in international sales,
as well as sales of $22.2 million from the LaJobi and CoCaLo acquisitions.
Net sales for the Company's Gift segment decreased 24.8% to $25.5 million for
the second quarter of 2008, compared to $33.8 million for the second quarter
of 2007, primarily as a result of a decrease in sales of the Shining Stars
product line compared to the same period last year and overall softness in the
gift market due to the economic slowdown.
Consolidated gross profit in the second quarter of 2008 was $28.5 million,
or 32.5% of consolidated net sales, compared to $28.4 million, or 40.1% of
consolidated net sales, for the second quarter of 2007. Excluding the
aforementioned unusual charges, which impacted gross profit and totaled $3.0
million, adjusted consolidated gross profit as a percentage of consolidated
net sales would have been 35.7% in the second quarter of 2008. The Infant &
Juvenile segment gross profit margins decreased from 38.1% of net sales for
the second quarter of 2007 to 32.5% in the second quarter of 2008, primarily
as a result of increases in product costs and the timing of price increases,
as well as some consumer mix shifts to lower price points. On an as-adjusted
basis after excluding the impact of the unusual items discussed above, Gift
segment margins were slightly higher at 43.4% of net sales for the second
quarter of 2008 as compared to 42.3% of net sales for the same period in the
prior year.
Consolidated SG&A expenses for the second quarter of 2008 were $36.3
million, or 41.4% of consolidated net sales, compared to $25.7 million, or
36.3% of consolidated net sales, in the second quarter of 2007. Excluding the
aforementioned $6.7 million non-cash, fixed asset impairment charge, adjusted
consolidated SG&A would have been 33.5% for the second quarter of 2008. SG&A
for the Infant & Juvenile segment increased to 20.4% of sales in the second
quarter of 2008 from 18.4% of sales in the prior year quarter, primarily due
to higher product development expenses and additional promotional costs to
support the growth in this segment. SG&A for the Gift segment increased as a
percentage of sales to 92.7% in the second quarter of 2008 from 55.8% in the
prior-year quarter, primarily as a result of the aforementioned impairment
charge. Excluding this charge, adjusted SG&A as a percentage of sales for the
Gift segment would have been 64.8% in the second quarter of 2008.
As a result of the foregoing, consolidated net loss was $12.1 million, or
($0.57) per basic and diluted share, for the second quarter ended June 30,
2008, compared to consolidated net income of $0.4 million, or $0.02 per
diluted share, for the same period in 2007. As discussed above, the 2008
results include certain unusual, primarily non-cash, charges totaling
approximately $10.4 million (pre-tax). After excluding these charges, the
Company's adjusted consolidated pre-tax income was $0.3 million in the second
quarter of 2008, as compared to pre-tax income of $1.5 million in the same
period in the prior year.
First Half of 2008
Consolidated net sales for the first half of 2008 increased 12.2% to
$163.6 million, compared to $145.8 million for the first half of 2007, due to
the LaJobi and CoCaLo acquisitions and organic sales growth at Sassy and Kids
Line, partially offset by softness in the gift segment. Net sales for the
Company's Infant & Juvenile segment increased 37.4% to $103.8 million,
compared to $75.6 million in the first half of 2007, driven by the inclusion
of sales from our acquired businesses, as well as aggregate 8.1% sales growth
from Kids Line and Sassy related to new product introductions and growth in
the international market. Net sales for the Company's Gift segment decreased
14.9% to $59.8 million for the first half of 2008, compared to $70.2 million
for the first half of 2007, primarily as a result of a decrease in sales of
the Shining Stars product line as compared to the same period last year and
overall softness in the gift market due to the economic slowdown.
Consolidated net loss for the first half of 2008 was $10.1 million, or
($0.48) per basic and diluted share, compared to consolidated net income of
$2.9 million, or $0.14 per diluted share, for the same period in 2007. The
2008 results include the aforementioned unusual charges totaling approximately
$10.4 million. Excluding these charges, adjusted consolidated pre-tax income
for the six months ended June 30, 2008 was $3.2 million, as compared to
consolidated pre-tax income of $5.3 million in the comparable prior year
period.
Conference Call Information
The conference call, which will be held at 10:00 a.m. ET on Tuesday,
August 19, 2008, may be accessed by dialing 800-254-5933 or 973-409-9255,
access code: 60012738. Additionally, a webcast of the call can be accessed at
http://www.russberrie.com/investorrelations/ or at www.earnings.com. A replay
of the call will be available through August 26, 2008, by dialing 800-642-1687
or 706-645-9291, access code: 60012738. In addition, the webcast of the call
will be archived online shortly after the conference call for 90 days.
Non-GAAP Information
In this release, certain financial measures for the three and six months
ended June 30, 2008, including gift segment and consolidated gross profit,
gift segment and consolidated SG&A and consolidated (loss)/income before
provision for income tax, are presented both in accordance with United States
generally accepted accounting principles ("GAAP") and also on a non-GAAP
basis. These non-GAAP measures are not based on any comprehensive set of
accounting rules or principles. We believe 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 Company's results from operations and cash resources generated
from its business in a more meaningful and consistent manner (by excluding
specific items which are not reflective of ongoing operating results in the
current period) and provides an analysis of operating results using the same
measures used by the Company's chief operating decision makers to measure the
performance of the Company. These non-GAAP financial measures result largely
from our management's determination that the facts and circumstances
surrounding the excluded charges are not indicative of the ordinary course of
the ongoing operation of our business. As a result, the non-GAAP financial
measures presented by us 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 schedules attached to this press release. Such
reconciliations indicate the specific items excluded from: gross profit;
selling, general and administrative expense; and other expense to arrive at
the non-GAAP adjusted financial measures presented.
About Russ Berrie and Company, Inc.
Russ Berrie and Company, Inc. and its subsidiaries engage in the design,
development and distribution of branded products through its Infant & Juvenile
segment and Gift segment. Its design-led products are sold primarily through
mass market, toy, specialty, food, drug and independent retailers worldwide.
The Infant & Juvenile segment sells its products under the Sassy(R) and
KidsLine(R) brand names and select private label programs. The Kids Line
division designs and markets infant bedding and related nursery accessories.
The Sassy division offers products and collections such as infant development
toys, teething, feeding, bathing and baby care products. The businesses also
license brands for select categories and markets including Disney(R), Leap
Frog(TM) and Carter's(R). In April 2008, the Company expanded its Infant &
Juvenile business through the acquisitions of LaJobi Industries, Inc and
CoCaLo, Inc. LaJobi is a leading designer, manufacturer, marketer and
distributor of branded infant furniture and related products. LaJobi also
licenses brands such as Graco(R) for cribs and Serta(R) for crib mattresses.
CoCaLo is a leading manufacturer and distributor of infant bedding and
accessory products under the brands of CoCaLo Baby, CoCaLo Couture and Baby
Martex(R).
The Gift segment encompasses seasonal and everyday plush and other gift
products. The Gift segment markets its products primarily under the RUSS(R)
and APPLAUSE(R) brand names and also produces product in select markets and
categories under licenses that include Shining Stars(R), Raggedy Ann(TM),
Curious George(TM), Simpsons(TM) and a variety of other well-recognized
trademarks.
More information about the Company can be found at: www.russberrie.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 Company's 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 Company's
most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q 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.
AT THE COMPANY AT FINANCIAL DYNAMICS
Marc S. Goldfarb Erica Pettit / Leigh Parrish
Senior Vice President & General Counsel General Information
201-337-9000 212-850-5600
(tables to follow)
RUSS BERRIE AND COMPANY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2008 2007 2008 2007
Net sales $87,693 $70,714 $163,617 $145,787
Cost of sales 59,190 42,346 104,556 86,092
Gross profit 28,503 28,368 59,061 59,695
Selling, general and
administrative
expenses 36,297 25,680 63,281 52,138
Operating income (7,794) 2,688 (4,220) 7,557
Other expenses (2,378) (1,169) (2,977) (2,291)
(Loss)/income before
income tax
provision (10,172) 1,519 (7,197) 5,266
Income tax provision 1,967 1,154 2,942 2,355
Net (loss)/income $(12,139) $365 $(10,139) $2,911
Net (loss)/income per
share:
Basic $(0.57) $0.02 $(0.48) $0.14
Diluted $(0.57) $0.02 $(0.48) $0.14
Weighted average shares:
Basic 21,300,000 21,080,000 21,300,000 21,078,000
Diluted 21,300,000 21,228,000 21,300,000 21,191,000
RUSS BERRIE AND COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(Dollars in Thousands)
June 30, December 31,
2008 2007
(Unaudited) (Audited)
Cash and cash equivalents $16,919 $21,925
Accounts receivable, net 64,354 64,544
Inventories, net 71,359 59,069
Other current assets 5,954 5,419
Long-term assets 238,175 191,018
Total assets $396,761 $341,975
Short-term debt $46,827 $34,844
Other current liabilities 48,921 52,980
Long-term liabilities 105,057 49,512
Total liabilities 200,805 137,336
Shareholders' equity 195,956 204,639
Total liabilities and shareholders' equity $396,761 $341,975
RUSS BERRIE AND COMPANY, INC.
RECONCILIATION OF CONSOLIDATED GROSS PROFIT, SG&A AND
(LOSS)/INCOME BEFORE PROVISION FOR INCOME TAX
(Dollars in Thousands, Except per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Gross profit, as reported $28,503 $28,368 $59,061 $59,695
Exclude: Inventory
charge 1,643 - 1,643 -
Exclude: Write-off
of website costs 1,015 - 1,015 -
Exclude: Asset
impairment charge 342 - 342 -
Adjusted gross profit $31,503 $28,368 $62,061 $59,695
Adjusted gross profit
margin 35.7 % 40.1 % 37.9 % 40.9 %
Selling, general and
administrative
expense, as reported $36,297 $25,680 $63,281 $52,138
Exclude: Asset
impairment charge (6,700) - (6,700) -
Adjusted selling, general
and administrative expense $29,597 $25,680 $56,581 $52,138
Adjusted SG&A as a
percentage of sales 33.8 % 36.3 % 34.6 % 35.8 %
(Loss)/income before
income tax
provision, as reported $(10,172) $1,519 $(7,197) $5,266
Exclude: Inventory
charge 1,643 - 1,643 -
Exclude: Write-off
of website costs 1,015 - 1,015 -
Exclude: Asset
impairment charge 7,042 - 7,042 -
Exclude: Interest
expense 728 - 728 -
Adjusted income before
income tax provision $256 $1,519 $3,231 $5,266
RUSS BERRIE AND COMPANY, INC.
RECONCILIATION OF GIFT SEGMENT GROSS PROFIT AND SG&A
(Dollars in Thousands, Except per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Gross profit, as reported $8,300 $14,304 $23,703 $30,754
Exclude: Inventory
charge 1,643 - 1,643 -
Exclude: Write-off of
website costs 1,015 - 1,015 -
Exclude: Asset
impairment charge 342 - 342 -
Adjusted gross profit $11,300 $14,304 $26,703 $30,754
Adjusted gross profit margin 43.4 % 42.3 % 44.3 % 43.8 %
Selling, general and
administrative
expense, as reported $23,593 $18,893 $43,260 $38,659
Exclude: Asset
impairment charge (6,700) - (6,700) -
Adjusted selling, general
and administrative expense $16,893 $18,893 $36,560 $38,659
Adjusted SG&A as a
percentage of sales 64.8 % 55.8 % 60.6 % 55.0 %
SOURCE Russ Berrie and Company, Inc.