Summer Infant 1Q profit grows 31.6%

WOONSOCKET – Summer Infant Inc. posted a first-quarter profit of $1 million, a 31.6-percent increase from the year-ago $760,000, on net revenue that rose 65.6 percent to $28.43 million. Diluted earnings per share rose to 7 cents from the year-ago 5 cents.

“This growth was driven primarily by an expanded product offering at existing customers and penetration into a larger number of stores within existing customers’ networks,” Summer Infant said in its report. “The company benefited from strong increases at all major existing customers, as well as solid growth from new customers such as Wal-Mart and Lowe’s.

“The increase in revenue was also driven by new product launches within the soft-goods and baby-gear categories, in addition to strong sales of the 3 Stage Super Seat. In addition, sales momentum remains strong in core categories, including baby monitors, [a category that] continues to benefit from solid performance of the new flat-screen monitor.”

The company’s gross margin shrank to 35.0 percent in the quarter just ended, from the 2007 fourth quarter’s 37.0 percent and the year-ago 38.2 percent.

“While we continued to face rising raw material, currency and labor cost headwinds in China, we remain focused on growing our business and positioning it for the long term,” CEO Jason Macari said in the after-market report.

On March 31, Summer Infant completed its purchase of Basic Comfort Inc., a maker of infant sleep positioners, head supports and changing pads. The company paid about $4.7 million in cash plus 450,000 shares of unregistered common stock, which had a closing price that day of $3.95 per share, giving the deal a total value of about $6.5 million. (READ MORE)

On April 18, the company completed its purchase of Kiddopotamus & Co., a maker of infant travel, feeding and nursery accessories. Summer Infant paid about $9.6 million in cash plus 697,890 unregistered shares, valued at $2.9 million, giving the deal a total value of about $12.5 million. (READ MORE)

As of March 31, Summer Infant’s balance sheet listed $2.2 million of cash and $32.5 million of debt. The company expanded its borrowing last month in preparation for the Kiddopotamus acquisition, to an authorized total of $50 million, of which $8.0 million remains untapped.

“Our recently announced acquisitions of Basic Comfort and Kiddopotamus complement our existing product offerings, enable us to expand our brand presence at existing customers, and provide access to new retailers,” Macari said. “We are confident we can realize significant sales and cost synergies as we integrate these operations into our existing platform.

“Looking ahead,” he added, “we expect our sales momentum in 2008 to remain healthy, as ordering rates and customer feedback continue to suggest solid demand. … While we anticipate raw-material inflation, higher labor costs and devaluation of the U.S. dollar in China to continue to pressure gross margins in the near-term, we have been able to implement select price increases in order to pass on some of the incremental costs … [and] we continue to implement sourcing and supply-chain initiatives to help offset some of the cost pressures we are incurring.”

The company yesterday boosted its full-year forecast, projecting 2008 revenue of $129.0 to $133.0 million and earnings of 37 to 40 cents per diluted share.

Summer Infant Inc. (Nasdaq: SUMR, SUMRU, SUMRW) – formerly KBL Healthcare Acquisition Corp. II – is the parent of Summer Infant (USA) Inc., Summer Infant Europe Ltd. and Summer Infant Asia Ltd. (collectively, the “Summer Infant Operating Companies”), which design and make audio-video monitors, safety gates, bed rails, infant thermometers, booster and potty seats and other infant and toddler products. To learn more, visit www.summerinfant.com.

By Susan A. Baird
PBN Web Editor