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By PBN Staff
WOONSOCKET – Juvenile health, safety and wellness product maker Summer Infant Inc. posted a net loss of $65.6 million, or $3.68 per diluted share, in 2012, compared with a profit of $3.8 million, or 21 cents per diluted share, in 2011, thanks to a third-quarter charge of $70.2 million based on impairment of goodwill and intangible assets.
Even as its bottom line took a hit, Summer Infant saw revenue rise 3.8 percent to $247.2 million in 2012.
For the three months ended Dec. 31, Summer Infant’s net loss increased to $1.5 million, or 9 cents per diluted share, from a loss of $352,000, or 2 cents per diluted share, during the fourth quarter of 2011.
Still, the company posted a 5.7 percent increase in revenue to $58.5 million.
“We achieved a 6 percent increase in revenues in the fourth quarter, demonstrating our ability to drive sales growth amid challenging economic conditions,” Jason Macari, president and CEO, said in a statement.
According to Macari, higher sales in furniture, safety, play and monitor products contributed to the increased revenue, as did a 19 percent increase in international sales, driven by growth in Canada and the United Kingdom.
Macari went on to attribute the company’s “lower gross margins” to higher than normal close-out sales, increases in freight costs and a higher mix of “low-margin products.”
“During the third and fourth quarter, we took action to reduce program costs and other selling expenses. We have an ongoing effort to analyze the effectiveness of these programs and their contribution to our bottom line,” said Macari. “With a more strategic approach to customer partnering, we expect to realize meaningful reductions in selling expenses beginning in the first quarter of 2013.”
In the company release, Macari said that Summer Infant expected 2013 to represent an “inflection point” that returned the company to “improved levels of profitability.”
“Although sales may be reduced in 2013 over 2012 due to a product line analysis and rationalization program currently underway, we expect our plan to result in improved operational focus and profitability,” said Macari, adding that the successful refinancing of the company’s debt on Feb. 28 would result in lowering borrowing costs and have an overall positive effect on the company’s bottom line.
The company took the impairment charge of $70.2 million in the third quarter after a decline in market capitalization triggered an interim impairment analysis of goodwill, intangible and long-lived assets.
Based on a valuation study conducted after the triggering event, Summer Infant recognized an estimated goodwill write-off of $61.9 million during the quarter as well as a charge based in impaired intangible assets of $8.3 million.