Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Sep. 30, 2014 | Nov. 01, 2014 | |
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-14 | ' |
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 | ' | 18,137,285 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
CURRENT ASSETS | ' | ' |
Cash and cash equivalents | $1,075 | $1,573 |
Trade receivables, net of allowance for doubtful accounts | 38,248 | 34,574 |
Inventory, net | 48,680 | 38,378 |
Prepaids and other current assets | 2,138 | 1,890 |
Deferred tax assets | 832 | 832 |
TOTAL CURRENT ASSETS | 90,973 | 77,247 |
Property and equipment, net | 13,455 | 14,796 |
Intangible assets, net | 20,958 | 21,575 |
Other assets | 1,465 | 1,749 |
TOTAL ASSETS | 126,851 | 115,367 |
CURRENT LIABILITIES | ' | ' |
Accounts payable | 26,290 | 22,072 |
Accrued expenses | 9,132 | 9,658 |
Current portion of long term debt (including capital leases) | 1,682 | 1,962 |
TOTAL CURRENT LIABILITIES | 37,104 | 33,692 |
Long-term debt, less current portion | 54,772 | 47,756 |
Other liabilities | 3,077 | 3,289 |
Deferred tax liabilities | 3,156 | 3,140 |
TOTAL LIABILITIES | 98,109 | 87,877 |
STOCKHOLDERS' EQUITY | ' | ' |
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at September 30, 2014 and December 31, 2013, respectively | ' | ' |
Common Stock $0.0001 par value, authorized, issued and outstanding of 49,000,000, 18,408,934, and 18,137,285 at September 30, 2014 and 49,000,000, 18,257,924, and 17,986,275 at December 31, 2013, respectively | 2 | 2 |
Treasury Stock at cost (271,649 shares at September 30, 2014 and December 31, 2013, respectively) | -1,283 | -1,283 |
Additional paid-in capital | 74,745 | 73,715 |
Accumulated deficit | -43,801 | -44,167 |
Accumulated other comprehensive loss | -921 | -777 |
TOTAL STOCKHOLDERS' EQUITY | 28,742 | 27,490 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $126,851 | $115,367 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
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 | 18,408,934 | 18,257,924 |
Common Stock, outstanding | 18,137,285 | 17,986,275 |
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, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Condensed Consolidated Statements of Operations | ' | ' | ' | ' |
Net sales | $51,020 | $50,538 | $154,390 | $163,435 |
Cost of goods sold | 34,420 | 35,521 | 103,897 | 112,859 |
Gross profit | 16,600 | 15,017 | 50,493 | 50,576 |
General and administrative expenses | 10,107 | 9,298 | 29,503 | 28,196 |
Selling expense | 4,456 | 4,855 | 13,742 | 16,054 |
Depreciation and amortization | 1,369 | 1,499 | 4,132 | 4,916 |
Operating income (loss) | 668 | -635 | 3,116 | 1,410 |
Interest expense, net | 870 | 945 | 2,571 | 3,128 |
Income (loss) before income taxes | -202 | -1,580 | 545 | -1,718 |
Provision (benefit) for income taxes | -64 | -304 | 179 | -581 |
NET INCOME (LOSS) | ($138) | ($1,276) | $366 | ($1,137) |
Net income (loss) per share: | ' | ' | ' | ' |
Net loss per share BASIC (in dollars per share) | ($0.01) | ($0.07) | $0.02 | ($0.06) |
Net loss per share DILUTED (in dollars per share) | ($0.01) | ($0.07) | $0.02 | ($0.06) |
Weighted average shares outstanding: | ' | ' | ' | ' |
Weighted average shares outstanding BASIC (in shares) | 18,086,441 | 17,968,977 | 18,029,659 | 17,912,970 |
Weighted average shares outstanding DILUTED (in shares) | 18,086,441 | 17,968,977 | 18,196,470 | 17,912,970 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Comprehensive Loss (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 |
Condensed Consolidated Statements of Comprehensive Loss | ' | ' | ' | ' |
Net (loss) income | ($138) | ($1,276) | $366 | ($1,137) |
Other comprehensive (loss) income: | ' | ' | ' | ' |
Changes in foreign currency translation adjustments | -431 | 383 | -144 | -118 |
Comprehensive (loss) income | ($569) | ($893) | $222 | ($1,255) |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Cash Flows (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 30, 2014 | Sep. 30, 2013 |
Cash flows from operating activities: | ' | ' |
Net (income) loss | $366 | ($1,137) |
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities | ' | ' |
Depreciation and amortization | 4,132 | 4,916 |
Stock-based compensation expense | 1,011 | 729 |
Loss on asset disposal | ' | -70 |
Changes in assets and liabilities: | ' | ' |
(Increase) decrease in trade receivables | -3,868 | 9,994 |
(Increase) decrease in inventory | -10,527 | 9,876 |
(Increase) decrease in prepaids and other assets | 160 | -1,076 |
Increase (decrease) in accounts payable and accrued expenses | 3,614 | -6,319 |
Net cash (used in) provided by operating activities | -5,112 | 17,053 |
Cash flows from investing activities: | ' | ' |
Acquisitions of intangible assets | -227 | -280 |
Proceeds from sale of assets | ' | 138 |
Acquisitions, net of cash acquired | ' | -87 |
Acquisitions of property and equipment | -1,976 | -2,369 |
Net cash used in investing activities | -2,203 | -2,598 |
Cash flows from financing activities: | ' | ' |
Proceeds from exercise of stock options | 19 | 32 |
Net borrowings (repayment) on financing arrangements | 6,736 | -16,053 |
Net cash (used in) provided by financing activities | 6,755 | -16,021 |
Effect of exchange rate changes on cash and cash equivalents | 62 | -140 |
Net (decrease) increase in cash and cash equivalents | -498 | -1,706 |
Cash and cash equivalents, beginning of period | 1,573 | 3,132 |
Cash and cash equivalents, end of period | 1,075 | 1,426 |
Supplemental disclosure of cash flow information: | ' | ' |
Cash paid for interest | 2,106 | 2,634 |
Cash paid for income taxes | $23 | $79 |
BASIS_OF_PRESENTATION_AND_SUMM
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2014 | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Nature of Operations | |
Summer Infant, Inc., together with its subsidiaries, (the “Company” or “Summer”) is a global designer, marketer, and distributor of branded juvenile health, safety and wellness products which are sold principally to large North American and international retailers and distributors. Most products are sold under the Company’s core brand names of Summer®, SwaddleMe®, and Born Free®. The Company’s significant product offerings 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. | |
Basis of Presentation and Principles of Consolidation | |
The accompanying interim condensed consolidated financial statements of the Company 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, 2013 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, 2013 included in its Annual Report on Form 10-K filed with the SEC on March 11, 2014 and amended on April 29, 2014 (as amended, the “2013 10-K”). | |
It is the Company’s policy to prepare its financial statements on the accrual basis of accounting in conformity with GAAP. The interim condensed 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. | |
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 contractual terms and 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 interim condensed consolidation 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. As of September 30, 2014 and December 31, 2013, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at September 30, 2014 and December 31, 2013. | |
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 (Loss) Per Share | |
Basic earnings (loss) 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 (loss) 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 subsidiaries, each of whose functional currency is in its local currency, 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 May 2014, the FASB issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective beginning January 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements. | |
DEBT
DEBT | 9 Months Ended | |||||
Sep. 30, 2014 | ||||||
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 with Bank of America, N.A. to provide an $80,000, asset-based revolving credit facility (as subsequently amended on November 8, 2013, the “BofA Agreement”). The BofA Agreement replaced the Company’s prior credit facility with Bank of America, which was set to expire in December 2013. In conjunction with its entry into the BofA Agreement, the Company also entered into a term loan agreement 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 the Company’s eligible accounts receivable plus the lesser of (i) 70% of the value of eligible inventory or (ii) 85% of the net orderly liquidation value of eligible inventory, less reserves. | ||||||
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 under the BofA Agreement were used to satisfy existing debt, pay fees and transaction expenses associated with the closing of the BofA Agreement, pay obligations under the Company’s prior BofA credit facility, and were 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, 2014, the base rate on loans was 4.0% and the LIBOR rate was 2.5%. | ||||||
Under the BofA Agreement, the Company is required to comply with certain financial covenants. Prior to the execution of an amendment to the BofA Agreement on November 8, 2013, the Company was required, (i) for the first year of the loan, to maintain and earn a specified minimum, monthly consolidated EBITDA amount, as defined in the BofA Agreement, (“Bank EBITDA”), with such specified amounts increasing over the first twelve months of the loan to a minimum consolidated Bank EBITDA of $12,000 at February 28, 2014, and (ii) beginning with the fiscal quarter ending March 31, 2014, was to 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 Bank 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. | ||||||
On November 8, 2013, the Company entered into an amendment to the BofA Agreement (the “BofA Amendment”). 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 prior minimum Bank EBITDA covenants for any period ending after September 30, 2013 and (ii) the Company maintain a trailing twelve month fixed charge coverage ratio of at least 1.0 to 1.0, tested on a monthly basis, from and after September 30, 2013. | ||||||
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 of 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. | ||||||
The amount outstanding on the BofA Agreement at September 30, 2014 was $43,045. Total borrowing capacity under the BofA Agreement at September 30, 2014 was $56,906 and borrowing availability was $13,861. | ||||||
Term Loan | ||||||
On February 28, 2013 the Company and its subsidiary, Summer Infant (USA), Inc., as borrowers, entered into a term loan agreement (as subsequently amended on November 8, 2013, the “Term Loan Agreement”) with Salus Capital Partners, LLC, for a $15,000 term loan (the “Term Loan”). | ||||||
Proceeds from the Term Loan were used to repay certain existing debt, and 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, 2014, 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. In addition, prior to the execution of an amendment to the Term Loan Agreement on November 8, 2013, the Company was required to comply with certain financial covenants, including that the Company (i) meet the same minimum, monthly consolidated Bank EBITDA as set forth in the BofA Agreement and (ii) initially maintaining a monthly senior leverage ratio of 1:1. For periods after February 28, 2014, the senior leverage ratio was to be based on an annual business plan to be approved by the Company’s Board of Directors and to be tested monthly on a trailing twelve month basis. For purposes of the financial covenants in the Term Loan Agreement, the senior leverage ratio was defined as the ratio of (1) all amounts outstanding under the Term Loan Agreement and the BofA Agreement to (2) consolidated Bank 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. | ||||||
On November 8, 2013, the Company entered into an amendment to the Term Loan Agreement (the “Term Loan Amendment”). 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 Bank EBITDA covenants for any period ending after September 30, 2013, (ii) the Company maintain a trailing twelve 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 twelve 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. | ||||||
The amount outstanding on the Term Loan at September 30, 2014 was $13,125. | ||||||
We were in compliance with the financial covenants under the BofA Agreement and the Term Loan as of September 30, 2014. | ||||||
Aggregate maturities of bank debt related to the BofA Agreement and the Term Loan are as follows: | ||||||
Year ending December 31: | 2014 | $ | 375 | |||
2015 | 1,500 | |||||
2016 | 1,500 | |||||
2017 | 1,500 | |||||
2018 | 51,295 | |||||
Total | $ | 56,170 | ||||
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
INTANGIBLE ASSETS | ' | |||||||
INTANGIBLE ASSETS | ' | |||||||
3.INTANGIBLE ASSETS | ||||||||
Intangible assets consisted of the following: | ||||||||
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Brand names | $ | 14,812 | $ | 14,812 | ||||
Patents and licenses | 3,605 | 3,378 | ||||||
Customer relationships | 6,946 | 6,946 | ||||||
Other intangibles | 1,882 | 1,882 | ||||||
27,245 | 27,018 | |||||||
Less: Accumulated amortization | (6,287 | ) | (5,443 | ) | ||||
Intangible assets, net | $ | 20,958 | $ | 21,575 | ||||
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 as of September 30, 2014 and December 31, 2013. | ||||||||
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2014 | |
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, 2014 | ||||||
SHARE BASED COMPENSATION | ' | |||||
SHARE BASED COMPENSATION | ' | |||||
5.SHARE BASED COMPENSATION | ||||||
The Company is authorized to issue up to 3,000,000 shares for equity awards under the Company’s 2006 Performance Equity Plan (“2006 Plan”) and 1,100,000 shares for equity awards under the Company’s 2012 Incentive Compensation Plan (“2012 Plan”). The Company’s stockholders approved an increase in the number of shares available under the 2012 Plan from 500,000 to 1,100,000 shares on August 13, 2014. | ||||||
Under the 2006 Plan and 2012 Plan, awards may be granted to participants in the form of non-qualified stock options, incentive stock options, restricted stock, deferred stock, restricted stock units and other stock-based awards. Subject to the provisions of the plans, 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. The application of this standard resulted in share-based compensation expense for the three months ended September 30, 2014 and 2013 of $468 and $213, respectively, and share-based compensation expense for the nine months ended September 30, 2014 and 2013 of $1,011 and $729, respectively. Share based compensation expense is included in selling, general and administrative expenses. | ||||||
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 table below. The Company uses the simplified method to estimate the expected term of the options, but used an estimate for grants of “plain vanilla” stock options based on a formula prescribed by the Securities and Exchange Commission. 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 recognized in the consolidated financial statements in 2014 and 2013 is based on awards that are ultimately expected to vest. | ||||||
As of September 30, 2014, there were 1,809,230 stock options outstanding and 278,535 unvested restricted shares outstanding. | ||||||
During the nine months ended September 30, 2014, the Company granted 551,000 stock options and granted 185,064 shares of restricted stock. The following table summarizes the weighted average assumptions used for stock options granted during the periods ended September 30, 2014 and 2013. | ||||||
2014 | 2013 | |||||
Expected life (in years) | 5.3 | 6.0 | ||||
Risk-free interest rate | 1.7 | % | 1.7 | % | ||
Volatility | 67.0 | % | 55.0 | % | ||
Dividend yield | 0.0 | % | 0.0 | % | ||
Forfeiture rate | 13.3 | % | 10.0 | % | ||
As of September 30, 2014, there are 101,468 shares available to grant under the 2006 Plan and 599,500 shares available to grant under the 2012 Plan. | ||||||
WEIGHTED_AVERAGE_COMMON_SHARES
WEIGHTED AVERAGE COMMON SHARES | 9 Months Ended |
Sep. 30, 2014 | |
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 diluted common shares for the three months ended September 30, 2014 excluded 1,809,230 stock options and 278,535 shares of restricted stock. The computation per diluted common shares for the nine months ended September 30, 3014 excluded 1,296,230 stock options and 172,712 shares of restricted stock. | |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2014 | |
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. | |
BASIS_OF_PRESENTATION_AND_SUMM1
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
BASIS OF PRESENTATION AND 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 contractual terms and 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 interim condensed consolidation 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. As of September 30, 2014 and December 31, 2013, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at September 30, 2014 and December 31, 2013. | |
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 (Loss) Per Share | ' |
Net Income (Loss) Per Share | |
Basic earnings (loss) 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 (loss) 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 subsidiaries, each of whose functional currency is in its local currency, 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 May 2014, the FASB issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective beginning January 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements. | |
DEBT_Tables
DEBT (Tables) | 9 Months Ended | |||||
Sep. 30, 2014 | ||||||
DEBT | ' | |||||
Schedule of aggregate maturities of bank debt | ' | |||||
Year ending December 31: | 2014 | $ | 375 | |||
2015 | 1,500 | |||||
2016 | 1,500 | |||||
2017 | 1,500 | |||||
2018 | 51,295 | |||||
Total | $ | 56,170 | ||||
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 9 Months Ended | |||||||
Sep. 30, 2014 | ||||||||
INTANGIBLE ASSETS | ' | |||||||
Schedule of intangible assets | ' | |||||||
September 30, | December 31, | |||||||
2014 | 2013 | |||||||
Brand names | $ | 14,812 | $ | 14,812 | ||||
Patents and licenses | 3,605 | 3,378 | ||||||
Customer relationships | 6,946 | 6,946 | ||||||
Other intangibles | 1,882 | 1,882 | ||||||
27,245 | 27,018 | |||||||
Less: Accumulated amortization | (6,287 | ) | (5,443 | ) | ||||
Intangible assets, net | $ | 20,958 | $ | 21,575 | ||||
SHARE_BASED_COMPENSATION_Table
SHARE BASED COMPENSATION (Tables) | 9 Months Ended | |||||
Sep. 30, 2014 | ||||||
SHARE BASED COMPENSATION | ' | |||||
Schedule of weighted average assumptions used for stock options granted | ' | |||||
2014 | 2013 | |||||
Expected life (in years) | 5.3 | 6.0 | ||||
Risk-free interest rate | 1.7 | % | 1.7 | % | ||
Volatility | 67.0 | % | 55.0 | % | ||
Dividend yield | 0.0 | % | 0.0 | % | ||
Forfeiture rate | 13.3 | % | 10.0 | % | ||
BASIS_OF_PRESENTATION_AND_SUMM2
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | ||
Income taxes | ' | ' |
Accrued interest and penalties relating to uncertain tax positions | $0 | $0 |
DEBT_Details
DEBT (Details) (USD $) | Sep. 30, 2014 | Feb. 28, 2013 | Sep. 30, 2013 | Sep. 30, 2014 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Feb. 28, 2013 | Nov. 08, 2013 | Nov. 08, 2013 | Nov. 08, 2013 | Nov. 08, 2013 | Nov. 08, 2013 | Feb. 28, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Feb. 28, 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 | Nov. 08, 2013 | Nov. 08, 2013 |
In Thousands, unless otherwise specified | Term Loan | Term Loan | Term Loan | Term Loan | Term Loan | Term Loan | Term Loan | Amended term loan | Amended term loan | Amended term loan | Amended term loan | Amended term loan | BofA Agreement | 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 | Amended BofA agreement | Amended BofA agreement | |
item | LIBOR | LIBOR | Minimum | Minimum | Maximum | Maximum | Maximum | LIBOR | Base rate | Minimum | Minimum | Maximum | Maximum | At February 28, 2014 | Beginning with the fiscal quarter ending March 31, 2014 | Beginning with the quarter ending on June 30, 2012 | Minimum | |||||||||||
item | Leverage ratio for the period ending on or before June 30, 2014 | Leverage ratio for periods ending July 1, 2014 through September 30, 2014 | Leverage ratio for periods following September 30, 2014 | LIBOR | Base rate | LIBOR | Base rate | Minimum | Minimum | item | ||||||||||||||||||
item | item | item | item | |||||||||||||||||||||||||
Debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Maximum amount of credit available | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $80,000 | $10,000 | ' | ' |
Borrowing base as a percentage of eligible receivables | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.85% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Borrowing base as a percentage of eligible inventory | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.70% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Borrowing base as a percentage of net orderly liquidation value of eligible inventory and less reserves | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 0.85% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
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% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
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 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1 | ' | ' | ' | ' | 1 |
Period of fixed charge coverage ratio | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '1 year | ' | ' | ' | ' |
Trailing period for EBITDA | ' | ' | ' | ' | ' | ' | ' | ' | '12 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '12 months | ' |
Amount outstanding on credit facility | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 43,045 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Current amount of credit available | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 56,906 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Available borrowing capacity | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 13,861 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount of debt | ' | ' | ' | ' | 15,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Ownership interests in subsidiaries pledged (as a percent) | ' | ' | ' | ' | 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 | ' | ' | ' | ' | ' | ' | ' | ' | 6 | 5.5 | 5 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Trailing period for testing senior leverage ratio | ' | '12 months | ' | ' | ' | ' | ' | ' | '12 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Period used in calculating the consolidated EBITDA under covenants | ' | '12 months | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Default event that may require Term Loan repayment if occurred, product recall value | ' | ' | ' | ' | ' | ' | ' | 2,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amount outstanding | 56,170 | ' | ' | 13,125 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Aggregate maturities of bank debt | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2014 | 375 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2015 | 1,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2016 | 1,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2017 | 1,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
2018 | 51,295 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Total | $56,170 | ' | ' | $13,125 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Interest rate at end of period | ' | ' | ' | 11.25% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
INTANGIBLE_ASSETS_Details
INTANGIBLE ASSETS (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | Minimum | Maximum | Patents and licenses | Patents and licenses | Customer relationship | Customer relationship | Other intangibles | Other intangibles | Brand names | Brand names | ||
Intangible assets | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Amortization period of intangible assets | ' | ' | '5 years | '20 years | ' | ' | ' | ' | ' | ' | ' | ' |
Intangible assets, gross | $27,245 | $27,018 | ' | ' | $3,605 | $3,378 | $6,946 | $6,946 | $1,882 | $1,882 | $14,812 | $14,812 |
Less: Accumulated amortization | -6,287 | -5,443 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Intangible assets, net | 20,958 | 21,575 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
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, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Aug. 13, 2014 |
2006 Plan and 2012 Plan | 2006 Plan and 2012 Plan | 2006 Plan and 2012 Plan | 2006 Plan and 2012 Plan | 2006 Plan and 2012 Plan | 2006 Plan and 2012 Plan | 2006 Plan and 2012 Plan | 2006 Plan | 2012 Incentive Compensation Plan | 2012 Incentive Compensation Plan | |
Stock option | Stock option | Restricted shares | ||||||||
Additional information related to share based compensation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of shares authorized under the plan | ' | ' | ' | ' | ' | ' | ' | 3,000,000 | 1,100,000 | 1,100,000 |
Shares available to grant | ' | ' | ' | ' | ' | ' | ' | 101,468 | 0 | ' |
Share-based compensation expense (in dollars) | $468 | $213 | $1,011 | $729 | ' | ' | ' | ' | ' | ' |
Stock options outstanding (in shares) | ' | ' | ' | ' | 1,809,230 | ' | ' | ' | ' | ' |
Unvested restricted shares outstanding | ' | ' | ' | ' | ' | ' | 278,535 | ' | ' | ' |
Stock options granted (in shares) | ' | ' | ' | ' | 551,000 | ' | ' | ' | ' | ' |
Granted (in shares) | ' | ' | ' | ' | ' | ' | 185,064 | ' | ' | ' |
Weighted average assumptions | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Expected life | ' | ' | ' | ' | '5 years 3 months 18 days | '6 years | ' | ' | ' | ' |
Risk-free interest rate (as a percent) | ' | ' | ' | ' | 1.70% | 1.70% | ' | ' | ' | ' |
Volatility (as a percent) | ' | ' | ' | ' | 67.00% | 55.00% | ' | ' | ' | ' |
Dividend yield (as a percent) | ' | ' | ' | ' | 0.00% | 0.00% | ' | ' | ' | ' |
Forfeiture rate (as a percent) | ' | ' | ' | ' | 13.30% | 10.00% | ' | ' | ' | ' |
WEIGHTED_AVERAGE_COMMON_SHARES1
WEIGHTED AVERAGE COMMON SHARES (Details) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | |
Stock option | ' | ' |
Weighted average common shares | ' | ' |
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares) | 1,809,230 | 1,296,230 |
Restricted shares | ' | ' |
Weighted average common shares | ' | ' |
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares) | 278,535 | 172,712 |