By Lindsay Lorenz
PBN Staff Writer
WOONSOCKET – Juvenile health, safety and wellness product maker Summer Infant Inc. posted decreases in first-quarter net revenue, net income and gross margins as it worked to phase out products and licensing agreements, and endured an increase in interest expense, according to quarterly results released Wednesday.
Net revenue for the three months ended March 31 decreased 6 percent year over year, falling to $59.1 million from $63 million. Summer Infant said the change is primarily attributed to the sales of discontinued non-profitable and low-margin products in all categories. The phasing out of licensing arrangements, it said, is also to blame.
Summer Infant reported net income of $444,000, or $0.02 per diluted share, in the first quarter of 2013, compared with net income of $1.3 million, or $0.07 per diluted share, in the first quarter of 2012.
According to Summer Infant, gross profit for the first quarter of 2013 decreased to $18.6 million from $21.1 million a year earlier.
“Close-out sales had a 1.5 percent dampening effect on the quarter’s gross margin and we expect this to continue in the second quarter,” said Jason Macari, president and CEO.
Macari added that despite the effect, Summer Infant anticipates that cost reduction and strict expense management will boost profitability in the second half of the year.
During the three months ended March 31, the company’s interest expense increased from $720,000 to $1.3 million. According to a company release, the increase in the quarter was due to higher interest rates and the write-off of unamortized fees, which were attributable to the retirement of the company’s 2010 credit agreement on Feb. 28.
In February, Summer Infant had refinanced, entering into a new, fully underwritten loan and security agreement with Bank of America. As a result, the company expects interest expense to be reduced by $1 million in 2013.
Summer Infant managed to decrease administrative expenses approximately 10 percent, with recently initiated cost reductions, including headcount reductions, salary reductions, voluntary reduction in board of director compensation, and lower professional service and other outside service fees.
Summer Infant reported approximately $2.6 million in cash and $133.3 in total assets, a decline from $140.3 at the end of 2012. According to the company, management of working capital has been a key focus.
“The progress we made during the first quarter gives us confidence that 2013 will be a turnaround year for Summer Infant as we execute on our strategy to improve our overall performance. To execute this strategy, we have invested in our management capabilities across the organization, including at the senior level. We believe we have the right team and the right strategy in place to build long-term value for our shareholders,” Macari said.
In quarters to come, the company said it is looking forward to new product launches and investing in marketing initiatives to build its own Summer and Born Free branded products.