Summer Infant (SUMR)

Accounting for Interest Rate Swap Agreements

In 2007 and 2008 the Company entered into various interest rate swap agreements as required under the Bank of America credit agreement.  These interest rate swap agreements provide a hedge against potential increases in interest rates by locking in a portion of the outstanding debt at a fixed rate. The fair value of the swaps approximated the stated value from the inception of the swaps until the fourth quarter of 2008, when the fair value declined due to the significant dislocation that occurred in the financial markets. This decline in value was not recorded by the Company at that time. Consequently, the Company will be restating its fourth quarter and full year 2008 results to record a liability and a charge to the income statement of approximately $0.7 million, which reflects the reduced fair value of the swaps at December 31, 2008 (net of income tax impact).  If the swaps are held to maturity, as required by the credit agreement, the fair value and the stated value will ultimately equal each other. Therefore the 2008 expense of $0.7 million is expected to reverse into income over the next two years. The restatement will reduce stockholders’ equity from $62.2 million to $61.5 million at December 31, 2008.  The restatement of 2008 results will have no impact on operating income or cash flow of the company. The Company is in the process of revising certain of its prior financial filings.