Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 01, 2013 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'Summer Infant, Inc. | ' |
Entity Central Index Key | '0001314772 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 17,972,969 |
Document Fiscal Year Focus | '2013 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | ||
CURRENT ASSETS | ' | ' |
Cash and cash equivalents | $1,426 | $3,132 |
Trade receivables, net of allowance for doubtful accounts | 35,328 | 45,299 |
Inventory, net | 39,960 | 49,823 |
Prepaids and other current assets | 2,009 | 2,483 |
Deferred tax assets | 1,185 | 1,185 |
TOTAL CURRENT ASSETS | 79,908 | 101,922 |
Property and equipment, net | 14,984 | 16,834 |
Other intangible assets, net | 21,032 | 21,556 |
Other assets | 1,563 | 8 |
TOTAL ASSETS | 117,487 | 140,320 |
CURRENT LIABILITIES | ' | ' |
Accounts payable and accrued expenses | 30,992 | 37,138 |
Current portion of long term debt (including capital leases) | 2,075 | 770 |
TOTAL CURRENT LIABILITIES | 33,067 | 37,908 |
Long-term debt, less current portion | 47,409 | 64,767 |
Other liabilities | 3,349 | 3,498 |
Deferred tax liabilities | 4,205 | 4,194 |
TOTAL LIABILITIES | 88,030 | 110,367 |
STOCKHOLDERS' EQUITY | ' | ' |
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at September 30, 2013 and December 31, 2012, respectively | ' | ' |
Common Stock $0.0001 par value, authorized, issued and outstanding of 49,000,000, 18,244,618, and 17,972,969 at September 30, 2013 and 49,000,000, 18,133,945, and 17,862,296 at December 31, 2012, respectively | 2 | 2 |
Treasury Stock at cost (271,649 shares at September 30, 2013 and December 31, 2012, respectively) | -1,283 | -1,283 |
Additional paid-in capital | 73,551 | 72,790 |
Accumulated deficit | -42,490 | -41,352 |
Accumulated other comprehensive loss | -323 | -204 |
TOTAL STOCKHOLDERS' EQUITY | 29,457 | 29,953 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $117,487 | $140,320 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Condensed Consolidated Balance Sheets | ' | ' |
Preferred Stock, par value (in dollars per share) | $0.00 | $0.00 |
Preferred Stock, authorized | 1,000,000 | 1,000,000 |
Preferred Stock, issued | 0 | 0 |
Preferred Stock, outstanding | 0 | 0 |
Common Stock, par value (in dollars per share) | $0.00 | $0.00 |
Common Stock, authorized | 49,000,000 | 49,000,000 |
Common Stock, issued | 18,244,618 | 18,133,945 |
Common Stock, outstanding | 17,972,969 | 17,862,296 |
Treasury Stock at cost, shares | 271,649 | 271,649 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Condensed Consolidated Statements of Operations | ' | ' | ' | ' |
Net sales | $50,538 | $63,984 | $163,435 | $188,714 |
Cost of goods sold | 35,521 | 44,359 | 112,859 | 127,198 |
Gross profit | 15,017 | 19,625 | 50,576 | 61,516 |
General & administrative expenses | 9,298 | 10,209 | 28,196 | 31,707 |
Selling expense | 4,855 | 7,968 | 16,054 | 21,739 |
Depreciation and amortization | 1,499 | 2,050 | 4,916 | 5,728 |
Impairment of goodwill and intangibles | ' | 69,796 | ' | 69,796 |
Operating income (loss) | -635 | -70,398 | 1,410 | -67,454 |
Interest expense, net | -945 | -938 | -3,128 | -2,557 |
Loss before benefit for income taxes | -1,580 | -71,336 | -1,718 | -70,011 |
Benefit for income taxes | -304 | -6,310 | -581 | -5,883 |
NET LOSS | ($1,276) | ($65,026) | ($1,137) | ($64,128) |
Net loss per share: | ' | ' | ' | ' |
BASIC (in dollars per share) | ($0.07) | ($3.63) | ($0.06) | ($3.59) |
DILUTED (in dollars per share) | ($0.07) | ($3.63) | ($0.06) | ($3.59) |
Weighted average shares outstanding: | ' | ' | ' | ' |
BASIC (in shares) | 17,968,977 | 17,926,885 | 17,912,970 | 17,870,502 |
DILUTED (in shares) | 17,968,977 | 17,926,885 | 17,912,970 | 17,870,502 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Comprehensive Loss (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
Condensed Consolidated Statements of Comprehensive Loss | ' | ' | ' | ' |
Net loss | ($1,276) | ($65,026) | ($1,137) | ($64,128) |
Other comprehensive income/(loss): | ' | ' | ' | ' |
Changes in foreign currency translation adjustments | 383 | 124 | -118 | -113 |
Comprehensive loss | ($893) | ($64,902) | ($1,255) | ($64,241) |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 |
Cash flows from operating activities: | ' | ' |
Net loss | ($1,137) | ($64,128) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities | ' | ' |
Impairment of goodwill and intangible assets | ' | 69,796 |
Depreciation and amortization | 4,916 | 5,728 |
Stock-based compensation expense | 729 | 766 |
Loss on asset disposal | 70 | ' |
Changes in assets and liabilities: | ' | ' |
(Increase)/Decrease in trade receivables | 9,994 | -4,975 |
Decrease in inventory | 9,876 | 1,849 |
(Increase)/Decrease in prepaids and other assets | -1,076 | 724 |
(Decrease) in accounts payable and accrued expenses | -6,319 | -9,718 |
Net cash provided by operating activities | 17,053 | 42 |
Cash flows from investing activities: | ' | ' |
Acquisitions of other intangible assets | -280 | ' |
Proceeds from sale of assets | 138 | ' |
Acquisitions, net of cash acquired | -87 | ' |
Acquisitions of property and equipment | -2,369 | -3,806 |
Net cash used in investing activities | -2,598 | -3,806 |
Cash flows from financing activities: | ' | ' |
Proceeds from exercise of stock options | 32 | 417 |
Net (repayment)/borrowings on financing arrangements | -16,053 | 14,144 |
Net cash (used in)/provided by financing activities | -16,021 | 14,561 |
Effect of exchange rate changes on cash and cash equivalents | -140 | -113 |
Net (decrease)/increase in cash and cash equivalents | -1,706 | 10,684 |
Cash and cash equivalents, beginning of period | 3,132 | 1,215 |
Cash and cash equivalents, end of period | 1,426 | 11,899 |
Supplemental disclosure of cash flow information: | ' | ' |
Cash payments on capital lease obligations | 592 | 313 |
Cash paid for interest | 2,634 | 2,385 |
Cash paid for income taxes | $79 | $18 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2013 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Nature of Operations | |
The Company is a global designer, marketer, and distributor of branded juvenile health, safety and wellness products (for ages 0-3) which are sold principally to large North American and European retailers. The Company currently markets its products in several product categories such as monitors, safety, nursery, feeding, gear and furniture. Most products are sold under the core brand names of Summer® and Born Free®. Significant products include audio/video monitors, safety gates, bath tubs and bathers, durable bath products, bed rails, swaddling blankets, baby bottles, warming/sterilization systems, booster and potty seats, bouncers, travel accessories, high chairs, swings, car seats, strollers, and nursery furniture. Over the years, the Company has completed several acquisitions and added products such as cribs, swaddling, and feeding products. | |
Basis of Presentation and Principles of Consolidation | |
The accompanying interim condensed consolidated financial statements of Summer Infant, Inc. (the “Company” or “Summer”) are unaudited, but in the opinion of management, reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim periods. Accordingly, they do not include all information and notes required by generally accepted accounting principles in the United States of America (“GAAP”) for complete financial statements. The results of operations for interim periods are not necessarily indicative of results to be expected for the entire fiscal year or any other period. The balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes for the year ended December 31, 2012 included in its Annual Report on Form 10-K filed with the SEC on March 13, 2013. | |
It is the Company’s policy to prepare its financial statements on the accrual basis of accounting in conformity with GAAP. The consolidated financial statements include the accounts of its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation. | |
All dollar amounts included in the Notes to Condensed Consolidated Financial Statements are in thousands of U.S. dollars except share and per share amounts. Certain items in prior year financials were reclassified to conform to current year presentation including the reporting of selling expenses separate from general and administrative expenses. The intangible asset impairment charge in the third quarter of 2012 has been retrospectively adjusted to properly state the interim periods within the fiscal year ended December 31, 2012. | |
Revenue Recognition | |
The Company records revenue when all of the following occur: persuasive evidence of an arrangement exists, product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Sales are recorded net of provisions for returns and allowances, customer discounts, and other sales-related discounts. The Company bases its estimates for discounts, returns and allowances on negotiated customer terms and historical experience. Customers do not have the right to return products unless the products are defective. The Company records a reduction of sales for estimated future defective product deductions based on historical experience. | |
Sales incentives or other consideration given by the Company to customers that are considered adjustments to the selling price of the Company’s products, such as markdowns, are reflected as reductions of revenue. Sales incentives and other consideration that represent costs incurred by the Company for assets or services received, such as the appearance of the Company’s products in a customer’s national circular ad, are reflected as selling expenses in the accompanying condensed consolidated statements of operations. | |
Income Taxes | |
Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred income tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carry-forwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, that it is more likely than not that such benefits will be realized. | |
Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon adoption and in subsequent periods. At September 30, 2013 and December 31, 2012, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at September 30, 2013 and December 31, 2012. | |
The Company’s federal tax return for the year ended December 31, 2009 was audited by the Internal Revenue Service and all taxes and interest have been paid. The Company expects no material changes to unrecognized tax positions within the next twelve months. | |
Use of Estimates | |
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Accordingly, actual results could differ from those estimates. | |
Net Income Per Share | |
Basic earnings per share for the Company are computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share includes the dilutive impact of outstanding stock options and unvested restricted shares. | |
Translation of Foreign Currencies | |
All assets and liabilities of the Company’s foreign affiliates, whose functional currency is not U.S. dollars, are translated into U.S. dollars at the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been translated at average rates prevailing during each respective quarter. Resulting translation adjustments are made to a separate component of stockholders’ equity within accumulated other comprehensive income or loss. | |
Recently Issued Accounting Pronouncements | |
In July 2013, the FASB issued an amendment to the accounting guidance related to the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. The guidance requires an unrecognized tax benefit to be presented as a decrease in a deferred tax asset where a net operating loss, a similar tax loss, or a tax credit carryforward exists and certain criteria are met. This guidance is effective prospectively for annual and interim reporting periods beginning after December 15, 2013. The Company is currently evaluating the potential impact of the adoption of this guidance on its consolidated financial statements. | |
DEBT
DEBT | 9 Months Ended | ||||||
Sep. 30, 2013 | |||||||
DEBT | ' | ||||||
DEBT | ' | ||||||
2. DEBT | |||||||
Credit Facilities | |||||||
On February 28, 2013, the Company and its subsidiary, Summer Infant (USA), Inc., entered into a new loan and security agreement (as amended, the “BofA Agreement”) with Bank of America, N.A., as agent, the financial institutions party to the agreement from time to time as lenders, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as sole lead arranger and sole book runner. The BofA Agreement replaced the Company’s prior credit facility with Bank of America. The Company also entered into a term loan with Salus Capital Partners, which is described below under “Term Loan.” | |||||||
BofA Agreement | |||||||
The BofA Agreement provides for an $80,000, asset-based revolving credit facility, with a $10,000 letter of credit sub-line facility. The total borrowing capacity is based on a borrowing base, which is defined as 85% of eligible receivables plus the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory and less reserves. Total borrowing capacity under the BofA Agreement at September 30, 2013 was $50,153 and borrowing availability was $16,153. The Company was in compliance with the financial covenants under the BofA Agreement at September 30, 2013. | |||||||
The scheduled maturity date of loans under the BofA Agreement is February 28, 2018 (subject to customary early termination provisions). All obligations under the BofA Agreement are secured by substantially all the assets of the Company, subject to a first priority lien on certain assets held by the term-loan lender described below. In addition, Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the BofA Agreement. Proceeds from the loans were used to satisfy existing debt, pay fees and transaction expenses associated with the closing of the BofA Agreement, pay obligations under the BofA Agreement, and will be used to make payments on the Term Loan and for other general corporate purposes, including working capital. | |||||||
Loans under the BofA Agreement bear interest, at the Company’s option, at a base rate or at LIBOR, plus applicable margins based on average quarterly availability under the BofA Agreement and ranging between 1.75% and 2.25% on LIBOR borrowings and 0.25% and 0.75% on base rate borrowings. Interest payments are due monthly, payable in arrears. The Company is also required to pay an annual non-use fee of 0.375% of the unused amounts under the BofA Agreement, as well as other customary fees as are set forth in the BofA Agreement. As of September 30, 2013 the base rate on loans was 4.0% and the LIBOR rate was 2.5%. | |||||||
Under the BofA Agreement, the Company must comply with certain financial covenants, including that the Company (i) for the first year of the loan, maintain and earn a specified minimum, monthly consolidated EBITDA amount, with such specified amounts increasing over the first year of the loan to a minimum consolidated EBITDA of $12,000 at February 28, 2014, and (ii) beginning with the fiscal quarter ending March 31, 2014, maintain a fixed charge coverage ratio of at least 1.0 to 1.0 for each period of four fiscal quarters most recently ended. For purposes of the financial covenants, consolidated EBITDA is defined as net income before interest, taxes, depreciation and amortization, plus certain customary expenses, fees and non-cash charges and minus certain customary non-cash items increasing net income. | |||||||
The BofA Agreement contains customary affirmative and negative covenants. Among other restrictions, the Company is restricted in its ability to incur additional debt, make acquisitions or investments, dispose of assets, or make distributions unless in each case certain conditions are satisfied. The BofA Agreement also contains customary events of default, including a cross default with the term loan, the occurrence of a material adverse event and the occurrence or a change of control. In the event of a default, all of the obligations of the Company and its subsidiaries under the BofA Agreement may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding obligations would become due and payable. | |||||||
Prior Bank of America Loan Agreement | |||||||
The BofA Agreement entered into in February 2013 replaced the Company’s prior secured credit facility with Bank of America, N.A., as Administrative Agent, as set forth in the Amended and Restated Loan Agreement, dated August 2, 2010, as amended through November 7, 2012 (as amended, the “Prior Loan Agreement”). The Prior Loan Agreement provided for an $80,000 working capital revolving credit facility. The amounts outstanding under the Prior Loan Agreement were payable in full upon maturity on December 31, 2013. | |||||||
The Company had also entered into various interest rate swap agreements in the past which effectively fixed the interest rates on a portion of the outstanding debt, of which, the last agreement matured on June 7, 2012. In addition, the credit facility had an unused line fee based on the unused amount of the credit facility equal to 25 basis points. | |||||||
The Prior Loan Agreement also contained customary events of default, including a cross default provision and a change of control provision. In the event of a default, all of the obligations of the Company and its subsidiaries under the loan Agreement may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding obligations become due and payable. | |||||||
Term Loan | |||||||
On February 28, 2013 the Company and its subsidiary, Summer Infant (USA), Inc., as borrowers, entered into a term-loan agreement (the “Term Loan Agreement”) with Salus Capital Partners, LLC, as administrative agent and collateral agent, and each lender from time to time a party to the Term Loan Agreement providing for a $15,000 term-loan (the “Term Loan”). | |||||||
Proceeds from the Term Loan were used to repay certain existing debt, and will also be used to finance the acquisition of working capital assets in the ordinary course of business, capital expenditures, and for other general corporate purposes. The Term Loan is secured by certain assets of the Company, including a first priority lien on intellectual property, plant, property and equipment, and a pledge of 65% of the ownership interests in certain subsidiaries of the Company. The Term Loan matures on February 28, 2018. In addition, Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the Term Loan Agreement. | |||||||
The principal of the Term Loan is being repaid, on a quarterly basis, in installments of $375, commencing with the quarter ending September 30, 2013, until paid in full on termination. The Term Loan bears interest at an annual rate equal to LIBOR, plus 10%, with a LIBOR floor of 1.25%. Interest payments are due monthly, in arrears. As of September 30, 2013 the interest rate on the Term Loan was 11.25%. | |||||||
The Term Loan Agreement contains customary affirmative and negative covenants substantially the same as the BofA Agreement described above. In addition, the Company must comply with certain financial covenants, including that the Company (i) meet the same minimum, monthly consolidated EBITDA as set forth in the BofA Agreement and (ii) initially maintain a monthly senior leverage ratio of 1:1. For periods after February 28, 2014, the senior leverage ratio will be based on an annual business plan to be approved by the Company’s Board of Directors and will be tested monthly on a trailing twelve month basis. For purposes of the financial covenants in the Term Loan Agreement, the senior leverage ratio is the ratio of (i) all amounts outstanding under the Term Loan Agreement and the BofA Agreement to (ii) consolidated EBITDA for the twelve-month period ending as of the last day of the most recently ended fiscal month. The Term Loan Agreement also contains events of default, including a cross default with the BofA agreement, the occurrence of a material adverse event, the occurrence of a change of control, and the recall of products having a value of $2,000 or more. In the event of a default, all of the obligations of the Company and its subsidiaries under the Term Loan Agreement may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding obligations would become due and payable. | |||||||
The amount outstanding on the Term Loan at September 30, 2013 was $14,625. | |||||||
The Company was in compliance with the financial covenants under the BofA Agreement and the Term Loan at September 30, 2013. | |||||||
Aggregate maturities of bank debt related to the BofA credit facility and Term Loan are as follows: | |||||||
Year ending December 31: | 2013 | $ | 375 | ||||
2014 | $ | 1,500 | |||||
2015 | $ | 1,500 | |||||
2016 | $ | 1,500 | |||||
2017 | $ | 1,500 | |||||
2018 | $ | 42,250 | |||||
Total | $ | 48,625 | |||||
November Debt Amendments[EF1] | |||||||
As discussed below in Note 7. Subsequent Events, on November 8, 2013, the Company entered into an amendment to the BofA Agreement and an amendment to the Term Loan Agreement. Under these amendments, certain financial covenants of the Company under the BofA Agreement and the Term Loan Agreement were modified. | |||||||
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
INTANGIBLE ASSETS | ' | |||||||
INTANGIBLE ASSETS | ' | |||||||
3. INTANGIBLE ASSETS | ||||||||
Intangible assets consist of the following: | ||||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Brand names — net | $ | 14,808 | $ | 14,812 | ||||
Patents and licenses | 2,544 | 2,221 | ||||||
Customer relationships | 6,946 | 6,946 | ||||||
Other intangibles | 1,886 | 1,882 | ||||||
$ | 26,184 | $ | 25,861 | |||||
Less: Accumulated amortization | (5,152 | ) | (4,305 | ) | ||||
Intangible assets, net | $ | 21,032 | $ | 21,556 | ||||
The amortization period for the majority of the intangible assets ranges from 5 to 20 years for those assets that have an estimated life; certain of the assets have indefinite lives (brand names). Total of intangibles not subject to amortization amounted to $12,308 at September 30, 2013 and December 31, 2012. | ||||||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2013 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
4. COMMITMENTS AND CONTINGENCIES | |
Litigation | |
The Company is a party to routine litigation and administrative complaints incidental to its business. The Company does not believe that the resolution of any or all of such routine litigation and administrative complaints is likely to have a material adverse effect on the Company’s financial condition or results of operations. | |
SHARE_BASED_COMPENSATION
SHARE BASED COMPENSATION | 9 Months Ended | |||
Sep. 30, 2013 | ||||
SHARE BASED COMPENSATION | ' | |||
SHARE BASED COMPENSATION | ' | |||
5. SHARE BASED COMPENSATION | ||||
The Company has granted stock awards, stock options and restricted shares under its 2006 Performance Equity Plan (“2006 Plan”) and its 2012 Incentive Compensation Plan (the “2012 Plan”). Under the 2006 Plan, awards may be granted to participants in the form of Non-Qualified Stock Options, Incentive Stock Options, Restricted Stock, Deferred Stock, Stock Reload Options and other share-based awards. Under the 2012 Plan, awards may be granted to participants in the form of stock options, restricted stock, restricted stock units, other stock-based awards and performance awards. Subject to the provisions of each plan, awards may be granted to employees, officers, directors, advisors and consultants who are deemed to have rendered or are able to render significant services to the Company or its subsidiaries and who are deemed to have contributed or to have the potential to contribute to the Company’s success. The Company accounts for options under the fair value recognition standard. Share-based compensation expense is included in selling, general and administrative expenses. There were no share-based payment arrangements capitalized as part of the cost of an asset. | ||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the assumptions noted in the following table. The Company uses the simplified method for grants of “plain vanilla” stock options based on a formula prescribed by the SEC to estimate the expected term of the options. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. | ||||
Share-based compensation expense for the three and nine months ended September 30, 2013 and 2012 was approximately $213 and $729 and $148 and $766, respectively. As of September 30, 2013, there were 1,484,580 stock options outstanding and 306,514 unvested restricted shares outstanding. | ||||
During the nine months ended September 30, 2013, the Company granted 343,000 stock options and granted 221,750 shares of restricted stock, respectively. There were no grants of stock options grants or restricted stock awards in the three months ended September 30, 2013. The following table summarizes the weighted average assumptions used for stock options granted during the quarters and periods ended September 30, 2013 and 2012. | ||||
Expected life (in years) | 6 | |||
Risk-free interest rate | 1.71 | % | ||
Volatility | 55 | % | ||
Dividend yield | 0 | % | ||
Forfeiture rate | 10 | % | ||
The Company is authorized to issue up to 3,000,000 stock options and restricted shares under the 2006 Plan. As of September 30, 2013, there were no shares available to grant under the 2006 Plan. | ||||
The Company is authorized to issue up to 500,000 shares of common stock for share-based awards under its 2012 Incentive Compensation Plan. As of September 30, 2013, 477,500 shares remain available to grant under this plan. |
WEIGHTED_AVERAGE_COMMON_SHARES
WEIGHTED AVERAGE COMMON SHARES | 9 Months Ended |
Sep. 30, 2013 | |
WEIGHTED AVERAGE COMMON SHARES | ' |
WEIGHTED AVERAGE COMMON SHARES | ' |
6. WEIGHTED AVERAGE COMMON SHARES | |
Basic and diluted earnings or loss per share (“EPS”) is based upon the weighted average number of common shares outstanding during the period. The Company does not include the anti-dilutive effect of common stock equivalents, including stock options, in computing net income (loss) per diluted common share. The computation of per diluted common shares for the three and nine months ended September 30, 3013 excluded 1,484,580 and 306,514 of stock options and shares of restricted stock outstanding, respectively. | |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2013 | |
SUBSEQUENT EVENTS | ' |
SUBSEQUENT EVENTS | ' |
7. SUBSEQUENT EVENTS | |
The Company has evaluated subsequent events through the filing date of this Quarterly Report and determined that no subsequent events occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto except as set forth herein. | |
BofA Agreement Amendment. On November 8, 2013, the Company entered into an amendment (the “BofA Amendment”) to the BofA Agreement described above in Note 2. The BofA Amendment amended the financial covenants in the BofA Agreement to provide that (i) the Company is no longer required to comply with the minimum EBITDA covenants for any period ending after September 30, 2013 and (ii) the Company maintain a trailing 12-month fixed charge coverage ratio of at least 1.0 to 1.0, tested on a monthly basis, from and after September 30, 2013. | |
Term Loan Agreement Amendment. On November 8, 2013, the Company entered into an amendment (the “Term Loan Amendment”) to the Term Loan Agreement described above in Note 2. The Term Loan Amendment amended the financial covenants in the Term Loan Agreement to provide that (i) the Company is no longer required to comply with the minimum EBITDA covenants for any period ending after September 30, 2013, (ii) the Company maintain a trailing 12-month fixed charge coverage ratio of at least 1.0 to 1.0, tested on a monthly basis, from and after September 30, 2013, and (iii) commencing February 28, 2014, the Company maintain a trailing 12-month senior leverage ratio, tested on a monthly basis of (a) no more than 6.0 to 1.0 for the periods ending on or before June 30, 2014, (b) no more than 5.5 to 1.0 for periods ending July 1, 2014 through September 30, 2014, and (c) no more than 5.0 to 1.0 for periods following September 30, 2014. | |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2013 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
Revenue Recognition | ' |
Revenue Recognition | |
The Company records revenue when all of the following occur: persuasive evidence of an arrangement exists, product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Sales are recorded net of provisions for returns and allowances, customer discounts, and other sales-related discounts. The Company bases its estimates for discounts, returns and allowances on negotiated customer terms and historical experience. Customers do not have the right to return products unless the products are defective. The Company records a reduction of sales for estimated future defective product deductions based on historical experience. | |
Sales incentives or other consideration given by the Company to customers that are considered adjustments to the selling price of the Company’s products, such as markdowns, are reflected as reductions of revenue. Sales incentives and other consideration that represent costs incurred by the Company for assets or services received, such as the appearance of the Company’s products in a customer’s national circular ad, are reflected as selling expenses in the accompanying condensed consolidated statements of operations. | |
Income Taxes | ' |
Income Taxes | |
Income taxes are computed using the asset and liability method of accounting. Under the asset and liability method, a deferred income tax asset or liability is recognized for estimated future tax effects attributable to temporary differences and carry-forwards. The measurement of deferred income tax assets is adjusted by a valuation allowance, if necessary, to recognize future tax benefits only to the extent, based on available evidence, that it is more likely than not that such benefits will be realized. | |
Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon adoption and in subsequent periods. At September 30, 2013 and December 31, 2012, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at September 30, 2013 and December 31, 2012. | |
The Company’s federal tax return for the year ended December 31, 2009 was audited by the Internal Revenue Service and all taxes and interest have been paid. The Company expects no material changes to unrecognized tax positions within the next twelve months. | |
Use of Estimates | ' |
Use of Estimates | |
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future. Accordingly, actual results could differ from those estimates. | |
Net Income Per Share | ' |
Net Income Per Share | |
Basic earnings per share for the Company are computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share includes the dilutive impact of outstanding stock options and unvested restricted shares. | |
Translation of Foreign Currencies | ' |
Translation of Foreign Currencies | |
All assets and liabilities of the Company’s foreign affiliates, whose functional currency is not U.S. dollars, are translated into U.S. dollars at the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been translated at average rates prevailing during each respective quarter. Resulting translation adjustments are made to a separate component of stockholders’ equity within accumulated other comprehensive income or loss. | |
Recently Issued Accounting Pronouncements | ' |
Recently Issued Accounting Pronouncements | |
In July 2013, the FASB issued an amendment to the accounting guidance related to the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. The guidance requires an unrecognized tax benefit to be presented as a decrease in a deferred tax asset where a net operating loss, a similar tax loss, or a tax credit carryforward exists and certain criteria are met. This guidance is effective prospectively for annual and interim reporting periods beginning after December 15, 2013. The Company is currently evaluating the potential impact of the adoption of this guidance on its consolidated financial statements. | |
DEBT_Tables
DEBT (Tables) | 9 Months Ended | ||||||
Sep. 30, 2013 | |||||||
DEBT | ' | ||||||
Schedule of aggregate maturities of bank debt | ' | ||||||
Year ending December 31: | 2013 | $ | 375 | ||||
2014 | $ | 1,500 | |||||
2015 | $ | 1,500 | |||||
2016 | $ | 1,500 | |||||
2017 | $ | 1,500 | |||||
2018 | $ | 42,250 | |||||
Total | $ | 48,625 | |||||
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2013 | ||||||||
INTANGIBLE ASSETS | ' | |||||||
Schedule of intangible assets | ' | |||||||
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
Brand names — net | $ | 14,808 | $ | 14,812 | ||||
Patents and licenses | 2,544 | 2,221 | ||||||
Customer relationships | 6,946 | 6,946 | ||||||
Other intangibles | 1,886 | 1,882 | ||||||
$ | 26,184 | $ | 25,861 | |||||
Less: Accumulated amortization | (5,152 | ) | (4,305 | ) | ||||
Intangible assets, net | $ | 21,032 | $ | 21,556 | ||||
SHARE_BASED_COMPENSATION_Table
SHARE BASED COMPENSATION (Tables) | 9 Months Ended | |||
Sep. 30, 2013 | ||||
SHARE BASED COMPENSATION | ' | |||
Schedule of weighted average assumptions used for options and shares granted | ' | |||
The following table summarizes the weighted average assumptions used for stock options granted during the quarters and periods ended September 30, 2013 and 2012. | ||||
Expected life (in years) | 6 | |||
Risk-free interest rate | 1.71 | % | ||
Volatility | 55 | % | ||
Dividend yield | 0 | % | ||
Forfeiture rate | 10 | % | ||
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 |
In Thousands, unless otherwise specified | Minimum | Maximum | ||
Nature of Operations | ' | ' | ' | ' |
Age group of customers for whom products are designed, marketed, and distributed | ' | ' | '0 years | '3 years |
Accrued interest and penalties relating to uncertain tax positions | $0 | $0 | ' | ' |
Estimated change in unrecognized tax benefits within the next twelve months | $0 | ' | ' | ' |
DEBT_Details
DEBT (Details) (USD $) | Sep. 30, 2013 | Feb. 28, 2013 | Sep. 30, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | Term Loan | Term Loan | Term Loan | Term Loan | BofA Agreement | BofA Agreement | BofA Agreement | BofA Agreement | BofA Agreement | BofA Agreement | BofA Agreement | BofA Agreement | BofA Agreement | BofA Agreement | Asset-based revolving credit facility | Letter of credit sub-line facility | Prior Loan Agreement | Prior Loan Agreement | |
LIBOR | Minimum | LIBOR | Base rate | Minimum | Minimum | Maximum | Maximum | At February 28, 2014 | Beginning with the fiscal quarter ending March 31, 2014 | ||||||||||
LIBOR | Base rate | LIBOR | Base rate | ||||||||||||||||
Debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum amount of credit available | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $80,000 | $10,000 | $80,000 | ' |
Borrowing base as a percentage of eligible receivables | ' | ' | ' | ' | ' | 85.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Borrowing base as a percentage of eligible inventory | ' | ' | ' | ' | ' | 70.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Borrowing base as a percentage of net orderly liquidation value of eligible inventory and less reserves | ' | ' | ' | ' | ' | 85.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Current amount of credit available | ' | ' | ' | ' | ' | ' | 50,153 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Available borrowing capacity | ' | ' | ' | ' | ' | ' | 16,153 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Variable interest rate base | ' | ' | ' | 'LIBOR | ' | ' | ' | 'LIBOR | 'base rate | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Applicable margin (as a percent) | ' | ' | ' | 10.00% | ' | ' | ' | ' | ' | 1.75% | 0.25% | 2.25% | 0.75% | ' | ' | ' | ' | ' | ' |
Unused line fee based on the unused amount of the credit facilities (as a percent) | ' | ' | ' | ' | ' | 0.38% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.25% | ' |
Variable rate basis at the end of the period | ' | ' | ' | ' | ' | ' | ' | 2.50% | 4.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
EBITDA to be maintained and earned | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 12,000 | ' | ' | ' | ' | ' |
Fixed charge coverage ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1 | ' | ' | ' | ' |
Period of fixed charge coverage ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '1 year | ' | ' | ' | ' |
Trailing period for EBITDA | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '12 months |
Amount of debt | ' | 15,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ownership interests in subsidiaries pledged | ' | 65.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Principal amount required to be paid on a quarterly basis | ' | 375 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Variable interest rate floor | ' | ' | ' | 1.25% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate at period end | ' | 11.25% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Senior leverage ratio | ' | 1 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Trailing period for testing senior leverage ratio | ' | '12 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Period used in calculating the consolidated EBITDA under covenants | ' | '12 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Event of defaults, recall of products | ' | ' | ' | ' | 2,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount outstanding | 48,625 | ' | 14,625 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Aggregate maturities of bank debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2013 | 375 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2014 | 1,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2015 | 1,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2016 | 1,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2017 | 1,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2018 | 42,250 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total | $48,625 | ' | $14,625 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
INTANGIBLE_ASSETS_Details
INTANGIBLE ASSETS (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2013 | Dec. 31, 2012 |
In Thousands, unless otherwise specified | Minimum | Maximum | Brand name | Brand name | Patents and licenses | Patents and licenses | Customer relationships | Customer relationships | Other intangibles | Other intangibles | ||
Intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amortization period of intangible assets | ' | ' | '5 years | '20 years | ' | ' | ' | ' | ' | ' | ' | ' |
Intangible assets, gross | $26,184 | $25,861 | ' | ' | ' | ' | $2,544 | $2,221 | $6,946 | $6,946 | $1,886 | $1,882 |
Less: Accumulated amortization | -5,152 | -4,305 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Intangible assets, net | 21,032 | 21,556 | ' | ' | 14,808 | 14,812 | ' | ' | ' | ' | ' | ' |
Intangibles not subject to amortization | $12,308 | $12,308 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
SHARE_BASED_COMPENSATION_Detai
SHARE BASED COMPENSATION (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 |
2006 Plan | ' | ' | ' | ' |
Stock options and restricted shares | ' | ' | ' | ' |
Share-based compensation costs capitalized | ' | ' | $0 | ' |
Share-based compensation expense (in dollars) | $213 | $148 | $729 | $766 |
Additional information related to share based compensation | ' | ' | ' | ' |
Number of shares authorized under the plan | 3,000,000 | ' | 3,000,000 | ' |
Shares available to grant | 0 | ' | 0 | ' |
2006 Plan | Stock option | ' | ' | ' | ' |
Stock options and restricted shares | ' | ' | ' | ' |
Stock options outstanding (in shares) | 1,484,580 | ' | 1,484,580 | ' |
Stock options granted (in shares) | 0 | ' | 343,000 | ' |
Weighted average assumptions | ' | ' | ' | ' |
Expected life (in years) | '6 years | '6 years | ' | ' |
Risk-free interest rate (as a percent) | 1.71% | 1.71% | ' | ' |
Volatility (as a percent) | 55.00% | 55.00% | ' | ' |
Dividend yield (as a percent) | 0.00% | 0.00% | ' | ' |
Forfeiture rate (as a percent) | 10.00% | 10.00% | ' | ' |
2006 Plan | Restricted shares | ' | ' | ' | ' |
Stock options and restricted shares | ' | ' | ' | ' |
Unvested restricted shares outstanding | 306,514 | ' | 306,514 | ' |
Restricted stock granted (in shares) | 0 | ' | 221,750 | ' |
2012 Incentive Compensation Plan | ' | ' | ' | ' |
Additional information related to share based compensation | ' | ' | ' | ' |
Number of shares authorized under the plan | 500,000 | ' | 500,000 | ' |
Shares available to grant | 477,500 | ' | 477,500 | ' |
WEIGHTED_AVERAGE_COMMON_SHARES1
WEIGHTED AVERAGE COMMON SHARES (Details) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2013 | Sep. 30, 2013 | |
Stock options | ' | ' |
Weighted average common shares | ' | ' |
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares) | 1,484,580 | 1,484,580 |
Restricted stock | ' | ' |
Weighted average common shares | ' | ' |
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares) | 306,514 | 306,514 |
SUBSEQUENT_EVENTS_Details
SUBSEQUENT EVENTS (Details) (Subsequent Events) | 0 Months Ended |
Nov. 08, 2013 | |
Amended term loan | ' |
SUBSEQUENT EVENTS | ' |
Period of fixed charge coverage ratio | '12 months |
Trailing period for testing senior leverage ratio | '12 months |
Amended term loan | Minimum | ' |
SUBSEQUENT EVENTS | ' |
Fixed charge coverage ratio | 1 |
Amended term loan | Leverage ratio for the period ending on or before June 30, 2014 | Maximum | ' |
SUBSEQUENT EVENTS | ' |
Senior leverage ratio | 6 |
Amended term loan | Leverage ratio for periods ending July 1, 2014 through September 30, 2014 | Maximum | ' |
SUBSEQUENT EVENTS | ' |
Senior leverage ratio | 5.5 |
Amended term loan | Leverage ratio for periods following September 30, 2014 | Maximum | ' |
SUBSEQUENT EVENTS | ' |
Senior leverage ratio | 5 |
Amended BofA agreement | ' |
SUBSEQUENT EVENTS | ' |
Period of fixed charge coverage ratio | '12 months |
Amended BofA agreement | Minimum | ' |
SUBSEQUENT EVENTS | ' |
Fixed charge coverage ratio | 1 |