Summer Infant, Inc. (SUMR) 2012 Q2 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to the Summer Infant second-quarter fiscal 2012 earnings conference call. On the call for the Company are Mr. Jason Macari, Chief Executive Officer; Mr. David Hemendinger, Chief Operating Officer; and Mr. Ed Schwartz, Chief Financial Officer.

By now everyone should have access to the earnings release, which went out today at approximately 4.00 PM Eastern time. If you have not received the release, it is available on the Investor Relations portion of Summer Infant's website at www.summerinfant.com, and on the www.SEC.gov website. This call is being recorded and webcasted, and a replay will be available on the Company's website as well.

Before we begin, we would like to remind everyone that the prepared remarks contain forward-looking statements, and that Management may make additional forward-looking statements in response to your questions. Forward-looking statements or information are based on a number of estimates and assumptions, and are subject to a variety of risks and uncertainties, which could cause actual events or results to differ from those reflected in the forward-looking statements or information. Forward-looking statements can be identified by words such as anticipates, intends, plans, believes, estimate, expects, or similar references to the future. Examples of forward-looking statements include but are not limited to statements we make regarding our future financial performance, business prospects, and operating strategies.

There are many factors that can result in actual performance differing from projections and forward-looking statements. We refer all of you to the risk factors detailed in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2011, filed on February 29, 2012, and subsequent filings with the Securities and Exchange Commission. Should one or more of these risks and uncertainties materialize, or should underlying estimates and assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements or information. Accordingly, undue reliance should not be placed on forward-looking statements or information. We do not expect to update forward-looking statements or information continually as conditions change, except as may be required by law, and you are referred to the full discussion of Company's business contained in its reports filed with the Securities and Exchange Commission. Additionally, Summer Infant assumes no obligations to revise any forward-looking projections that may be made in today's release or call.

And with that, I would like to turn the call over to Mr. Jason Macari. Please go ahead, sir.

Thank you, operator and thank you everyone for being with us today. While our second-quarter sales performance does reflect a slight increase of 1.2% to the comparable 2011 second quarter, we were disappointed with our overall financial performance in this quarter. We did experience sales gains with the a number of our major customers. However, we had a decline in shipments to our largest customer in the quarter compared to the same quarter last year. In addition we experienced higher selling costs as customers continue to be very aggressive with promotional dollars, to support soft retail sales levels.

We also spent more on consumer advertising without receiving the anticipated pull through effect on sales. Consumers appear to be cautiously spending their discretionary income beyond the initial new baby necessity purchases, due to an unstable economic outlook. While we continue to invest in consumer advertising to support our brands in the back half of 2012, we will do so on a smaller scale, focused on our new product introductions. Despite total sales growth being lower than expected, we continue to be successful in increasing our shelf space and have made headway expanding into new distribution channels. While competition has increased in several categories, healthy sale-in is reinforcing our position as a preferred vendor and a market leader in the juvenile space.

Our four key strategies for growth include innovation, brand building, diversification, and operational excellence. Regarding innovation, we continue to distinguish ourselves from other competitors in the industry by continually bringing to market truly innovative, safe, and compelling products which now extend across seven major categories. Monitors, safety, nursery, furniture, gear, play, and feeding. Through a continued focus on product development, our product pipeline remains robust and features some new and exciting offerings in all seven categories.

In July we began shipping our new innovative Peek Monitor products, as well as a completely redesigned monitor product line. Initial shipments have been well received by customers and consumers. The initial response to these product introductions has been very favorable and early indication suggest sales will meet or exceed our expectations. The Peek Monitor introduction will be followed at the end of the year by the relaunch of our award-winning Prodigy Travel System. As previously mentioned, the new Prodigy Travel System, one of only a few such systems to receive five stars across the board by NHTSA, includes several completely redesigned strollers and new styling which we believe will stand out in this very competitive space.

Finally, we continue to introduce new line extensions to the BornFree line of feeding products. This line continues to have positive sales trends and the brand has passionate advocate among the higher-end consumer base. Brand building for BornFree, Summer, and other brands in our portfolio continues to be a key focus.

Diversification is even more important than ever and we continue to grow both internationally and by broadening our customer base. In the second quarter we continued to show growth improvement in international markets. We view international expansion as key to our future organic growth strategy and are thoughtfully investing in these markets. We continue to develop expanded programs with all of our customers. The margin improvement in the second quarter was largely driven by cost reductions with our suppliers, offset by higher customer allowance, deductions, higher sales of lower-margin furniture products, and a less than favorable overall product mix primarily caused by lower monitor sales.

We continue to face ongoing pressure for certain direct product costs particularly fuel, plastics, and wood. Freight costs, while higher, have seemed to stabilize and aren't expected to have any incremental negative impact on margins in the back half of 2012. Given the projected continuing weak retail market conditions and the underlying uncertainty of the recovery of consumer spending, we've performed a comprehensive review of our operations and have begun to execute a strategy designed to lower operating costs. These operational excellence initiatives include a resulting -- and have resulted in tighter controls over retailer program costs. An approximate 10% reduction in worldwide headcount, a reduction in Executive salaries and Board of Director compensation for the back half of the year, cuts in overhead spending related to discontinuing various outside services, a reduction in planned consumer advertising, and negotiated lower outside service costs.

We expect the headcount reductions alone to generate an annualized savings of approximately $2 million in 2013, with approximately $0.8 million expected savings in the third and fourth quarters of 2012. The results we are sharing with you today and the information contained in our 10-Q filing, reflect that our second-quarter financial performance resulted in the Company meeting all of the covenants set forth in its loan agreement. While we were in compliance with all covenants under our loan agreement as of June 30, 2012, in the past we have been required to obtain amendments and/or waivers from our lenders to avoid breaches of financial covenants including for the period ending March 31, 2012.

Based on current internal forecasts for the remainder of 2012, we may not comply with the consolidated EBITDA and consolidated leverage ratio covenants required under our loan agreement for the period ending September 30 or thereafter. We are currently in discussions with our lenders regarding a potential amendment and/or waiver or renegotiation of the loan agreement. However, there is no assurance that our lenders will grant any waiver or agree to an amendment or renegotiation of the loan agreement. We are in frequent communication with the banks and they are supportive of our efforts to improve our financial performance.

And with that I'd like to turn the call over to Ed, who will review our second-quarter financial performance.

Thanks, Jason and hello everyone. Net revenues in the second quarter of 2012 increased by 1.2% from the prior year quarter to $61.7 million from $61 million. The second-quarter sales volume increase was primarily attributable to increases in our furniture, year, and safety categories offset by lower monitor sales. In the second quarter, sales for most of our major accounts were up, but we experienced a decline in shipments to our largest customer. Sales volumes in our monitor lines were slowed as customers delayed purchases awaiting the Company's new innovative monitor product lines, which started shipping in July.

Gross profit increased to approximately $20.8 million in the three months ended June 30, 2012, compared to approximately $20.2 million for the three months ended June 30, 2011. Gross profit quarter over quarter as a percentage of sales increased to 33.7%, from 33.2%. The major contributing factor for the gross profit increase in the second quarter ended June 30, 2012, related to cost reductions with our supplier base, partially offset by an increase in customer allowance activity, the higher mix of lower-margin sales in the furniture category, and decreased sales in the higher-margin monitor category.

Selling, general, & administrative expenses excluding depreciation, amortization, and stock-based compensation increased from approximately $16.4 million for the three months ended June 30, 2011, to approximately $18.3 million for the three months ended June 30, 2012. The increase is mainly comprised of higher promotional costs related to customer cooperative advertising, higher licensing costs, increased consumer advertising, and increased salary and outside service costs. Interest expense increased from approximately $769,000 for the three months ended June 30, 2011, to approximately $899,000 for the three months ended June 30, 2012, primarily as a result of higher borrowings required to fund the working capital needs of the business, and additional amortized deferred finance costs.

We recorded a tax benefit of $113,000 in the second quarter of 2012, that reflects the impact of the $424,000 loss recorded in the quarter. Our effective tax rate now stands at about 32% from 22% in the previous year's second quarter. The change in our tax rate can be primarily attributed to the suspension of federal R&D tax credit, and a more limited tax shift benefit associated with our permanent investment in our Asian operations.

In the quarter, we reported a net loss of $424,000, or a $0.02 loss per diluted share, compared to net income of $921,000 or $0.05 per diluted share in the second quarter of 2011. The net loss recorded resulted mainly from the previously mentioned higher SG&A costs. As of June 30, the Company had approximately $5.3 million in cash and $72.5 million of bank debt for a net bank debt balance of $67.2 million, compared to a $60.8 million net bank debt balance as of December 31, 2011. The $6.4 million increase resulted from the need for working capital to support lower operating cash flow. We expect that third and fourth quarter to show improvement over our second-quarter financial performance, as we begin to realize the effect of cost containment initiatives, price increases, tighter controls over customer promotion costs, and improved sales mix supported by new product introduction. With that I will turn the call back to Jason.

Thank you, Ed. We expect financial performance improvement in the back half of this year as a result of the various initiatives mentioned. However, due to the unpredictable market conditions which make it difficult to forecast future performance with reliable accuracy, we have made a decision to withdraw our earlier estimates on our 2012 outlook, and to suspend guidance. We continue to believe in the key strategic drivers of our business, which include innovation, diversifying our customer base, brand building, and operational excellence, and we'll continue to invest in these areas as we rebuild a more profitable business. Operator, we are now ready to take questions.

(Operator Instructions)

Liz Pierce, Roth Capital Partners.

Just a couple off the top of my head, for the shipment delay, to your largest customer, was this across any particular category? Or was it just everything?

Well, I think it was -- in the second quarter, really, we had a little bit of a delay in the monitors, but it really was an overall continued soft economy, and as well as tightening of inventories. Still -- I don't know exactly the percentage down, but our products are down around 10 points, at that particular retailer. And that then of course slows inventory, so you actually -- your orders go down by upwards of 20%.

So hopefully, it's a short-term thing. And it will bounce back in the second half, with baby sales and the safety -- September safety month. But in general, the hit in the quarter really came as a result of softer sales.

Okay. At retail, right?

At retail, yes.

In general. Not specific just to you guys?

I don't think it's across every single retailer. It seems to be there's some shift going on between internet, mass, and mass specialty, and specialty. In other words, sales seem to be shifting with our products, anyway, -- and in the industry I think in general to more of the mass and internet pieces -- customers. Including all of our customers. In other words the internet portion of even the mass is up pretty significantly.

And so, the mass meaning the discounters, Walmart, Target, et cetera?

That's correct.

And specialty meaning, just to clarify, BRU?

Yes.

Okay. And then, did you say on the Prodigy, you weren't launching until the end of the year? Because we've seen a little bit of it in the stores. And on the web. So I'm just trying to clarify that.

Yes. The product that we had from last year in the pipeline is still moving through the retailers. But the brand new product, which is really great looking stuff, it's not just a new car seat with an old stroller. It's really a completely new package. We're shipping that in fourth quarter.

Okay. So what's online right now is still the old stuff?

Yes. There's nothing new. There are two new stroller platforms coming out that are going to carry the Prodigy car seat.

Okay. And will you be showing those at the show in October?

I don't believe so. I think we'll probably be having private showings with our key customers on those.

Okay. So in terms of the promotional situation, it sounds like you guys are taking a position and trying to control that. I'm just curious how far -- how much leverage do you have?

Yes. That's a great question.

I think what really has gone on is that we just weren't managing it in the first and second quarters. I think we started taking control -- I shouldn't even say first and second. It's really fourth and first. And it's really affected first and second quarters, and we still have a little bit to get through in third quarter but not a lot.

I think what really happened, Liz, quite frankly is that we were just being too -- doing things that weren't really a win-win. And weren't really driving additional sales. So it's one thing to promote products when you're confident or comfortable that there's a profitable equation in that for you. But it's another thing to promote and get really not a lot of return on it. And I think that's what's been going on over the last half a year or three quarters of a year.

And we've just drilled down pretty aggressively in it. And are just choosing not to participate in those kind of promotions that we don't -- when we do the gait analysis, which we've gotten much more aggressive on, if you look at the numbers, a big chunk of the mix is in SG&A. And specifically, when you drill down, our G&A is pretty much in line with where we've been. It's really the selling costs that are really the culprit. And we probably got too aggressive with customer advertising, direct to consumer. And we've just been giving too much money back to promote our products and not getting the return for it.

We are not saying anything out of school here. We've been very clear with our retail partners, and you would think it was just one retailer, but it really is spread out amongst a number of bigger retailers. And what that comes down to is that everybody got a little bit more aggressive, I think over the last six to nine months. And not all of it benefited us.

Okay. All right. I'll get back in the queue. Thanks.

(Operator Instructions)

James Fonda, Sidoti & Company.

Just your thoughts on the overall economy, and any read through for how the third quarter is shaping up to be in terms of sales, regardless of the shipments of the new video monitors?

Yes. As far as the overall economy goes, it just seems to be -- for lack of a better way of saying it, a little soft. Our numbers at some retailers are up. And other retailers are down, but generally speaking across the board, it did not meet expectations.

We thought we would get a number of -- more million in sales than we actually were able to achieve. So I would say -- when I speak about our sales at retail, specifically POS at retail is soft, which obviously translates into weaker sales for us.

But with regards to our outlook for the second half of the year, although we're not giving guidance and walking away from what we have given in the past, we still feel very strongly about our second half. We still feel like it could be or should be a good performance, but we just -- given the last couple of quarters, we feel like it's best not to try to do it again. And make commitments or say something that we somehow either don't make or -- either side of it we are not going to look like we're in control, which we feel like we're operating in control, but we really have just been too easy on the promotional side of things.

Right. Okay.

And I guess going forward, do you think you guys have the resources to come up with a new product? Or would you go out and make another acquisition? And any future cash you do get, do you think you'll be paying down debt going forward?

Yes. I think that's -- as far as acquisitions go, we kind of have that on hold. We're really focused internally right now. And we think we will be for the next year or so, because first of all the financial performance isn't acceptable. We have all our resources going into making that better than what it should be. That's number one.

Number two is, we've done five acquisitions in the last three or four years, and we feel like we still are digesting BornFree and trying to get it back, sales back up where it's accretive versus dilutive. And really focusing on what we have. We're diverse -- our diversification product line wise is very good, and we don't feel like we need a lot more on the optional right this second. It's really more build up what we have.

All right. Okay. All right guys, I appreciate it. Thank you.

Rob Strauss, Gilbert Securities.

A few questions here. First of all, you had mentioned and discussed the sales mix in your retail channel. It sounds like towards internet and mass, a little bit away from the specialty channel. Can you discuss with us how that impacts your margin structure?

Sure. Well, our mix is absolutely changing. Last year, I think we were upwards of high 47%, 48% with one customer, Toys "R" Us. And this year, year-to-date we're in the 30%s. So definitely it's -- we've stepped -- our sales have weakened with them, but it's also grown with many others. Actually from an overall sales standpoint, we're up slightly.

So what we're seeing right now is kind of -- I guess the best way to say it is a diversification. We are broadening up our base. We are doing well with a number of customers. And Babies "R" Us, we're doing well too. It's a combination of softer retail sales and them being all focused -- 100% focused on baby.

But we are definitely broadening our base of retail accounts. We're doing business with -- our international continues to grow, but even domestically, we find ourselves doing business with a wider array of customers.

Can you directionally give us some detail on which categories are higher versus lower-margin retail channels?

From a category -- product category -- ?

I'm sorry. Not category. Just retail channel. Specialty, mass, internet, which is the highest channel? Which is the lowest channel? Or doesn't it matter for you?

To a degree, it doesn't matter. Specialty and internet tend to be a little higher because it is less channel cross if you will, and it's a little purer versus some of the mass. Mass specialty, Babies "R" Us, buybuy baby, because it's so focused on baby, it's tough to compare to the other two. The dollars tend to be a little bigger, but the promotional activity and cost to do business are higher.

And the Walmart, Target, and other mass like Kmart and Sears and others, Burlington Coat Factory, those are all reasonable margin programs. Sometimes they're harder with you up front, but easier on terms, so it's such a mix. It's tough to say, this channel is the best. It's kind of varies depending -- and of course, contribution margin differs too. What you would think would be the best contribution margin customers aren't always, so it really depends.

Okay. Just switching topics now, to your SG&A line, are you able to give us any more detail on the contribution in that SG&A from co-op customer ad placement and licensing costs? Clearly the dollar amount went up, but even if you do that in percentages, just so we know the impact? It seems like co-op was the largest component.

Yes. Clearly. It was probably 75% of the number -- of the mix. And consumer advertising and licensing were probably 25%.

And honestly, our overhead costs internally were up just slightly. So almost not a significant factor in the overall quarter. Clearly, promotional spending was the bulk of it. And then us spending too much on advertising and -- licensing is a matter of mix.

And our furniture lines, a good percentage of it are under the Carter's brand. So when we sell more furniture, obviously our licensing royalty payments go up.

Generally speaking, though, what we're trying to do and -- as I mentioned about the cost controls, we're just being tougher on ourselves. Tougher on the business that we are writing, if you will. And the terms.

And much of those costs are variable. They're not fixed into the terms of the program costs with the retailers. So we can say no.

I guess that's the point with the part that we missed is I think more discretionary than not. And that's kind of -- just in introspection looking at the business and really digging in, we just know that we have to be smarter about things and scrutinize more tightly. And as far as operational G&A, we've just been hard on ourselves there and tightened up the belt in every way we can without hurting our future development and programs that we have going for next year and thereafter.

If you plan on pulling back on your co-op spending, what is your expectation as it relates to shelf space?

It shouldn't affect the actual sell in of our products. I think where it affects things is as -- when there are opportunities to promote and multiple suppliers or brands are promoting, nobody wins. So it's really being a little bit more selective on that.

A good example is when you go in -- if the consumer goes in for a new bedding sets and every bedding set is on sale, no ships rise. You might get a little bit of increased traffic, but generally speaking, unless it's a really big advertised special, you don't get a lot of lift. When just one or two or three or 10% or 20% or 30% of the shelf is on special, then you truly do get a lift. So it's really analyzing those kind of opportunities and making sure with our retail partners that it is a win-win and it's not just a bringing down the everyday price of the product.

Do you plan on reducing the number of SKUs you have at the Company? Talk a little bit about that management.

Sure. We probably have roughly 700 or 800 active SKUs. Many of the volume of that is in the soft lines of the business. Well over 50%. And because of sizes and colors and fashion, but we still would like to take that down while still introducing new items, so we have a continuing process to weed out underperformers, whether it be through volume or margin.

And is that sort of weed out the bottom 10% per year or do you have a targeted goal from that 700 to 800 current SKU count?

It really comes down to if we are introducing 100 new products, then we want to see 100 or more go out or be discontinued. So to continually improve the breed of herd or the quality of the items that we have in the line. So we are definitely still in the process of rationalizing and making sure that our line is as productive as possible.

Okay. Shifting to monitors, clearly, there was some delay in purchase, because of your new monitors that are coming out. First, do you have any idea on how that impacted the quarter from a dollar volume standpoint? And then, I'll leave it at that first. Go ahead.

Well, it's tough to actually quantify the dollars, but it was -- I'm going to say at least several million, but hard to be exact. I'm not exactly sure. It definitely -- we were going to ship the new monitor line in second quarter and it definitely shifted more to July.

And even the sales right now are -- the sales of the new line at retailer is doing real well. And we're still fighting on availability, so we're hand to mouth with that new product line. The good news is it's doing well. I think -- the not so good news is that we need to keep up with the forecast.

And the inventory levels of the prior model, tell us a little bit about that.

Well, we definitely had -- typically any retailer even the mass are going to hold six weeks of stock in inventory. So we reintroduced the majority of the monitor line with the largest customers of monitors, top three or four retailers. And those new monitors, they held off on the purchases of the old-style. In fact, marking a lot of them down to move through them, so to make room for the new line.

The new line shipped -- like I say, a little bit in second quarter, mainly in third quarter now. And really the whole line at three of the four top major retailers was completely revamped. So it was a pretty big undertaking. And I think we did pretty well other than some dollars sliding from second to third quarter.

So you're comfortable with your level of inventory for the monitor category right now? Other than the fact that you said that you would like more product for sellthrough?

Yes. With the new items, it's all going to depend on how the old items, how they impact -- if you have -- still have some old items on the shelf, they may take up some of the sales volume of the new. But those will be gone I think in the next month or two, the new products are selling well in spite of having the extra inventory in the supply chain.

I don't think we are really heavy. We've been dealing with it over the last quarter or two in trying to mitigate and reduce our overall monitor inventory, so we have been working it down, if you will. So there's a little bit of short-term pain in that, but I think overall, we needed a fresh line out there -- and we're pretty pleased and I think the retailers are pleased with what's on the shelf today.

Okay. Last question. Regarding new terms on your facilities, when would you expect that to be completed?

We would like to do it prior to the end of third quarter. But that's what we'd like to see happen.

Okay. Thank you very much for your time and good luck.

Liz Pierce, Roth Capital Partners.

I wanted to go over this issue on the monitor -- I just want to understand because that new monitor is $350. And when you say getting rid of the old inventory, just want to make sure that -- not everybody's going to buy a $350 monitor. So today actually when I was at BRU looking, they had one $350, and three, $299 and then not much else. So I was curious about what the opening price point, what's happening.

Yes. As far as price points go, we have four price points right now. We have the $199, we have the $279, $299, and $349.

The lower price point monitors we actually -- Babies "R" Us has a private label program which we participate in. And they're covering that. We also have lower price point monitors at other retailers.

All right. Now, I noticed something at Target, I think it was $200, maybe $250, called an internet monitor. That was Summer Infant.

Is that what you made specifically for them? Because it was (multiple speakers) not accessible. I couldn't see what -- if he just didn't have all the bells or whistles?

Yes. It's at $229 and it's internet only. In other words, it doesn't have a portion of the product -- the $349 actually has a handheld that goes along with it that's used in the home. Whereas the $229 is strictly for the internet.

Okay. Are there plans to expand -- just given the demographic that I think shops at Target? I would think that there'd be room for that higher price point.

Yes. We're working on that. And it's a timing issue with different exclusive deals that we have going on.

And we also have a number of lower price point monitors in the pipeline that should be out early next year. So we're -- we started revamping the monitor line, and the first wave was really in July, which was what we call the Privacy Plus series that is at Babies "R" Us. And then the series at Target, and then there are other monitor initiatives that are coming out end of year in first quarter.

Okay. So as we think about revisiting a similar issue where they delay shipments, it would seem to me that the lower-priced issue, we're not going to see the same topline impact.

No. I don't think so. In general, the lower end monitors are easier to sellthrough, whether it be at the retailer or through other channels.

Okay. And when you said that you wanted -- would like more inventory and also getting back to what the delay was in Q2, was this an additional delay on the shipping?

No. I think what's going on is that the sellthrough is greater than the forecast, we went in conservative to your point, $350 monitors, you don't want to be over inventoried on something like that. So we're still building and trying to understand what the sellthrough's going to be at retail to understand the right inventory levels to have.

Okay. But just in terms of when you expected it to ship, I guess just to clarify, was that in line with the revised expectations on -- ?

Yes. We were close. Revised expectations, we thought we would ship in June, quite frankly. And really turned out to be -- I think we shipped some small quantity in June. I want to say $1,500 or $1,800 or something like that. And then of just that one, but the rest of the pipeline on the whole assortment of products really took place in third quarter.

And in terms of the supply chain, how quickly can you react and get more monitors put together on the ship and over?

Well, we're doing -- we are executing against our production plans, so that's obviously number one. If we already have it on order, if we can move around ship days and kind of pull in what we can. And then the last resort would be to air freight things over, on monitors, it's a pretty high value to wait or queue. So on the last resort you can fly it in and still be profitable with the product.

Okay.

So we haven't come to that point yet, but we're kind of hand to mouth and just assessing as it develops and our sellthroughs become clearer.

And then on your comment about BornFree, it sounds like this is still a work in progress. I continue to not see what I was expecting to be in the presentation -- at BRU.

Yes. That's a fair comment. We shipped in the new product in January and February of this year.

During the lull, while we acquired BornFree and their end of cycle, I think the shelf had gotten ragged, to be honest. And what had happened was by the time we hit the shelf, our space quote-unquote space, the four foot of planogram space that we have allotted kind of got encroached on by several other competitors. They're undergoing a reset in week 30, so sometime end of August, early September, you should see a cleaned up section with a clear statement on BornFree.

Oh good.

We actually paid for some fixturing, which kind of contributed to the negative situation here, but the five or six key brands at Babies "R" Us are putting up new displays that clearly show the function and benefits of the bottle.

Yes. I've seen that. Okay.

I think it should be a really big improvement for us, less impact on the other brands because they already have pretty significant statements. But of the brands that they're featuring, I think we were probably the most poorly represented. I think this reset should look a lot better.

These other brands have been living rent free?

(laughter) I think so.

Wow.

I would say other retailers too I think were starting to see some positive momentum. We've done -- some of the advertising that we spent was on BornFree. And some of the things we've tried to do at different mom events around the country, we've been to the BlogHer, we've been to Big City Moms, we've done a fair amount of grassroots marketing on the BornFree side of things. As well as consumer ad spending.

And I think it's starting to have a positive impact. Sales trends are definitely good. And we have new products that are introducing in the next couple of months. Again, that will enhance the overall offering and kind of strengthen the bottle program.

I thought that this year we'd see an accretive purchase, meaning when we bought BornFree last year was definitely dilutive, this year I thought it would be accretive. It's just taken a little longer I think -- this year, hopefully we'll kind of breakeven, and next year is when I think the BornFree line will really start proving its worth.

Perfect. All right. Great. Thanks again, and best of luck.

And that does conclude today's Q&A session. I'll turn the call back to our moderator for any closing remarks.

Thank you for all your continued support and confidence in Summer Infant. We look forward to our new product introductions, the balance of 2012, and improved financial performance.

Again, we're very excited about the new product introductions. We appreciate everyone's patience and support received from our employees, retail partners, and shareholders. Thank you very much.

Thank you, and this does conclude today's conference call. Once again we would like to thank everyone for your participation, and have a wonderful day.