OAKLAND, N.J., April 1, 2008 /PRNewswire-FirstCall/ -- Russ Berrie and
Company, Inc. (NYSE: RUS) today reported results for the fourth quarter and
full year ended December 31, 2007.
Bruce G. Crain, Chief Executive Officer and President, commented, "Both
our Infant & Juvenile and Gift segments delivered considerable growth in 2007,
reflecting the success of our strategy to focus on design-led and branded
product development. Across our businesses, we introduced a significant
number of new branded, proprietary and licensed products, and continued our
focus on cost containment, which strengthened our position in all of our
markets."
Fourth Quarter 2007 Results
Consolidated net sales for the fourth quarter of 2007 increased 14.3% to
$84.5 million, compared to $73.9 million for the fourth quarter of 2006, as a
result of higher sales in both the Infant & Juvenile and Gift segments. Net
sales for the Company's Infant & Juvenile segment increased 9.1% to $42.3
million, compared to $38.8 million in the fourth quarter of 2006, driven by
sales growth at both Kids Line and Sassy. Net sales for the Company's Gift
segment increased 20.1% to $42.1 million for the quarter, compared to $35.1
million for the fourth quarter of 2006, primarily as a result of the continued
rollout of new products launched in 2007.
Consolidated gross profit in the fourth quarter of 2007 was $25.3 million,
or 30.0% of net sales, compared to $29.5 million, or 39.9% of net sales, for
the fourth quarter of 2006. Without giving effect to a $6.4 million
impairment charge relating to Sassy's MAM distribution agreement (the "MAM
Agreement"), which was recorded in the fourth quarter in cost of goods sold,
consolidated gross profit would have been $31.7 million, or 37.6% of net
sales. The increase in adjusted gross profit was driven by higher sales
volume, while the decrease in gross profit as a percentage of sales reflected
lower margins in the Infant & Juvenile segment that were only partially offset
by higher margins in the Company's Gift segment. The Infant & Juvenile
segment gross profit margins were negatively impacted by the MAM Agreement
impairment, market pricing constraints, a shift in product mix, higher raw
material costs and unfavorable foreign currency fluctuations, while Gift
segment margins increased primarily as a result of new, higher margin products
in the 2007 product line. As discussed in more detail in the Company's Annual
Report on Form 10-K filed earlier today, based on the decreasing profitability
of the products sold under the MAM Agreement and certain restrictions
contained therein that limit the Company's ability to enter into competitive
product categories, the Company exercised its right to terminate the MAM
Agreement early, effective March 26, 2008. Pursuant to contractual transition
provisions, the Company will continue to distribute MAM products through
December 2008.
Consolidated selling, general and administrative expenses for the fourth
quarter of 2007 were $30.9 million, or 36.6% of net sales, compared to $25.3
million, or 34.2% of net sales, in the fourth quarter of 2006. SG&A for the
Gift segment increased as a percentage of sales to 56.8% in the fourth quarter
of 2007 from 52.0% in the prior year quarter, primarily as a result of
advertising expenses associated with the Shining Stars product line, $2.9
million of current and future severance obligations recorded in the fourth
quarter and a $940,000 write-down of a note receivable related to a 2005
divestiture. SG&A for the Infant & Juvenile segment decreased to 16.4% of
sales from 18.1% of sales in the prior year quarter as sales growth provided
leverage for these cost areas; however, this was partially offset by increased
costs associated with growth at Kids Line, including the establishment of a
U.K. subsidiary of Kids Line.
Consolidated net loss for the fourth quarter of 2007 was $8.3 million, or
a loss of $0.39 per share, as compared to consolidated net income of $1.3
million, or $0.06 per share, in the fourth quarter of 2006. Results for the
fourth quarter of 2007 include special charges of $7.3 million related to: (i)
the non-cash, charge of $6.4 million related to the impairment, and subsequent
termination, of the MAM Agreement; and (ii) the charge of $940,000 for the
write down of the note receivable, each of which is noted above and discussed
in more detail in the "Full Year 2007 Results" below.
Full Year 2007 Results
Consolidated net sales for the full year ended December 31, 2007 increased
12.4% to $331.2 million, compared to $294.8 million for the prior year. Sales
growth was generated by net sales increases of 10.9% in the Infant & Juvenile
segment and 13.8% in the Gift segment. Notable product introductions for 2007
included Shining Stars(R) in the Gift segment, Carter's(R) branded bedding
from Kids Line and Leap Frog(TM) licensed products from Sassy.
Consolidated gross profit for the year was $125.4 million, or 37.9% of net
sales, compared to $118.1 million, or 40.1% of net sales, in the same period
in 2006. Without giving effect to an aggregate impairment charge of $10.0
million relating to the MAM Agreement, which was recorded in the third and
fourth quarters in cost of goods sold, consolidated gross profit would have
been $135.4 million, or 40.9% of net sales. The increase in consolidated
gross profit and adjusted gross profit margin (i.e., excluding the MAM impact)
was driven by an increase in Gift segment margins resulting from the
introduction of new products, partially offset by lower margins in the Infant
& Juvenile segment, reflecting the negative impact of market pricing
constraints, a shift in product mix (partially reflecting the success of
licensed products), higher raw material costs and unfavorable foreign currency
fluctuations.
Consolidated SG&A expenses were $110.2 million, or 33.3% of net sales, for
the full year of 2007 compared to $112.0 million, or 38.0% of net sales, in
2006. The decrease in SG&A expenses was driven by the impact of expense
reduction initiatives in the Gift segment that were implemented in prior
years, partially offset by severance obligations, higher advertising costs in
connection with the introduction of new products, the write-down of the note
receivable related to a 2005 divestiture and higher expenses incurred to
expand international distribution at Kids Line.
Consolidated net income increased $18.3 million to $8.9 million, or $0.42
per basic and diluted share, for the full year ended December 31, 2007,
compared to a consolidated net loss of $9.4 million, or a loss of $0.45 per
basic and diluted share, for fiscal 2006. Results for fiscal 2007 include
special charges of $10.9 million related to the following items:
(i) a non-cash, asset impairment charge of $10.0 million related to the
write-off of intangibles associated with the MAM Agreement; and
(ii) the charge of $940,000 for the write-down of a note receivable
related to a divestiture from 2005.
Excluding these special charges and the estimated tax benefits related to
their elimination, adjusted net income for fiscal 2007 was $18.7 million, or
$0.88 per diluted share.
As of December 31, 2007, the Company's outstanding debt was approximately
$66.8 million, reflecting the repayment during 2007 of approximately $16.0
million of debt, offset by the payment in December 2007 of $28.5 million,
reflecting 90% of the Earnout consideration due in connection with the
Company's 2004 acquisition of Kids Line. The remaining $3.6 million of the
Earnout consideration was paid in January 2008.
Mr. Crain continued, "As we build on the solid momentum we achieved in
2007, we will focus on two core objectives for 2008 that we believe will
further position us to deliver excellent shareholder value for the long-term.
First, we intend to advance our leadership position in the marketplace by
investing in organic growth and acquisitions, design and branded product
innovation, and retail customer and consumer relationships. The anticipated
acquisitions of LaJobi and CoCaLo that we announced today are solid steps in
further growing our offering in the dynamic Infant & Juvenile industry and
extending our range of products for the baby nursery. Second, we will seek to
further enhance our infrastructure by driving efficiency throughout our
logistics, sourcing and other cost groups. While we expect a challenging
macro-economy throughout the year, we remain confident that we have the right
strategy in place to navigate through this environment and grow the Company."
Additional Information
In a separate release, the Company announced today it has significantly
strengthened its presence in the Infant & Juvenile segment by entering into
agreements to acquire LaJobi Industries, Inc. ("LaJobi"), a privately-held
branded infant furniture and related products company based in Cranbury, N.J.,
and CoCaLo Inc. ("CoCaLo"), a privately-held infant bedding and accessory
products company based in Costa Mesa, CA. The Company also expects to expand
its Infant & Juvenile senior credit facility to $175 million to provide the
necessary funds to close the LaJobi and CoCaLo transactions and to provide
additional financial flexibility. The Company anticipates that both
acquisitions and the amended credit facility will be closed in early April,
although there can be no assurance that any such transaction will be
consummated. The press release announcing this news can be found at Russ
Berrie's web site at www.russberrie.com .
Conference Call Information
The conference call, which will be held at 10:00 a.m. ET on Wednesday,
April 2, 2008, may be accessed by dialing 800-254-5933 or 973-409-9255, access
code: 41071714. 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 April 9, 2008, by dialing
800-642-1687 or 706-645-9291, access code: 41071714. 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 fiscal quarter and
year ended December 31, 2007, including gross profit, net income, and net
income per share, are presented both in accordance with United States
generally accepted accounting principles ("GAAP") and also on a non-GAAP basis
(to exclude an aggregate $10.0 million charge recorded in cost of goods sold
in connection with the MAM Agreement, and a $940,000 charge with respect to
the write-down of a note receivable). 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 cost of goods sold
and selling, general and administrative expense, and the related tax benefit
from eliminating these expenses, to arrive at the non-GAAP adjusted financial
measures presented.
Corporate Governance and Available Information
The Company makes available a wide variety of information free of charge
on its website at www.russberrie.com. The Company's filings with the United
States Securities and Exchange Commission (the "SEC"), including our Annual
Reports on Form 10-K, are available on the Company's website as soon as
reasonably practicable after the reports are electronically filed with the
SEC. Mailed copies of our complete audited financial statements for fiscal
2007 can be obtained free of charge by writing to the Company at Russ Berrie
and Company, Inc., 111 Bauer Drive, Oakland, NJ 07436, Attention: Investor
Relations.
About Russ Berrie and Company, Inc.
Founded in 1963, 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. Kids Line designs
and markets infant bedding and related nursery accessories. Sassy offers
products and collections such as infant development toys and bathing and baby
care products. The segment's businesses also have licensed brands for select
categories and markets, including Disney(R), Leap Frog(TM) and Carter's(R)
among other trademarks.
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
Russ Berrie and Company, Inc.
Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Years Ended
December 31, December 31,
2007 2006 2007 2006
(Unaudited) (Audited)
Net sales $84,458 $73,889 $331,173 $294,769
Cost of sales 59,131 44,405 205,792 176,666
Gross profit 25,327 29,484 125,381 118,103
Selling, general and
administrative expenses 30,882 25,254 110,152 111,961
Operating income (loss) (5,555) 4,230 15,229 6,142
Other expenses (370) (1,477) (3,377) (9,780)
Income (loss) before income
tax provision (5,925) 2,753 11,852 (3,638)
Income tax provision 2,385 1,478 2,944 5,798
Net income (loss) $(8,310) $1,275 $8,908 $(9,436)
Net income (loss) per share:
Basic $(0.39) $0.06 $0.42 $(0.45)
Diluted $(0.39) $0.06 $0.42 $(0.45)
Weighted average shares:
Basic 21,203,000 20,963,000 21,130,000 20,876,000
Diluted 21,203,000 21,147,000 21,215,000 20,876,000
Russ Berrie and Company, Inc.
Selected Consolidated Balance Sheet Data
(Dollars in Thousands)
(Audited)
December 31, December 31,
2007 2006
Cash and cash equivalents $21,925 $11,526
Accounts receivable, net 64,544 55,976
Inventories, net 59,069 48,026
Other current assets 5,419 16,556
Long-term assets 191,018 171,683
Total assets $341,975 $303,767
Short-term debt $34,844 $30,832
Other current liabilities 52,980 55,380
Long-term liabilities 49,512 26,891
Total liabilities 137,336 113,103
Shareholders' equity 204,639 190,664
Total liabilities and shareholders' equity $341,975 $303,767
Russ Berrie and Company, Inc.
Reconciliation of Gross Profit, Net Income and Earnings per Share
(Dollars in Thousands, Except per Share Data)
(Unaudited)
Three Months Ended
December 31,
2007 2006
Gross profit, as reported $25,327 $29,484
Add: MAM Agreement impairment charge 6,400 -
Adjusted gross profit $31,727 $29,484
Adjusted gross profit margin 37.6% 39.9%
Years Ended
December 31,
2007 2006
Gross profit, as reported $125,381 $118,103
Add: MAM Agreement impairment charge 10,000 -
Adjusted gross profit $135,381 $118,103
Adjusted gross profit margin 40.9% 40.1%
Net income (loss), as reported $8,908 $(9,436)
Add: MAM Agreement impairment charge 10,000 -
Add: Write-off of note receivable 940 -
Tax benefit from adjustments (1,194) -
Adjusted net income (loss) $18,654 $(9,436)
Adjusted net income (loss) per common share:
Basic $0.88 $(0.45)
Diluted $0.88 $(0.45)
SOURCE Russ Berrie and Company, Inc.