Summer Infant (SUMR) 10-Q 5 May 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Apr. 02, 2016	May. 01, 2016
Document and Entity Information
Entity Registrant Name	Summer Infant, Inc.
Entity Central Index Key	1,314,772
Document Type	10-Q
Document Period End Date	Apr. 2, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		18,701,810
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q1

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 02, 2016	Jan. 02, 2016
CURRENT ASSETS
Cash and cash equivalents	$ 414	$ 923
Trade receivables, net of allowance for doubtful accounts	36,489	40,514
Inventory, net	37,562	36,846
Prepaid and other current assets	2,070	1,758
TOTAL CURRENT ASSETS	76,535	80,041
Property and equipment, net	11,435	12,007
Intangible assets, net	18,336	18,512
Deferred tax assts	2,512	2,483
Other assets	101	95
TOTAL ASSETS	108,919	113,138
CURRENT LIABILITIES
Accounts payable	33,008	29,541
Accrued expenses	8,057	9,584
Current portion of long-term debt (including capital leases)	3,295	3,318
TOTAL CURRENT LIABILITIES	44,360	42,443
Long-term debt, less current portion and unamortized debt issuance costs	42,687	48,767
Other liabilities	2,868	2,962
TOTAL LIABILITIES	$ 89,915	$ 94,172
STOCKHOLDERS' EQUITY
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at April 2, 2016 and January 2, 2016, respectively
Common Stock $0.0001 par value, authorized, issued and outstanding of 49,000,000, 18,701,810, and 18,430,161 at April 2, 2016 and 49,000,000, 18,639,407, and 18,367,758 at January 2, 2016, respectively	$ 2	$ 2
Treasury Stock at cost (271,649 shares at April 2, 2016 and January 2, 2016, respectively)	(1,283)	(1,283)
Additional paid-in capital	75,971	75,812
Accumulated deficit	(53,396)	(53,063)
Accumulated other comprehensive loss	(2,290)	(2,502)
TOTAL STOCKHOLDERS' EQUITY	19,004	18,966
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 108,919	$ 113,138

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Apr. 02, 2016	Jan. 02, 2016
Condensed Consolidated Balance Sheets
Preferred Stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
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)	$ 0.0001	$ 0.0001
Common Stock, authorized	49,000,000	49,000,000
Common Stock, issued	18,701,810	18,639,407
Common Stock, outstanding	18,430,161	18,367,758
Treasury Stock at cost, shares	271,649	271,649

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Condensed Consolidated Statements of Operations
Net sales	$ 49,670	$ 53,013
Cost of goods sold	33,944	36,038
Gross profit	15,726	16,975
General and administrative expenses	10,753	10,310
Selling expense	3,916	4,868
Depreciation and amortization	1,156	1,334
Operating (loss) income	(99)	463
Interest expense, net	640	846
Loss before income taxes	(739)	(383)
Benefit for income taxes	(406)	(141)
NET LOSS	$ (333)	$ (242)
Net loss income per share:
BASIC (in dollars per share)	$ (0.02)	$ (0.01)
DILUTED (in dollars per share)	$ (0.02)	$ (0.01)
Weighted average shares outstanding:
BASIC (in shares)	18,386,572	18,178,196
DILUTED (in shares)	18,386,572	18,178,196

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Condensed Consolidated Statements of Comprehensive (Loss) Income
Net loss	$ (333)	$ (242)
Other comprehensive loss:
Foreign currency translation adjustments	212	(595)
Comprehensive (loss) income	$ (121)	$ (837)

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Cash flows from operating activities:
Net loss	$ (333)	$ (242)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization	1,129	1,297
Stock-based compensation	127	174
Changes in assets and liabilities:
Decrease (increase) in trade receivables	4,179	(2,014)
(Increase) decrease in inventory	(503)	686
(Increase) prepaids and other assets	(228)	(751)
Increase in accounts payable and accrued expenses	1,724	5,335
Net cash provided by operating activities	6,095	4,485
Cash flows from investing activities:
Acquisitions of other intangible assets		207
Acquisitions of property and equipment	(371)	(508)
Net cash used in investing activities	(371)	(715)
Cash flows from financing activities:
Proceeds from exercise of common stock options		46
(Repayment) of term loan facilities	500	375
Net repayment on revolving facilities	(5,692)	(2,096)
Net cash used in financing activities	(6,192)	(2,425)
Effect of exchange rate changes on cash and cash equivalents	(41)	(1,028)
Net (decrease) increase in cash and cash equivalents	(509)	317
Cash and cash equivalents at beginning of period	923	1,272
Cash and cash equivalents at end of period	414	1,589
Supplemental disclosure of cash flow information:
Cash paid for interest	546	751
Cash paid for income taxes	$ 241	$ 236

BASIS OF PRESENTATION AND SUMMA

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Apr. 02, 2016
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 The Company designs, markets and distributes branded juvenile health, safety and wellness products that are sold globally to large national retailers as well as independent retailers, primarily in North America. The Company currently markets its products in several product categories including monitoring, safety, nursery, baby gear, and feeding products. Most products are sold under our core brand names of Summer ® , SwaddleMe ® , Born Free ® , and Kiddopotamus®. 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 January 2, 2016 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 January 2, 2016 included in its Annual Report on Form 10-K filed with the SEC on February 24, 2016. 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. Certain prior year balances have been retrospectively reclassified for current year reporting purposes. 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 on 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 Consolidated Statements of Operations. Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and related disclosures. These estimates are based on management’s best knowledge as of the date the financial statements are published of current events and actions the Company may undertake in the future. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our financial statements. Accordingly, actual results could differ from those estimates, which could have a material effect on the reported amounts of assets and liabilities in our financial statements and results of operations. Inventory Valuation Inventory is comprised mostly of finished goods and some component parts and is stated at the lower of cost using the first-in, first-out (FIFO) method, or market (net realizable value). The Company regularly reviews slow-moving and excess inventories, and writes down inventories to net realizable value if the ultimate expected net proceeds from the disposals of excess inventory are less than the carrying cost of the merchandise. 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. The Company follows the appropriate guidance relative to uncertain tax positions. This standard provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Uncertain tax positions must meet a recognition threshold of more-likely-than-not in order for those tax positions to be recognized in the financial statements. Net Loss Per Share Basic earnings per share for the Company are computed by dividing net loss 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 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 (loss). Foreign exchange transaction gains and losses are included in the accompanying interim, condensed consolidated statement of operations. Recently Issued Accounting Pronouncements In May 2014, the FASB issued new accounting guidance related to revenue recognition. This guidance was originally proposed to be effective for reporting periods beginning after December 15, 2016, however in July 2015, the FASB approved the delay in this guidance until reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This guidance requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability. This guidance is effective for fiscal years beginning after December 15, 2015. The Company adopted this guidance in the first quarter of 2016 and it resulted in the retrospective reclassification of $1,489 as of January 2, 2016 in unamortized debt issuance costs from other assets to a direct reduction of long-term debt. In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” This guidance requires inventory within the scope of ASU 2015-11 to be measured at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years beginning after December 15, 2016. The Company has evaluated the impact this guidance will have on its consolidated financial statements and expects the impact to be immaterial. In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” This guidance eliminates the current requirement for an entity to separate deferred income tax liabilities and deferred tax assets into current and non-current amounts in a classified balance sheet. Instead, this guidance requires deferred tax liabilities, deferred tax assets, and valuation allowances be classified as noncurrent in a classified balance sheet. This ASU is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted. The Company adopted this guidance in the first quarter of 2016 and it resulted in the retrospective reclassification of $799 as of January 2, 2016 in current deferred tax assets to noncurrent deferred tax assets. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize assets and liabilities on the balance sheet for leases with lease terms greater than twelve months and disclose key information about leasing arrangements. The effective date will be the first quarter of fiscal year 2019, with early adoption permitted. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements. Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

DEBT

DEBT	3 Months Ended
	Apr. 02, 2016
DEBT
DEBT	2. DEBT Credit Facilities In April 2015, the Company and its wholly owned subsidiary, Summer Infant (USA), Inc., entered into an amended and restated loan and security agreement with Bank of America, N.A., as agent, providing for an asset-based credit facility. The Credit Facility replaced the Company’s prior credit facility with Bank of America. On December 10, 2015, the Company amended the Credit Facility with respect to (i) the interest rate under each of Revolving Facility, the FILO Facility and the Term Loan Facility; (ii) to modify the maximum leverage ratio financial covenant; (iii) to modify certain expenses and fees included within the definition of EBITDA; and (iv) to remove the occurrence of an event having a material adverse effect on the Company as an event of default (as amended, the “Credit Facility”). The Credit Facility consists of a $60,000 asset-based revolving credit facility, with a $10,000 letter of credit sub-line facility (the “Revolving Facility”), a $5,000 “first in last out” (FILO) revolving credit facility (the “FILO Facility”) and a $10,000 term loan facility (the “Term Loan Facility”). Pursuant to an accordion feature, the Credit Facility includes the ability to increase the Revolving Facility by an additional $15,000 upon the Company’s request and the agreement of the lenders participating in the increase. The total borrowing capacity under the Revolving Facility is based on a borrowing base, generally defined as 85% of the value of eligible accounts 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 total borrowing capacity under the FILO Facility is based on a borrowing base, generally defined as a specified percentage of the value of eligible accounts that steps down over time, plus a specified percentage of the value of eligible inventory that steps down over time. The scheduled maturity date of the loans under the Revolving Facility and the Term Loan Facility is April 21, 2020, and loans under the FILO Facility terminate April 21, 2018, subject in each case to customary early termination provisions. Any termination of the Revolving Facility would require termination of the Term Loan Facility and the FILO Facility. All obligations under the Credit Facility are secured by substantially all of the Company’s assets. In addition, Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the Credit Facility. Proceeds from the loans were used to (i) repay the Company’s outstanding term loan, (ii) pay fees and transaction expenses associated with the closing of the Credit Facility, (iii) pay obligations under the Credit Facility, and (iv) pay for lawful corporate purposes, including working capital. Borrowings under the Revolving Facility will bear interest, at the Company’s option, at a base rate or at LIBOR, plus applicable margins based on average quarterly availability and ranging between 2.0% and 2.5% on LIBOR borrowings and 0.5% and 1.0% on base rate borrowings. Loans under the FILO Facility and Term Loan Facility will bear interest, at the Company’s option, at a base rate or at LIBOR, plus a margin of 4.25% on LIBOR borrowings and 2.75% on base rate borrowings. Beginning on July 1, 2015, the Company was required to begin repaying the Term Loan Facility in quarterly installments of $500. Beginning with the fiscal year ending January 2, 2016, the Company was required to prepay the Term Loan Facility in an amount equal to 50% of the Company’s “excess cash flow,” as such term is defined in the Credit Facility, at the end of each fiscal year. Under the Credit Facility, the Company must comply with certain financial covenants, including that the Company (i) maintain a fixed charge coverage ratio of at least 1.0 to 1.0 for the twelve consecutive fiscal months most recently ended and (ii) maintain a certain leverage ratio at the end of each fiscal quarter. For purposes of the financial covenants, consolidated EBITDA is defined as net income before interest, taxes, depreciation and amortization, plus certain customary expenses, fees, non-cash charges and up to $2,000 of specified inventory dispositions, and minus certain customary non-cash items increasing net income and other specified items. The Credit Facility 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 Credit Facility also contains customary events of default, including the occurrence of a change of control. In the event of a default, all of the Company’s obligations under the Credit Facility may be declared immediately due and payable. For certain events of default relating to insolvency and receivership, all outstanding obligations immediately become due and payable. As of April 2, 2016, the base rate on loans was 4.5% and the LIBOR rate was 3.125%. The amount outstanding on the Revolving Facility at April 2, 2016 was $34,338. Total borrowing capacity under the Revolving Facility at April 2, 2016 was $48,004 and borrowing availability was $13,674. The amounts outstanding on the Term Loan Facility and FILO Facility at April 2, 2016 were $8,000 and $5,000, respectively. Aggregate maturities of bank debt related to the BofA credit facility: Fiscal Year ending: 2016 $ 2017 2018 2019 2020 Total $ Unamortized debt issuance costs were $1,401 at April 2, 2016 and $1,489 at January 2, 2016, and are presented as a direct deduction of long-term debt on the consolidated balance sheets.

INTANGIBLE ASSETS

INTANGIBLE ASSETS	3 Months Ended
	Apr. 02, 2016
INTANGIBLE ASSETS
INTANGIBLE ASSETS	3. INTANGIBLE ASSETS Intangible assets consisted of the following: April 2, January 2, 2016 2016 Brand names $ $ Patents and licenses Customer relationships Other intangibles $ $ Less: Accumulated amortization ) ) Intangible assets, net $ $ 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 April 2, 2016 and January 2, 2016.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Apr. 02, 2016
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, except as noted below. On May 27, 2015, the Company filed a Complaint against Carol E. Bramson, Annamaria Dooley, Kenneth N. Price, Carson J. Darling, Dulcie M. Madden, and Bruce Work in the United States District Court for the District of Rhode Island (Civil Action No. 1:15-CV-00218-5-LDA) (the “Complaint”). The Complaint alleges theft and misappropriation of the Company’s confidential and proprietary trade secrets, intellectual property, and business, branding and marketing strategies. The following updates information previously reported in Note 10, Commitments and Contingencies, under Part IV, Item 15 of the Company’s Annual Report on Form 10-K for the year ended January 2, 2016. On March 18, 2016, the Company filed a motion to dismiss certain counterclaims made by Mr. Price in his answer filed on February 23, 2016. Mr. Price filed an objection to the Company’s motion on April 18, 2016. On March 23, 2016, the Company filed an objection to Ms. Dooley’s February 19, 2016 motion to amend her counterclaims and bring a third party complaint, and Ms. Dooley filed a reply to the Company’s objection on April 18, 2016. The Company and the remaining defendants are concluding discovery, and no trial date has been set. The Company has incurred significant expenses related to this lawsuit to date and may continue to incur expenses related to this lawsuit. The Company cannot predict the outcome of this lawsuit or for how long it will remain active.

SHARE BASED COMPENSATION

SHARE BASED COMPENSATION	3 Months Ended
	Apr. 02, 2016
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 1,700,000 shares for equity awards under the Company’s 2012 Incentive Compensation Plan (as amended, “2012 Plan”). Periodically, the Company may also grant equity awards outside of its 2006 Plan and 2012 Plan as inducement grants for new hires. 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 April 2, 2016 and April 4, 2015 of $127 and $174, 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 2016 and 2015 is based on awards that are ultimately expected to vest. As of April 2, 2016, there were 1,265,844 stock options outstanding and 132,806 unvested restricted shares outstanding. During the three months ended April 2, 2016, the Company granted 7,000 stock options and granted no shares of restricted stock, respectively. The following table summarizes the weighted average assumptions used for stock options granted during the quarters ended April 2, 2016 and April 4, 2015. 2016 2015 Expected life (in years) Risk-free interest rate % % Volatility % % Dividend yield % % Forfeiture rate % % As of April 2, 2016, there are 667,485 shares available to grant under the 2006 Plan and 1,004,722 shares available to grant under the 2012 Plan. Restricted Stock Units In December 2015, the Company’s Board of Directors granted restricted stock units to the executive Chairman of the Board (the “RSUs”). The RSUs represent the right to receive shares of the Company’s common stock upon achievement of specified stock price performance metrics, and only vest if such market-based performance metrics are achieved. The RSUs expire on the date of the Company’s 2017 annual stockholder meeting. The amount of shares that ultimately vest may range from 0 shares to 194,209. The fair value of the restricted stock units was determined by utilizing a Monte Carlo simulation model, which projects the value of the Company’s stock versus the peer group under numerous scenarios and determines the value of the award based upon the present value of these projected outcomes. During the three months ended April 2, 2016, 38,278 RSUs vested. There was $48 of compensation cost recognized in the quarter ending April 2, 2016 and $22 of unrecognized compensation cost related to the RSUs. Expected cost is recognized over a weighted-average period of approximately 1 year.

WEIGHTED AVERAGE COMMON SHARES

WEIGHTED AVERAGE COMMON SHARES	3 Months Ended
	Apr. 02, 2016
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. Common stock equivalents, including stock options, are included in the calculation of dilutive common shares outstanding. However, since there was a net loss in both periods presented, the inclusion of common stock equivalents was anti-dilutive. The computation of diluted common shares for the three months ended April 2, 2016 excluded 1,265,844 stock options and 132,806 shares of restricted stock outstanding. The computation of diluted common shares for the three months ended April 4, 2015 excluded 2,154,115 stock options and 311,124 shares of restricted stock outstanding.

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	3 Months Ended
	Apr. 02, 2016
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS	7. SUBSEQUENT EVENTS The company has evaluated subsequent events through the filing date of this Quarterly Report and determined that n o subsequent events occurred that would require recognition in the condensed consolidated financial statements or disclosures in the notes thereto.

BASIS OF PRESENTATION AND SUM14

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Apr. 02, 2016
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 on 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 Consolidated Statements of Operations.
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 of assets and liabilities and related disclosures. These estimates are based on management’s best knowledge as of the date the financial statements are published of current events and actions the Company may undertake in the future. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our financial statements. Accordingly, actual results could differ from those estimates, which could have a material effect on the reported amounts of assets and liabilities in our financial statements and results of operations.
Inventory Valuation	Inventory Valuation Inventory is comprised mostly of finished goods and some component parts and is stated at the lower of cost using the first-in, first-out (FIFO) method, or market (net realizable value). The Company regularly reviews slow-moving and excess inventories, and writes down inventories to net realizable value if the ultimate expected net proceeds from the disposals of excess inventory are less than the carrying cost of the merchandise.
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. The Company follows the appropriate guidance relative to uncertain tax positions. This standard provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Uncertain tax positions must meet a recognition threshold of more-likely-than-not in order for those tax positions to be recognized in the financial statements.
Net Loss Per Share	Net Loss Per Share Basic earnings per share for the Company are computed by dividing net loss 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 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 (loss). Foreign exchange transaction gains and losses are included in the accompanying interim, condensed consolidated statement of operations.
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In May 2014, the FASB issued new accounting guidance related to revenue recognition. This guidance was originally proposed to be effective for reporting periods beginning after December 15, 2016, however in July 2015, the FASB approved the delay in this guidance until reporting periods beginning after December 15, 2017. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements. In April 2015, the FASB issued ASU 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This guidance requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability. This guidance is effective for fiscal years beginning after December 15, 2015. The Company adopted this guidance in the first quarter of 2016 and it resulted in the retrospective reclassification of $1,489 as of January 2, 2016 in unamortized debt issuance costs from other assets to a direct reduction of long-term debt. In July 2015, the FASB issued ASU 2015-11, “Simplifying the Measurement of Inventory.” This guidance requires inventory within the scope of ASU 2015-11 to be measured at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years beginning after December 15, 2016. The Company has evaluated the impact this guidance will have on its consolidated financial statements and expects the impact to be immaterial. In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes.” This guidance eliminates the current requirement for an entity to separate deferred income tax liabilities and deferred tax assets into current and non-current amounts in a classified balance sheet. Instead, this guidance requires deferred tax liabilities, deferred tax assets, and valuation allowances be classified as noncurrent in a classified balance sheet. This ASU is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption is permitted. The Company adopted this guidance in the first quarter of 2016 and it resulted in the retrospective reclassification of $799 as of January 2, 2016 in current deferred tax assets to noncurrent deferred tax assets. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize assets and liabilities on the balance sheet for leases with lease terms greater than twelve months and disclose key information about leasing arrangements. The effective date will be the first quarter of fiscal year 2019, with early adoption permitted. The Company is evaluating the impact that adoption of this new standard will have on its consolidated financial statements. Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

DEBT (Tables)

DEBT (Tables)	3 Months Ended
	Apr. 02, 2016
DEBT
Schedule of aggregate maturities of bank debt	Fiscal Year ending: 2016 $ 2017 2018 2019 2020 Total $

INTANGIBLE ASSETS (Tables)

INTANGIBLE ASSETS (Tables)	3 Months Ended
	Apr. 02, 2016
INTANGIBLE ASSETS
Schedule of intangible assets	April 2, January 2, 2016 2016 Brand names $ $ Patents and licenses Customer relationships Other intangibles $ $ Less: Accumulated amortization ) ) Intangible assets, net $ $

SHARE BASED COMPENSATION (Table

SHARE BASED COMPENSATION (Tables)	3 Months Ended
	Apr. 02, 2016
SHARE BASED COMPENSATION
Schedule of weighted average assumptions used for stock options granted	2016 2015 Expected life (in years) Risk-free interest rate % % Volatility % % Dividend yield % % Forfeiture rate % %

BASIS OF PRESENTATION AND SUM18

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	Apr. 02, 2016	Jan. 02, 2016
Recently Issued Accounting Pronouncements
Other assets	$ 101	$ 95
Long-term debt	$ 42,687	48,767
Accounting Standards Update ("ASU") 2015-03 - Simplifying the Presentation of Debt Issuance Costs | Retrospective adjustments
Recently Issued Accounting Pronouncements
Other assets		(1,489)
Long-term debt		(1,489)
Accounting Standards Update ("ASU") 2015-17 - Income Taxes: Balance Sheet Classification of Deferred Taxes | Retrospective adjustments
Recently Issued Accounting Pronouncements
Current deferred tax assets		(799)
Noncurrent deferred tax assets		$ 799

DEBT - Credit Facilities (Detai

DEBT - Credit Facilities (Details) $ in Thousands	Jul. 01, 2015USD ($)	Feb. 28, 2013USD ($)	Apr. 02, 2016USD ($)	Jan. 02, 2016
Debt
Amount outstanding			$ 47,338
LIBOR
Debt
Applicable margin (as a percent)			3.125%
Base rate
Debt
Applicable margin (as a percent)			4.50%
Term Loan Facility
Debt
Required prepayment amount of excess cash flow beginning with fiscal year ending January 2, 2016 (as a percent)				50.00%
Quarterly payment due beginning July 1, 2015	$ 500
Amount outstanding			$ 8,000
BofA Agreement
Debt
Additional borrowing capacity available upon Company request			$ 15,000
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%
Number of most recent consecutive months used to measure fixed charge coverage ratio			12 months
BofA Agreement | LIBOR
Debt
Variable interest rate base			LIBOR
Variable rate basis at the end of the period			4.25%
BofA Agreement | Base rate
Debt
Variable interest rate base			base rate
Variable rate basis at the end of the period			2.75%
BofA Agreement | Minimum | LIBOR
Debt
Applicable margin (as a percent)			2.00%
BofA Agreement | Minimum | Base rate
Debt
Applicable margin (as a percent)			0.50%
BofA Agreement | Maximum | LIBOR
Debt
Applicable margin (as a percent)			2.50%
BofA Agreement | Maximum | Base rate
Debt
Applicable margin (as a percent)			1.00%
BofA Agreement | Term Loan Facility
Debt
Maximum amount of credit available			$ 10,000
BofA Agreement | At February 28, 2014 | Maximum
Debt
Specified inventory dispositions for financial covenant EBITDA		$ 2,000
BofA Agreement | Beginning with the fiscal quarter ending July, 4, 2015 | Minimum
Debt
Fixed charge coverage ratio			1
BofA Agreement | Beginning with the quarter ending on June 30, 2012
Debt
Period of fixed charge coverage ratio		1 year
Asset-based revolving credit facility
Debt
Maximum amount of credit available			$ 60,000
Revolving Facility
Debt
Maximum amount of credit available			10,000
Current amount of credit available			48,004
Available borrowing capacity			13,674
Revolving Facility | Base rate
Debt
Amount outstanding			34,338
FILO Facility
Debt
Maximum amount of credit available			5,000
Amount outstanding			$ 5,000

DEBT - maturities of bank debt

DEBT - maturities of bank debt (Details) - USD ($) $ in Thousands	Apr. 02, 2016	Jan. 02, 2016
Aggregate maturities of bank debt
2,016	$ 2,750
2,017	4,500
2,018	3,250
2,019	2,000
2,020	34,838
Total	47,338
Debt extinguishment
Unamortized Debt Issuance Cost	1,401	$ 1,489
Asset-based revolving credit facility
Aggregate maturities of bank debt
Maximum amount of credit available	60,000
Revolving Facility
Aggregate maturities of bank debt
Maximum amount of credit available	10,000
FILO Facility
Aggregate maturities of bank debt
Total	5,000
Maximum amount of credit available	$ 5,000

INTANGIBLE ASSETS (Details)

INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2016	Jan. 02, 2016
Intangible assets
Intangible assets, gross	$ 27,406	$ 27,406
Less: accumulated amortization	(9,070)	(8,894)
Intangible assets, net	18,336	18,512
Intangibles not subject to amortization	$ 12,308	12,308
Minimum
Intangible assets
Amortization period of intangible assets	5 years
Maximum
Intangible assets
Amortization period of intangible assets	20 years
Patents and licenses
Intangible assets
Intangible assets, gross	$ 3,766	3,766
Customer relationship
Intangible assets
Intangible assets, gross	6,946	6,946
Other intangibles
Intangible assets
Intangible assets, gross	1,882	1,882
Brand names
Intangible assets
Intangible assets, gross	$ 14,812	$ 14,812

SHARE BASED COMPENSATION (Detai

SHARE BASED COMPENSATION (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Additional information related to share based compensation
Unvested restricted shares outstanding	38,278
Stock options
Additional information related to share based compensation
Stock options granted (in shares)	7,000
2006 Plan and 2012 Plan
Additional information related to share based compensation
Share-based compensation expense	$ 127	$ 174
2006 Plan and 2012 Plan | Stock options
Additional information related to share based compensation
Stock options outstanding (in shares)	1,265,844
Weighted average assumptions
Expected life	5 years 1 month 6 days	5 years 3 months 18 days
Risk-free interest rate (as a percent)	1.30%	1.70%
Volatility (as a percent)	70.20%	62.60%
Dividend yield (as a percent)	0.00%	0.00%
Forfeiture rate (as a percent)	20.00%	10.90%
2006 Plan and 2012 Plan | Restricted Stock Awards
Additional information related to share based compensation
Unvested restricted shares outstanding	132,806
2006 Plan
Additional information related to share based compensation
Number of shares authorized under the plan	3,000,000
Shares available to grant	667,485
2012 Incentive Compensation Plan
Additional information related to share based compensation
Number of shares authorized under the plan	1,700,000
Shares available to grant	1,004,722

SHARE BASED COMPENSATION - Rest

SHARE BASED COMPENSATION - Restricted Stock (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Number of Shares
Non Vested restricted stock awards at the end of the period (in shares)	38,278
Restricted Stock Units
Restricted stock awards, additional disclosure
Share-based compensation expense	$ 48
Unrecognized compensation cost	$ 22
Minimum | Restricted Stock Units
Number of Shares
Granted (in shares)	0
Maximum | Restricted Stock Units
Number of Shares
Granted (in shares)	194,209
2006 Plan and 2012 Plan
Restricted stock awards, additional disclosure
Share-based compensation expense	$ 127	$ 174
2006 Plan and 2012 Plan | Restricted Stock Awards
Number of Shares
Non Vested restricted stock awards at the end of the period (in shares)	132,806
2006 Plan
Additional information related to share based compensation
Shares available to grant	667,485
2012 Incentive Compensation Plan
Additional information related to share based compensation
Shares available to grant	1,004,722

WEIGHTED AVERAGE COMMON SHARES

WEIGHTED AVERAGE COMMON SHARES (Details) - shares	3 Months Ended
	Apr. 02, 2016	Apr. 04, 2015
Stock options
Weighted average common shares
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares)	1,265,844	2,154,115
Restricted Stock Awards
Weighted average common shares
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares)	132,806	311,124