Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 26, 2020 | Nov. 06, 2020 | |
Document and Entity Information | ||
Entity Registrant Name | Summer Infant, Inc. | |
Document Type | 10-Q | |
Document Period End Date | Sep. 26, 2020 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Trading Symbol | SUMR | |
Security Exchange Name | NASDAQ | |
Title of 12(b) Security | Common Stock, par value $0.0001 | |
Entity Common Stock, Shares Outstanding | 2,131,507 | |
Entity Central Index Key | 0001314772 | |
Current Fiscal Year End Date | --01-02 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 26, 2020 | Dec. 28, 2019 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 871 | $ 395 |
Trade receivables, net of allowance for doubtful accounts | 30,757 | 32,787 |
Inventory, net | 24,460 | 28,056 |
Prepaids and other current assets | 2,814 | 2,946 |
TOTAL CURRENT ASSETS | 58,902 | 64,184 |
Property and equipment, net | 5,205 | 8,788 |
Other intangible assets, net | 12,613 | 12,896 |
Right of use assets, noncurrent | 4,225 | 4,578 |
Deferred tax assets, net | 1,615 | 996 |
Other assets | 99 | 101 |
TOTAL ASSETS | 82,659 | 91,543 |
CURRENT LIABILITIES | ||
Accounts payable | 29,460 | 25,396 |
Accrued expenses | 7,858 | 7,289 |
Lease liabilities, current | 2,877 | 2,495 |
Current portion of long term debt | 656 | 875 |
TOTAL CURRENT LIABILITIES | 40,851 | 36,055 |
Long-term debt, less current portion and unamortized debt issuance costs | 32,130 | 45,359 |
Lease liabilities, noncurrent | 1,629 | 2,546 |
Other liabilities | 2,000 | |
TOTAL LIABILITIES | 74,610 | 85,960 |
STOCKHOLDERS' EQUITY | ||
Preferred Stock, $0.0001 par value, 1,000,000 authorized, none issued or outstanding at September 26, 2020 and December 28, 2019, respectively | ||
Common Stock $0.0001 par value, authorized, issued and outstanding of 49,000,000, 2,161,692 and 2,131,507 at September 26, 2020 and 49,000,000, 2,138,926, and 2,108,743 at December 28, 2019, respectively | 2 | 2 |
Treasury Stock at cost (30,185 shares at September 26, 2020 and December 28, 2019) | (1,283) | (1,283) |
Additional paid-in capital | 77,861 | 77,715 |
Accumulated deficit | (66,801) | (69,088) |
Accumulated other comprehensive loss | (1,730) | (1,763) |
TOTAL STOCKHOLDERS' EQUITY | 8,049 | 5,583 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 82,659 | $ 91,543 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 26, 2020 | Dec. 28, 2019 |
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 | 2,161,692 | 2,138,926 |
Common Stock, outstanding | 2,131,507 | 2,108,743 |
Treasury Stock at cost, shares | 30,185 | 30,185 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Condensed Consolidated Statements of Operations | ||||
Net sales | $ 40,704 | $ 41,523 | $ 119,256 | $ 130,486 |
Cost of goods sold | 27,168 | 28,928 | 79,178 | 89,599 |
Gross profit | 13,536 | 12,595 | 40,078 | 40,887 |
General & administrative expenses | 6,890 | 8,353 | 21,766 | 26,255 |
Selling expenses | 2,802 | 3,597 | 9,984 | 10,981 |
Depreciation and amortization | 783 | 919 | 2,563 | 2,808 |
Operating income (loss) | 3,061 | (274) | 5,765 | 843 |
Interest expense | 1,017 | 1,191 | 3,548 | 3,733 |
Income (loss) before (benefit) provision for income taxes | 2,044 | (1,465) | 2,217 | (2,890) |
(Benefit) provision for income taxes | (166) | 195 | (70) | 392 |
Net income (loss) | $ 2,210 | $ (1,660) | $ 2,287 | $ (3,282) |
Net income (loss) per share: | ||||
BASIC (in dollars per share) | $ 1.04 | $ (0.79) | $ 1.08 | $ (1.56) |
DILUTED (in dollars per share) | $ 1.03 | $ (0.79) | $ 1.08 | $ (1.56) |
Weighted average shares outstanding: | ||||
BASIC (in shares) | 2,126,497 | 2,104,207 | 2,115,694 | 2,098,886 |
DILUTED (in shares) | 2,155,791 | 2,104,207 | 2,120,044 | 2,098,886 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Condensed Consolidated Statements of Comprehensive Income (Loss) | ||||
Net income (loss) | $ 2,210 | $ (1,660) | $ 2,287 | $ (3,282) |
Other comprehensive income (loss): | ||||
Changes in foreign currency translation adjustments | 40 | (100) | 33 | 113 |
Comprehensive income (loss) | $ 2,250 | $ (1,760) | $ 2,320 | $ (3,169) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 26, 2020 | Sep. 28, 2019 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 2,287 | $ (3,282) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||
Depreciation and amortization | 2,563 | 2,808 |
Stock-based compensation expense | 135 | 224 |
Write off of unamortized deferred financing costs | 266 | |
(Recovery of) provision for allowance for doubtful accounts | (14) | 21 |
Paid in kind interest expense | 366 | |
Amortization of right of use assets | 1,810 | 1,569 |
Changes in assets and liabilities: | ||
Decrease in trade receivables | 1,988 | 1,666 |
Decrease in inventory | 3,539 | 6,098 |
Decrease in lease liability | (1,992) | (1,053) |
Increase (decrease) in prepaids and other assets | 178 | (351) |
Increase (decrease) in accounts payable and accrued expenses | 4,037 | (6,558) |
Net cash provided by operating activities | 15,163 | 1,142 |
Cash flows from investing activities: | ||
Acquisitions of property and equipment | (1,052) | (1,632) |
Acquisitions of other intangible assets | (83) | (281) |
Net cash used in investing activities | (1,135) | (1,913) |
Cash flows from financing activities: | ||
Issuance of common stock upon exercise of stock options | 11 | |
Proceeds from Paycheck Protection Program loan | 1,956 | |
Repayment of Term Loan Facility | (656) | |
Net (repayment) borrowings on revolving facilities | (15,623) | 1,484 |
Net cash (used in) provided by financing activities | (13,656) | 828 |
Effect of exchange rate changes on cash and cash equivalents | 104 | (119) |
Net increase (decrease) in cash and cash equivalents | 476 | (62) |
Cash and cash equivalents, beginning of period | 395 | 721 |
Cash and cash equivalents, end of period | 871 | 659 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 2,300 | 2,878 |
Cash (refunded) paid for income taxes | (204) | $ 5 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Derecognition of a building sale-leaseback fixed asset, net of depreciation | 2,357 | |
Derecognition of a building sale-leaseback financial obligation | (2,390) | |
Right-of-use asset acquired through new operating lease | (1,457) | |
Lease liability acquired through new operating lease | $ 1,457 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Additional Paid in Capital | Treasury Stock | Accumulated Deficit | Accumulated Comprehensive Loss | Total |
Balance, beginning of period at Dec. 29, 2018 | $ 2 | $ 77,396 | $ (1,283) | $ (63,885) | $ (2,960) | $ 9,270 |
Balance, beginning of period (in shares) at Dec. 29, 2018 | 2,091,178 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Issuance of common stock upon vesting of restricted shares (in shares) | 3,681 | |||||
Stock-based compensation | 48 | 48 | ||||
Net income (loss) for the period | (1,398) | (1,398) | ||||
Foreign currency translation adjustment | 165 | 165 | ||||
Balance, end of period at Mar. 30, 2019 | $ 2 | 77,444 | (1,283) | (65,283) | (2,795) | 8,085 |
Balance, end of period (in shares) at Mar. 30, 2019 | 2,094,859 | |||||
Balance, beginning of period at Dec. 29, 2018 | $ 2 | 77,396 | (1,283) | (63,885) | (2,960) | 9,270 |
Balance, beginning of period (in shares) at Dec. 29, 2018 | 2,091,178 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Net income (loss) for the period | (3,282) | |||||
Foreign currency translation adjustment | 113 | |||||
Balance, end of period at Sep. 28, 2019 | $ 2 | 77,620 | (1,283) | (67,167) | (2,847) | 6,325 |
Balance, end of period (in shares) at Sep. 28, 2019 | 2,104,608 | |||||
Balance, beginning of period at Mar. 30, 2019 | $ 2 | 77,444 | (1,283) | (65,283) | (2,795) | 8,085 |
Balance, beginning of period (in shares) at Mar. 30, 2019 | 2,094,859 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Issuance of common stock upon vesting of restricted shares (in shares) | 8,109 | |||||
Stock-based compensation | 104 | 104 | ||||
Net income (loss) for the period | (224) | (224) | ||||
Foreign currency translation adjustment | 48 | 48 | ||||
Balance, end of period at Jun. 29, 2019 | $ 2 | 77,548 | (1,283) | (65,507) | (2,747) | 8,013 |
Balance, end of period (in shares) at Jun. 29, 2019 | 2,102,968 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Issuance of common stock upon vesting of restricted shares (in shares) | 1,640 | |||||
Stock-based compensation | 72 | 72 | ||||
Net income (loss) for the period | (1,660) | (1,660) | ||||
Foreign currency translation adjustment | (100) | (100) | ||||
Balance, end of period at Sep. 28, 2019 | $ 2 | 77,620 | (1,283) | (67,167) | (2,847) | 6,325 |
Balance, end of period (in shares) at Sep. 28, 2019 | 2,104,608 | |||||
Balance, beginning of period at Dec. 28, 2019 | $ 2 | 77,715 | (1,283) | (69,088) | (1,763) | 5,583 |
Balance, beginning of period (in shares) at Dec. 28, 2019 | 2,108,743 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Issuance of common stock upon vesting of restricted shares (in shares) | 1,064 | |||||
Stock-based compensation | (11) | (11) | ||||
Fractional share issuance upon reverse stock split | 1,620 | |||||
Net income (loss) for the period | (1,210) | (1,210) | ||||
Foreign currency translation adjustment | (55) | (55) | ||||
Balance, end of period at Mar. 28, 2020 | $ 2 | 77,704 | (1,283) | (70,298) | (1,818) | 4,307 |
Balance, end of period (in shares) at Mar. 28, 2020 | 2,111,427 | |||||
Balance, beginning of period at Dec. 28, 2019 | $ 2 | 77,715 | (1,283) | (69,088) | (1,763) | 5,583 |
Balance, beginning of period (in shares) at Dec. 28, 2019 | 2,108,743 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Net income (loss) for the period | 2,287 | |||||
Foreign currency translation adjustment | 33 | |||||
Balance, end of period at Sep. 26, 2020 | $ 2 | 77,861 | (1,283) | (66,801) | (1,730) | 8,049 |
Balance, end of period (in shares) at Sep. 26, 2020 | 2,131,507 | |||||
Balance, beginning of period at Mar. 28, 2020 | $ 2 | 77,704 | (1,283) | (70,298) | (1,818) | 4,307 |
Balance, beginning of period (in shares) at Mar. 28, 2020 | 2,111,427 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Issuance of common stock upon vesting of restricted shares (in shares) | 2,676 | |||||
Stock-based compensation | 42 | 42 | ||||
Net income (loss) for the period | 1,287 | 1,287 | ||||
Foreign currency translation adjustment | 48 | 48 | ||||
Balance, end of period at Jun. 27, 2020 | $ 2 | 77,746 | (1,283) | (69,011) | (1,770) | 5,684 |
Balance, end of period (in shares) at Jun. 27, 2020 | 2,114,103 | |||||
Increase (Decrease) in Shareholders' Equity | ||||||
Issuance of common stock upon vesting of restricted shares (in shares) | 16,014 | |||||
Issuance of common stock upon exercise of stock options | 11 | 11 | ||||
Issuance of common stock upon exercise of stock options (in shares) | 1,390 | |||||
Stock-based compensation | 104 | 104 | ||||
Net income (loss) for the period | 2,210 | 2,210 | ||||
Foreign currency translation adjustment | 40 | 40 | ||||
Balance, end of period at Sep. 26, 2020 | $ 2 | $ 77,861 | $ (1,283) | $ (66,801) | $ (1,730) | $ 8,049 |
Balance, end of period (in shares) at Sep. 26, 2020 | 2,131,507 |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 26, 2020 | |
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 safety, nursery, monitoring, and baby gear. Most products are sold under our core brand names of Summer™, SwaddleMe ® , and born free TM . When used herein, the terms the “Company,” “we,” “us,” and “our” mean Summer Infant, Inc. and its consolidated subsidiaries. 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 28, 2019 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 28, 2019 included in its Annual Report on Form 10-K filed with the SEC on March 18, 2020, as amended on April 24, 2020. 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. In March 2020, the Company completed a 1-for-9 reverse stock split of the Company's issued and outstanding shares of common stock in order to regain compliance with Nasdaq's minimum bid price requirement. Accordingly, all information in the financial statements and accompanying notes included within this Quarterly Report on Form 10-Q have been adjusted retrospectively to give effect to the reverse stock split as if it occurred at the beginning of the first period presented. Reclassification Previously reported amounts have been revised in the accompanying condensed consolidated statement of cash flows to properly state certain right to use assets and lease liabilities. These revisions had no impact on the Company’s net cash provided by operating activities. Revenue Recognition The Company recognizes revenue to depict the transfer of promised goods to customers in an amount that reflects what it expects to receive in exchange for the goods. The Company’s principal activities from which it generates its revenue is product sales. The Company has one reportable segment of business. Revenue is measured based on consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control over a product to a customer when product delivery occurs. Consideration is typically paid approximately 60 days from the time control is transferred. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in selling costs. A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for the Company is transfer of juvenile products to its customers. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. A transaction price is the amount of consideration the Company expects to receive under the arrangement. The Company is required to estimate variable consideration (if any) and to factor that estimation into the determination of the transaction price. The Company conducts its business with customers through valid purchase or sales orders each of which is considered a separate contract because individual orders are not interdependent on one another. Product transaction prices on a purchase or sale order are discrete and stand-alone. Purchase or sales orders may be issued under either a customer master service agreement or a reseller allowance agreement. Purchase or sales orders, master service agreements, and reseller allowance agreements, which are specific and unique to each customer, may include product price discounts, markdown allowances, return allowances, and/or volume rebates which reduce the consideration due from customers. Variable consideration is estimated using the most likely amount method, which is based on historical experience as well as current information such as sales forecasts. Contracts may also include cooperative advertising arrangements where the Company allows a discount from invoiced product amounts in exchange for customer purchased advertising that features the Company’s products. These allowances are generally based upon product purchases or specific advertising campaigns. Such allowances are accrued when the related revenue is recognized. These cooperative advertising arrangements provide a distinct benefit and fair value and are accounted for as direct selling expenses. 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 revenues, expenses, assets, 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. Accordingly, actual results could differ from those estimates. Trade Receivables Trade receivables are carried at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers’ ability to pay and current economic trends. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible. Amounts are considered to be uncollectable based upon historical experience and management’s evaluation of outstanding accounts receivable. Changes in the allowance for doubtful accounts are as follows: For the Nine months ended September 26, 2020 September 28, 2019 Allowance for doubtful accounts, beginning of period $ $ 304 (Reversals of) charges to costs and expenses, net 21 Account write-offs — Allowance for doubtful accounts, end of period $ $ 325 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 net realizable value. The Company regularly reviews slow-moving and excess inventories, and writes down inventories to net realizable value if the expected net proceeds from the disposals of excess inventory are less than the carrying cost of the merchandise. Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Company’s condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company’s uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although separation of lease and non-lease components is required, certain practical expedients are available to entities. Entities electing the practical expedient would not separate lease and non-lease components. Rather, they would account for each lease component and the related non-lease component together as a single component. The Company’s facilities operating leases have lease and non-lease components to which the Company has elected to apply the practical expedient and account for each lease component and related non-lease component as one single component. The lease component results in a ROU asset being recorded on the balance sheet. Lease expense for lease payments is recognized on a straight-line basis over the lease term. 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 net deferred tax assets and liabilities are presented as noncurrent. The Company utilized the discrete method of accounting for income taxes in the U.S. for the three and nine months ended September 26, 2020 and for the three and nine months ended September 28, 2019 as it believes the discrete method results in a more accurate representation of the income tax provision for the periods. 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. On March 27, 2020, the U.S. CARES Act was enacted, which provided a substantial tax-and-spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The U.S. CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. As a result of the U.S. CARES Act tax law changes and revised final regulations released on July 28, 2020, we recognized a $624 tax benefit for the nine months ended September 26, 2020 related to the increase in interest deduction occurring during the fiscal years ended December 28, 2019 and December 29, 2018 which was previously fully reserved for. The impact of the U.S. CARES Act in prospective periods may differ from our estimate as of September 26, 2020 due to changes in interpretations and assumptions, additional guidance that may be issued and actions the Company may take in response to the U.S. CARES Act. The U.S. CARES Act is highly detailed, and the Company will continue to assess the impact that various provisions will have on its business. Net Loss/Income Per Share Basic income or loss per share for the Company is computed by dividing net income or loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income or loss per share includes the dilutive impact of outstanding stock options and unvested restricted shares. Translation of Foreign Currencies Assets and liabilities of the Company’s foreign subsidiaries whose functional currency is 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 loss. Assets and liabilities of the Company’s foreign subsidiaries whose functional currency is the U.S. dollar are remeasured into U.S. dollars at their historical rates or the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been remeasured at average rates prevailing during each respective quarter. Resulting remeasurement adjustments are made to the condensed consolidated statement of operations. Foreign exchange transaction gains and losses are included in the accompanying interim condensed consolidated statement of operations. 2020 Plan and COVID-19 Pandemic In March 2020, the COVID-19 outbreak was declared a global pandemic and became widespread in the U.S. While our products are considered “essential” and our distribution center located in California continues to operate, some of our customers have been impacted and, to the extent they operated retail stores, have been required to close their stores and curtail operations. We began to see an impact on orders at the end of March and have continued to see lower demand from our mid-sized and smaller customers as governmental restrictions on businesses remain in place and with the resurgence of COVID-19. Due to the uncertainty with respect to when governmental restrictions may be lifted and the widespread nature of the pandemic, we cannot currently predict how it will impact our business in the long term. The Company is not currently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update any estimates, judgments or materially revise the carrying value of our assets or liabilities. The Company’s estimates may change, however, as events evolve and additional information is obtained, and any such changes will be recognized in the condensed consolidated financial statements. Beginning in the first quarter of 2020, the Company implemented various restructuring initiatives to streamline operations and support its liquidity needs, including headcount reductions, reductions in facility space, and other cost reductions, as well as working with its lenders to amend its credit facility and term loan agreement to undertake these restructuring initiatives and to provide availability. In addition, the Company began taking actions to mitigate the impact of the expiration in August 2020 of tariff exclusions previously granted with respect to certain of its products, including seeking price increases from its customers and alternative manufacturing sources. In light of the ongoing uncertainty surrounding the COVID-19 pandemic in the U.S. and other countries and unpredictable economic consequences in the coming months, the Company applied for and in August 2020, received a loan through the Paycheck Protection Program of the U.S. CARES Act in the amount of $1,956, which may be used to fund certain qualified expenses, including payroll costs, rent and utility costs. Further, as noted in Note 9, after the end of the third quarter the Company refinanced its existing debt. The Company believes that its existing plan will generate sufficient cash which, along with its existing cash and availability under its facilities, will enable it to fund operations through at least the next 12 months. To the extent the Company experiences unexpected impacts from the COVID-19 pandemic or is unable to meet its current financial forecast, the Company would take further action to reduce costs, mitigate risks to its supply chain and, if necessary, seek to raise additional funds through debt or equity financings, engage in strategic collaborations, and/or a strategic transaction. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 9 Months Ended |
Sep. 26, 2020 | |
REVENUE RECOGNITION | |
REVENUE RECOGNITION | 2. REVENUE RECOGNITION Disaggregation of Revenue The Company’s revenue is primarily from distinct fixed-price product sales in the juvenile product market, to similar customers and channels utilizing similar types of contracts that are short term in nature (less than one year). The Company does not sell service agreements or goods over a period of time and does not sell or utilize customer financing arrangements or time-and-material contracts. The following is a table that presents net sales by geographical area: For the Three For the Three Months Ended Months Ended September 26, 2020 September 28, 2019 United States $ 35,729 $ 35,833 All Other 4,975 5,690 Net Sales $ 40,704 $ 41,523 For the nine For the nine months ended months ended September 26, 2020 September 28, 2019 United States $ 107,307 $ 111,133 All Other 11,949 19,353 Net Sales $ 119,256 $ 130,486 All Other consists of Canada, Europe, South America, Mexico, Asia, and the Middle East. Contract Balances The Company does not have any contract assets such as work-in-process or contract liabilities such as customer advances. All trade receivables on the Company's condensed consolidated balance sheet are from contracts with customers. Contract Costs Costs incurred to obtain a contract are capitalized unless short term in nature. As a practical expedient, costs to obtain a contract that are short term in nature are expensed as incurred. All contract costs incurred in the three and nine months ended September 26, 2020 and three and nine months ended September 28, 2019 fall under the provisions of the practical expedient and have therefore been expensed . |
DEBT
DEBT | 9 Months Ended |
Sep. 26, 2020 | |
DEBT | |
DEBT | 3. DEBT Credit Facilities On October 15, 2020, the Company and its subsidiary, Summer Infant (USA), Inc., as borrowers, entered into a Third Amended and Restated Loan and Security Agreement (the “Third Restated BofA Agreement”) with Bank of America, N.A. (“BofA”) that replaced its existing agreement with BofA and funded in part the prepayment of the Company’s outstanding term loan with Pathlight Capital LLC, increased revolver and lowered its interest rates. Information about the Third Restated BofA Agreement is included below in Note 9. The following description of debt reflects the Company’s agreements that were effective as of September 26, 2020. Bank of America Credit Facility. On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Second Amended and Restated Loan and Security Agreement with Bank of America, N.A., as agent, the financial institutions party to the agreement from time to time as lenders, and certain subsidiaries of the Company as guarantors, as amended through August 2020 (as amended, the “Restated BofA Agreement”). The Restated BofA Agreement replaced the Company’s prior credit facility with Bank of America, and provided for an asset-based revolving credit facility with a letter of credit sub-line facility. As of September 26, 2020, total revolver commitments under the credit facility were $48,000. The total borrowing capacity as of September 26, 2020 was based on a borrowing base, 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, less applicable reserves. The scheduled maturity date of loans under the Restated BofA Agreement was June 28, 2023 (subject to customary early termination provisions). As a result of the amendments made to the Restated BofA Agreement in the first nine months of 2020, (i) the definition of Financial Covenant Trigger Amount was modified, (ii) the lenders' aggregate revolver commitments were reduced to $48,000, (iii) the definition of EBITDA was amended to exclude certain fees and expenses, (iv) the Company was required to meet certain minimum net sales amounts for each period of three consecutive fiscal months through the three-month period ending December 31, 2020, (v) the Company was required to meet a certain minimum EBITDA (as defined in the Restated BofA Agreement) as of the end of each fiscal month, calculated on a trailing 12-month basis, (vi) the applicable margin and applicable unused line fee rate were increased, (vii) a LIBOR floor of 0.75% was added, (viii) certain reporting requirements were modified, (ix) the maximum percentage of accounts owing from the Amazon Companies that could be included as eligible accounts was temporarily increased and (x) certain provisions were modified to accommodate the PPP Loan described below. All obligations under the Restated BofA Agreement were secured by substantially all the assets of the Company, including a first priority lien on accounts receivable and inventory and a junior lien on certain assets subject to the Term Loan lender’s first priority lien described below. Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, were guarantors under the Restated BofA Agreement. Proceeds from the loans were used to satisfy existing debt, pay fees and transaction expenses associated with the closing of the Restated BofA Agreement and could be used to pay obligations under the Restated BofA Agreement, and for lawful corporate purposes, including working capital. Loans under the Restated BofA Agreement bore interest, at the Company’s option, at a base rate or at LIBOR, plus applicable margins based on average quarterly availability under the Restated BofA Agreement. Interest payments were due monthly, payable in arrears. The Company was also required to pay an annual non-use fee on unused amounts, as well as other customary fees as are set forth in the Restated BofA Agreement. The Restated BofA Agreement contained customary affirmative and negative covenants. Among other restrictions, the Company was restricted in its ability to incur additional debt, make acquisitions or investments, dispose of assets, or make distributions unless in each case certain conditions were satisfied. The Company was also required to meet certain financial covenants through the end of fiscal 2020, specifically (a) a minimum net sales amount for each period of three consecutive fiscal months, measured at the end of each month, and (b) a trailing, 12-month minimum adjusted EBITDA amount (as defined in the Restated BofA Agreement), measured at the end of each fiscal month. In addition, if availability fell below agreed minimum amounts, a springing covenant would have been in effect requiring the Company to maintain a fixed charge coverage ratio at the end of each fiscal month of at least 1.0 to 1.0 for the twelve-month period then ended. The Restated BofA Agreement also contained customary events of default, including a cross default with the Term Loan Agreement described below or the occurrence of a change of control. In the event of a default, the lenders could declare all of the obligations of the Company and its subsidiaries under the Restated BofA Agreement immediately due and payable. For events of default relating to insolvency and receivership, all outstanding obligations automatically would have become due and payable without any action on the part of the lenders. As of September 26, 2020, under the Restated BofA Agreement, the rate on base-rate loans was 5.75% and the rate on LIBOR-rate loans was 4.25%. The amount outstanding on the Restated BofA Agreement at September 26, 2020, was $16,255 and borrowing availability was $15,924. The amendments executed in the nine months ended September 26, 2020 were evaluated to determine the proper accounting treatment for the transactions. Accordingly, debt extinguishment accounting was used to account for the reduction in the total revolver commitments under the credit facility, resulting in the write off of $266 in remaining unamortized deferred financing costs during the three months ended March 28, 2020. Term Loan Agreement. On June 28, 2018, the Company and Summer Infant (USA), Inc., as borrowers, entered into a Term Loan and Security Agreement with Pathlight Capital LLC, as agent, each lender from time to time a party thereto, and certain subsidiaries of the Company as guarantors, as amended of IP Advance Rate Reduction was modified , (ii) t he definition of Term Loan Borrowing Base was modified to deduct a specified equipment reserve amount from the calculation of the borrowing base, (iii) the definitions of Financial Covenant Trigger Amount and EBITDA were amended consistent with the Restated BofA Agreement, (iv) consistent with the Restated BofA Agreement, the Company was required to meet certain minimum net sales amounts for each period of three consecutive fiscal months through the three-month period ending December 31, 2020 and certain minimum EBITDA as of the end of each fiscal month, calculated on a trailing 12-month period, (v) principal payments on the term loan were suspended for 2020 and such payments were to resume in March 2021, (vi) a LIBOR floor of 0.75% was added, (vii) certain reporting requirements were modified, and (viii) certain provisions were modified to accommodate the PPP Loan described below. In addition, as described below, beginning March 10, 2020, the Term Loan began to bear additional interest, to be paid in kind ("PIK interest") at an annual rate of 4.0%. The principal of the Term Loan was to be repaid, on a quarterly basis, in installments of $219, with the first installment having been paid on December 1, 2018, until paid in full on termination. In connection with the March 2020 amendment, principal payments on the Term Loan were suspended for 2020 and were to resume in March 2021. The Term Loan bore interest at an annual rate equal to LIBOR, plus 9.0%. Cash interest payments were due monthly, in arrears. In addition, the Term Loan began to accrue PIK (payment in kind) interest at an annual rate of 4.0% in March 2020, which interest would become payable upon the earlier to occur of (i) the repayment of the Term Loan in full, (ii) a sale or merger of the Company, (iii) the occurrence of default or event of default under the Term Loan Agreement, or (iv) the Company achieving adjusted EBITDA of $12 million (calculated on a trailing, 12-month basis). If, and only if, the PIK interest became due and payable as a result of the Company achieving the adjusted EBITDA event noted in clause (iv), then the Company was required to pay all PIK interest then due and thereafter, PIK interest would continue to accrue and be paid on each subsequent anniversary of such event. Obligations under the Term Loan Agreement were also subject to a prepayment penalty if the Term Loan was repaid prior to the third anniversary of the closing of the Term Loan. The Term Loan Agreement contained customary affirmative and negative covenants that were substantially the same as the Restated BofA Agreement. Consistent with the Restated BofA Agreement, the Company was also required to meet certain financial covenants through the end of fiscal 2020, specifically (a) a minimum net sales amount for each period of three consecutive fiscal months, measured at the end of each month, and (b) a trailing, 12-month minimum adjusted EBITDA amount (as defined in the Restated BofA Agreement), measured at the end of each fiscal month. In addition, consistent with the Restated BofA Agreement, if availability fell below a specified amount as described above, then the Company was required to maintain a fixed charge coverage ratio at the end of each fiscal month of at least 1.0 to 1.0 for the twelve-month period then ended. The Term Loan Agreement also contained events of default, including a cross default with the Restated BofA Agreement or the occurrence of a change of control. In the event of a default, the lenders could declare all of the obligations of the Company and its subsidiaries under the Term Loan Agreement immediately due and payable. For events of default relating to insolvency and receivership, all outstanding obligations automatically become due and payable without any action on the part of the lenders. As of September 26, 2020, the interest rate on the Term Loan was 9.75% of cash interest and 4.0% of PIK interest. The amount outstanding on the Term Loan at September 26, 2020 was $16,406 and $366 of accrued PIK interest. Aggregate maturities of bank debt related to the Restated BofA Agreement and the Term Loan Agreement including PIK interest as of September 26, 2020 was as follows: Fiscal Year ending: 2020 — 2021 875 2022 875 2023 and thereafter $ 31,277 Total $ 33,027 Unamortized debt issuance costs were $2,197 at September 26, 2020 and $2,398 at December 28, 2019, and are presented as a direct deduction of long-term debt on the condensed consolidated balance sheets. PPP Loan . On August 3, 2020, the Company received loan proceeds of $1,956 (the "PPP Loan") pursuant to the Paycheck Protection Program ("PPP") administered by the U.S. Small Business Administration under the U.S. CARES Act. The PPP Loan, which was in the form of a promissory note (the "PPP Note"), between the Company and BofA, as the lender, matures on July 27, 2025 and bears interest at a fixed rate of 1% per annum, payable monthly commencing six months from the date of the PPP Loan. The Company may voluntarily prepay the borrowings in full with no associated penalty or premium. Under the terms of the PPP, the principal and interest may be forgiven if the PPP Loan proceeds are used for qualifying expenses, including payroll costs, rent and utility costs. The PPP Note contains customary representations, warranties, and covenants for this type of transaction, including customary events of default relating to, among other things, payment defaults and breaches of representations and warranties or other provisions of the PPP Note. The occurrence of an event of default may result in, among other things, the Company becoming obligated to repay all amounts outstanding under the PPP Note. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 26, 2020 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | 4. PROPERTY AND EQUIPMENT Property and equipment, at cost, consisted of the following: September 26, December 28, Depreciation/ 2020 2019 Amortization Period Computer-related 4,532 $ 4,511 5 years Tools, dies, prototypes, and molds 27,662 27,457 1 - 5 years Building — 4,156 30 years Other 7,650 7,474 1 - 15 years 39,844 43,598 Less: accumulated depreciation 34,639 34,810 Property and equipment, net $ 5,205 $ 8,788 Property and equipment included amounts acquired under capital leases of approximately $589 and $589 at September 26, 2020 and December 28, 2019, respectively, with related accumulated depreciation of approximately $189 and $115, respectively. Total depreciation expense was $2,197 and $2,254 for the nine months ended September 26, 2020 and September 28, 2019, respectively. See Note 6 on the derecognition of the building asset in May 2020. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 9 Months Ended |
Sep. 26, 2020 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | 5. INTANGIBLE ASSETS Intangible assets consisted of the following: September 26, 2020 December 28, 2019 Brand names $ 11,819 $ 11,819 Patents and licenses 4,184 4,101 Customer relationships 6,946 6,946 Other intangibles 1,882 1,882 24,831 24,748 Less: Accumulated amortization (12,218) (11,852) Intangible assets, net $ 12,613 $ 12,896 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). Amortization expense for the nine months ended September 26, 2020 and September 28, 2019 was $366 and $554, respectively. Total of intangibles not subject to amortization amounted to $8,400 as of September 26, 2020 and September 28, 2019. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 26, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 6. COMMITMENTS AND CONTINGENCIES Leases The Company leases office space and distribution centers primarily related to its United States, Canada, United Kingdom, and Hong Kong operations. In connection with these leases, there were no cash incentives from the landlord to be used for the construction of leasehold improvements within the facility. In May 2020, the Company entered into a lease agreement amendment related to our headquarters in Woonsocket, Rhode Island. The agreement decreased the leased premises square footage and extended the current term, which was set to end in March 2021 prior to the amendment to June 2025. It additionally granted two 5-year term extension options. The Company was accounting for the lease in Woonsocket as a sale-leaseback with the building on the balance sheet as property and equipment, net and a corresponding financing obligation in long-term liabilities. Upon the execution of the lease amendment, the Company re-assessed the classification of the lease and determined it to be an operating lease, as the criteria for a sale had been met. As part of this re-classification, the Company derecognized the financing obligation of $2,390 from long-term liabilities and the amount related to the property and equipment, net of $2,357 from the balance sheet and recorded a ROU asset and lease liability of $1,457 respectively. The Company did not include either of the term extension options in the calculation of the ROU asset and lease liability. In April 2020, the Company entered into a twelve-month sublease agreement for a portion of the distribution warehouse located in Riverside, California. Fixed sublease payments received are recognized on a straight-line basis over the sublease term in general and administrative expenses. The Company identified and assessed the following significant assumptions in recognizing the right-of-use asset and corresponding liabilities: · Expected lease term – The expected lease term includes both contractual lease periods and, when applicable, cancelable option periods when it is reasonably certain that the Company would exercise such options. These leases have remaining lease terms between 1.00 and 4.75 years. The Woonsocket lease has two 5-year extension options and the Canada lease has one 5-year extension option that have not been included in the lease term. · Incremental borrowing rate – The Company’s lease agreements do not provide an implicit rate. As the Company does not have any external borrowings for comparable terms of its leases, the Company estimated the incremental borrowing rate based on secured borrowings available to the Company for the next 5 years. This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. · Lease and non - lease components – In certain cases the Company is required to pay for certain additional charges for operating costs, including insurance, maintenance, taxes, and other costs incurred, which are billed based on both usage and as a percentage of the Company’s share of total square footage. The Company determined that these costs are non-lease components and they are not included in the calculation of the lease liabilities because they are variable. Payments for these variable, non-lease components are considered variable lease costs and are recognized in the period in which the costs are incurred. The components of the Company’s lease expense for the nine months ended September 26, 2020 and September 28, 2019 were as follows: Nine Months Ended Nine Months Ended September 26, 2020 September 28, 2019 Operating lease cost $ 1,999 $ 1,867 Variable lease cost $ 785 $ 890 Less: sublease income (500) — Total lease expense $ 2,284 $ 2,757 Weighted-average remaining lease term 1.0 year Weighted-average discount rate: % Cash paid for amounts included in the measurement of the Company’s lease liabilities were $2,145 and $1,946 for the nine months ended September 26, 2020 and September 28, 2019 respectively. As of September 26, 2020, the present value of maturities of the Company’s operating lease liabilities were as follows: Fiscal Year Ending: 2020 757 2021 2,448 2022 618 2023 465 2024 325 Thereafter 164 Less imputed interest (271) Total $ 4,506 The future fixed sublease receipts under non-cancelable operating lease agreements as of September 26, 2020 are as follows: Fiscal Year Ending: 2020 250 2021 250 Thereafter — Total $ 500 Litigation The Company is a party to various routine claims, litigation and administrative complaints incidental to its business, including claims involving product liability, employee matters and other general liability claims, most of which are covered by insurance. We are not aware of any such proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, results of operations or financial condition. |
SHARE BASED COMPENSATION
SHARE BASED COMPENSATION | 9 Months Ended |
Sep. 26, 2020 | |
SHARE BASED COMPENSATION | |
SHARE BASED COMPENSATION | 7. SHARE BASED COMPENSATION The Company is currently authorized to issue up to 188,889 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 2012 Plan as inducement grants for new hires. Under the 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. Share-based compensation expense for the nine months ended September 26, 2020 and September 28, 2019 was $136 and $224, respectively. Share based compensation expense is included in 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 condensed consolidated financial statements is based on awards that are ultimately expected to vest. As of September 26, 2020, there were 65,170 stock options outstanding and 17,680 unvested restricted shares outstanding. During the nine months ended September 26, 2020, the Company granted 21,433 stock options and 25,202 shares of restricted stock, respectively. The following table summarizes the weighted average assumptions used for stock options granted during the nine months ended September 26, 2020 and September 28, 2019. For the Nine For the Nine Months Ended Months Ended September 26, 2020 September 28, 2019 Expected life (in years) 4.7 5.0 Risk-free interest rate 0.3 % 2.3 % Volatility 98.9 % 64.2 % Dividend yield 0 % 0 % Forfeiture rate 26.5 % 24.2 % As of September 26, 2020, there were 58,851 shares available to grant under the 2012 Plan. |
WEIGHTED AVERAGE COMMON SHARES
WEIGHTED AVERAGE COMMON SHARES | 9 Months Ended |
Sep. 26, 2020 | |
WEIGHTED AVERAGE COMMON SHARES | |
WEIGHTED AVERAGE COMMON SHARES | 8. 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. Diluted weighted average number of common shares outstanding also included common stock equivalents such as stock options and restricted shares. The Company does not include the anti-dilutive effect of common stock equivalents in the calculation of dilutive common shares outstanding. A reconciliation of basic and diluted net income (loss) attributable to common stockholders is as follows: For the Three For the Three Months Ended Months Ended Calculation of Basic and Diluted EPS September 26, 2020 September 28, 2019 Weighted-average common shares outstanding - basic 2,126,497 2,104,207 Dilutive effect of restricted shares 8,672 — Dilutive effect of stock options 20,622 — Weighted-average common shares outstanding – diluted 2,155,791 2,104,207 Earnings (loss) per share - basic $ 1.04 $ (0.79) Earnings (loss) per share - diluted $ 1.03 $ (0.79) For the Nine For the Nine Months Ended Months Ended Calculation of Basic and Diluted EPS September 26, 2020 September 28, 2019 Weighted-average common shares outstanding - basic 2,115,694 2,098,886 Dilutive effect of restricted shares 1,956 — Dilutive effect of stock options 2,394 — Weighted-average common shares outstanding – diluted 2,120,044 2,098,886 Earnings (loss) per share - basic $ 1.08 $ (1.56) Earnings (loss) per share - diluted $ 1.08 $ (1.56) The computation of diluted common shares for the three and nine months ended September 26, 2020 excluded 44,548 and 62,776 of stock options outstanding, respectively and excluded 9,008 and 15,724 shares of restricted stock outstanding, respectively. The computation of diluted common shares for the three and nine months ended September 28, 2019 excluded 112,292 stock options and 31,142 shares of restricted stock outstanding. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 26, 2020 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 9. SUBSEQUENT EVENTS The Company has evaluated subsequent events through the filing date of this Quarterly Report on Form 10-Q and determined that no subsequent events occurred that would require recognition in the condensed consolidated financial statements or disclosure in the notes thereto except as follows. On October 15, 2020, the Company and its subsidiary, Summer Infant (USA), Inc., as borrowers, entered into a Third Amended and Restated Loan and Security Agreement (the "Third Restated BofA Agreement") with Bank of America, N.A., as agent, the financial institutions party to the agreement from time to time as lenders, and certain subsidiaries of the Company as guarantors. The Third Restated BofA Agreement provides for (i) a $40 million asset-based revolving credit facility, with a $5 million letter of credit sub-line facility, (ii) a $7.5 million term loan and (iii) a $2.5 million FILO (first-in, last-out) loan as described below. Proceeds from the Third Restated BofA Agreement were used to repay the Company's outstanding term loan with Pathlight Capital, other related obligations, and to pay fees and transaction expenses associated with the closing of the Third Restated BofA Agreement, and may be used for paying obligations under the Third Restated BofA Agreement and for lawful corporate purposes, including working capital. · Revolving Credit Facility - Total borrowing capacity under the revolving credit facility is based on a borrowing base, which is generally defined as 85% of eligible receivables plus the lesser of (i) 70% of the value of eligible inventory (subject to certain limitations) or (ii) 85% of the net orderly liquidation value (NOLV) of eligible inventory, less applicable reserves. The scheduled maturity date of loans under the revolving credit facility is October 15, 2025 (subject to customary early termination provisions). Loans under the revolving credit facility bear interest, at the Company’s option, at a base rate or at LIBOR, plus applicable margins based on average quarterly availability. Interest payments are due monthly, payable in arrears. The Company is also required to pay an annual non-use fee on unused amounts under the revolving credit facility, as well as other customary fees as are set forth in the Third Restated BofA Agreement. As of October 15, 2020, the applicable margin for base rate loans under the revolving credit facility was 1.25% and for LIBOR rate loans was 2.25%. · Term Loan - The principal of the term loan will be repaid, on a quarterly basis, in installments of $375, with the first installment to be paid on January 1, 2021, until paid in full on termination and subject to mandatory repayment in certain circumstances. The scheduled maturity date of the term loan is October 15, 2025 or, if earlier, the date the revolving credit facility is terminated. The term loan bears interest, at the Company’s option, at a base rate or at LIBOR, plus applicable margins, and interest payments are due monthly, in arrears. As of October 15, 2020, the applicable margin for term loans at base rate was 2.50% and for term loans at LIBOR rate was 3.50%. · FILO Loan - The total borrowing capacity under the FILO loan is the lesser of (i) the then applicable aggregate FILO commitment amount and (ii) a borrowing base, generally defined as a specific percentage of the value of eligible accounts, plus a specified percentage of the value of eligible inventory. The aggregate FILO commitment amount as of October 15, 2020 was $2.5 million, and such amount will be proportionately reduced on the first calendar day of each quarter beginning January 1, 2021 until the FILO loan is terminated at maturity on October 15, 2024. There can be no voluntary repayment on the FILO loan as long as there are loans outstanding under the revolving credit facility, unless (i) there is an overadvance under the FILO loan, or (ii) such prepayment is accompanied by a permanent dollar for dollar reduction in the aggregate FILO commitment amount such that, after giving effect to such prepayment and reduction, the outstanding principal amount of the FILO loan is equal to but does not exceed the lesser of (A) the aggregate FILO commitment amount and (B) the FILO borrowing base. The FILO loan bears interest, at the Company’s option, at a base rate or at LIBOR, plus applicable margins, and interest payments are due monthly, in arrears. As of October 15, 2020, the applicable margin for the FILO loan at base rate was 2.25% and for the FILO loan at LIBOR rate was 3.25%. All obligations under the Third Restated BofA Agreement are secured by substantially all the assets of the Company. Summer Infant Canada Limited and Summer Infant Europe Limited, subsidiaries of the Company, are guarantors under the Third Restated BofA Agreement. The Third Restated 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. Until the term loan and FILO loan have been repaid in full, the Company must maintain a fixed charge coverage ratio at the end of each fiscal month of at least 1.00 to 1.00 for the twelve-month period then ended. After the term loan and FILO loan have been repaid in full, the Company will be required to maintain the fixed charge coverage ratio if availability falls below $5.0 million. The Third Restated BofA Agreement also contains customary events of default, including if the Company fails to comply with any required financial covenants, if there is an event of default under the PPP Loan 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 Third Restated BofA 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. |
BASIS OF PRESENTATION AND SUM_2
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 26, 2020 | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Reclassification | Reclassification Previously reported amounts have been revised in the accompanying condensed consolidated statement of cash flows to properly state certain right to use assets and lease liabilities. These revisions had no impact on the Company’s net cash provided by operating activities. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue to depict the transfer of promised goods to customers in an amount that reflects what it expects to receive in exchange for the goods. The Company’s principal activities from which it generates its revenue is product sales. The Company has one reportable segment of business. Revenue is measured based on consideration specified in a contract with a customer. The Company recognizes revenue when it satisfies a performance obligation in a contract by transferring control over a product to a customer when product delivery occurs. Consideration is typically paid approximately 60 days from the time control is transferred. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in selling costs. A performance obligation is a promise in a contract to transfer a distinct product to the customer, which for the Company is transfer of juvenile products to its customers. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as the customer receives the benefit of the performance obligation. A transaction price is the amount of consideration the Company expects to receive under the arrangement. The Company is required to estimate variable consideration (if any) and to factor that estimation into the determination of the transaction price. The Company conducts its business with customers through valid purchase or sales orders each of which is considered a separate contract because individual orders are not interdependent on one another. Product transaction prices on a purchase or sale order are discrete and stand-alone. Purchase or sales orders may be issued under either a customer master service agreement or a reseller allowance agreement. Purchase or sales orders, master service agreements, and reseller allowance agreements, which are specific and unique to each customer, may include product price discounts, markdown allowances, return allowances, and/or volume rebates which reduce the consideration due from customers. Variable consideration is estimated using the most likely amount method, which is based on historical experience as well as current information such as sales forecasts. Contracts may also include cooperative advertising arrangements where the Company allows a discount from invoiced product amounts in exchange for customer purchased advertising that features the Company’s products. These allowances are generally based upon product purchases or specific advertising campaigns. Such allowances are accrued when the related revenue is recognized. These cooperative advertising arrangements provide a distinct benefit and fair value and are accounted for as direct selling expenses. |
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 revenues, expenses, assets, 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. Accordingly, actual results could differ from those estimates. |
Trade Receivables | Trade Receivables Trade receivables are carried at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts. The Company estimates doubtful accounts based on historical bad debts, factors related to specific customers’ ability to pay and current economic trends. The Company writes off accounts receivable against the allowance when a balance is determined to be uncollectible. Amounts are considered to be uncollectable based upon historical experience and management’s evaluation of outstanding accounts receivable. Changes in the allowance for doubtful accounts are as follows: For the Nine months ended September 26, 2020 September 28, 2019 Allowance for doubtful accounts, beginning of period $ $ 304 (Reversals of) charges to costs and expenses, net 21 Account write-offs — Allowance for doubtful accounts, end of period $ $ 325 |
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 net realizable value. The Company regularly reviews slow-moving and excess inventories, and writes down inventories to net realizable value if the expected net proceeds from the disposals of excess inventory are less than the carrying cost of the merchandise. |
Leases | Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Company’s condensed consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company’s uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The components of a lease should be split into three categories: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components. Although separation of lease and non-lease components is required, certain practical expedients are available to entities. Entities electing the practical expedient would not separate lease and non-lease components. Rather, they would account for each lease component and the related non-lease component together as a single component. The Company’s facilities operating leases have lease and non-lease components to which the Company has elected to apply the practical expedient and account for each lease component and related non-lease component as one single component. The lease component results in a ROU asset being recorded on the balance sheet. Lease expense for lease payments is recognized on a straight-line basis over the lease term. |
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 net deferred tax assets and liabilities are presented as noncurrent. The Company utilized the discrete method of accounting for income taxes in the U.S. for the three and nine months ended September 26, 2020 and for the three and nine months ended September 28, 2019 as it believes the discrete method results in a more accurate representation of the income tax provision for the periods. 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. On March 27, 2020, the U.S. CARES Act was enacted, which provided a substantial tax-and-spending package intended to provide additional economic stimulus to address the impact of the COVID-19 pandemic. The U.S. CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. As a result of the U.S. CARES Act tax law changes and revised final regulations released on July 28, 2020, we recognized a $624 tax benefit for the nine months ended September 26, 2020 related to the increase in interest deduction occurring during the fiscal years ended December 28, 2019 and December 29, 2018 which was previously fully reserved for. The impact of the U.S. CARES Act in prospective periods may differ from our estimate as of September 26, 2020 due to changes in interpretations and assumptions, additional guidance that may be issued and actions the Company may take in response to the U.S. CARES Act. The U.S. CARES Act is highly detailed, and the Company will continue to assess the impact that various provisions will have on its business. |
Net Loss/Income Per Share | Net Loss/Income Per Share Basic income or loss per share for the Company is computed by dividing net income or loss by the weighted-average number of shares of common stock outstanding during the period. Diluted income or loss per share includes the dilutive impact of outstanding stock options and unvested restricted shares. |
Translation of Foreign Currencies | Translation of Foreign Currencies Assets and liabilities of the Company’s foreign subsidiaries whose functional currency is 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 loss. Assets and liabilities of the Company’s foreign subsidiaries whose functional currency is the U.S. dollar are remeasured into U.S. dollars at their historical rates or the exchange rate in effect at the end of the quarter and the income and expense accounts of these affiliates have been remeasured at average rates prevailing during each respective quarter. Resulting remeasurement adjustments are made to the condensed consolidated statement of operations. Foreign exchange transaction gains and losses are included in the accompanying interim condensed consolidated statement of operations. |
2020 Plan and COVID-19 Pandemic | 2020 Plan and COVID-19 Pandemic In March 2020, the COVID-19 outbreak was declared a global pandemic and became widespread in the U.S. While our products are considered “essential” and our distribution center located in California continues to operate, some of our customers have been impacted and, to the extent they operated retail stores, have been required to close their stores and curtail operations. We began to see an impact on orders at the end of March and have continued to see lower demand from our mid-sized and smaller customers as governmental restrictions on businesses remain in place and with the resurgence of COVID-19. Due to the uncertainty with respect to when governmental restrictions may be lifted and the widespread nature of the pandemic, we cannot currently predict how it will impact our business in the long term. The Company is not currently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update any estimates, judgments or materially revise the carrying value of our assets or liabilities. The Company’s estimates may change, however, as events evolve and additional information is obtained, and any such changes will be recognized in the condensed consolidated financial statements. Beginning in the first quarter of 2020, the Company implemented various restructuring initiatives to streamline operations and support its liquidity needs, including headcount reductions, reductions in facility space, and other cost reductions, as well as working with its lenders to amend its credit facility and term loan agreement to undertake these restructuring initiatives and to provide availability. In addition, the Company began taking actions to mitigate the impact of the expiration in August 2020 of tariff exclusions previously granted with respect to certain of its products, including seeking price increases from its customers and alternative manufacturing sources. In light of the ongoing uncertainty surrounding the COVID-19 pandemic in the U.S. and other countries and unpredictable economic consequences in the coming months, the Company applied for and in August 2020, received a loan through the Paycheck Protection Program of the U.S. CARES Act in the amount of $1,956, which may be used to fund certain qualified expenses, including payroll costs, rent and utility costs. Further, as noted in Note 9, after the end of the third quarter the Company refinanced its existing debt. The Company believes that its existing plan will generate sufficient cash which, along with its existing cash and availability under its facilities, will enable it to fund operations through at least the next 12 months. To the extent the Company experiences unexpected impacts from the COVID-19 pandemic or is unable to meet its current financial forecast, the Company would take further action to reduce costs, mitigate risks to its supply chain and, if necessary, seek to raise additional funds through debt or equity financings, engage in strategic collaborations, and/or a strategic transaction. |
BASIS OF PRESENTATION AND SUM_3
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Summary of changes in the allowance for doubtful accounts | Changes in the allowance for doubtful accounts are as follows: For the Nine months ended September 26, 2020 September 28, 2019 Allowance for doubtful accounts, beginning of period $ $ 304 (Reversals of) charges to costs and expenses, net 21 Account write-offs — Allowance for doubtful accounts, end of period $ $ 325 |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
REVENUE RECOGNITION | |
Schedule of net sales by geographical area | For the Three For the Three Months Ended Months Ended September 26, 2020 September 28, 2019 United States $ 35,729 $ 35,833 All Other 4,975 5,690 Net Sales $ 40,704 $ 41,523 For the nine For the nine months ended months ended September 26, 2020 September 28, 2019 United States $ 107,307 $ 111,133 All Other 11,949 19,353 Net Sales $ 119,256 $ 130,486 All Other consists of Canada, Europe, South America, Mexico, Asia, and the Middle East. |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
DEBT | |
Schedule of aggregate maturities of the Restated BofA Agreement and the Term Loan Agreement | Fiscal Year ending: 2020 — 2021 875 2022 875 2023 and thereafter $ 31,277 Total $ 33,027 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment, at cost | September 26, December 28, Depreciation/ 2020 2019 Amortization Period Computer-related 4,532 $ 4,511 5 years Tools, dies, prototypes, and molds 27,662 27,457 1 - 5 years Building — 4,156 30 years Other 7,650 7,474 1 - 15 years 39,844 43,598 Less: accumulated depreciation 34,639 34,810 Property and equipment, net $ 5,205 $ 8,788 |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
INTANGIBLE ASSETS | |
Schedule of intangible assets | September 26, 2020 December 28, 2019 Brand names $ 11,819 $ 11,819 Patents and licenses 4,184 4,101 Customer relationships 6,946 6,946 Other intangibles 1,882 1,882 24,831 24,748 Less: Accumulated amortization (12,218) (11,852) Intangible assets, net $ 12,613 $ 12,896 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of lease expense | The components of the Company’s lease expense for the nine months ended September 26, 2020 and September 28, 2019 were as follows: Nine Months Ended Nine Months Ended September 26, 2020 September 28, 2019 Operating lease cost $ 1,999 $ 1,867 Variable lease cost $ 785 $ 890 Less: sublease income (500) — Total lease expense $ 2,284 $ 2,757 Weighted-average remaining lease term 1.0 year Weighted-average discount rate: % |
Schedule of maturities of the operating lease liabilities | As of September 26, 2020, the present value of maturities of the Company’s operating lease liabilities were as follows: Fiscal Year Ending: 2020 757 2021 2,448 2022 618 2023 465 2024 325 Thereafter 164 Less imputed interest (271) Total $ 4,506 |
Schedule of future fixed sublease receipts under non-cancelable operating lease agreements | The future fixed sublease receipts under non-cancelable operating lease agreements as of September 26, 2020 are as follows: Fiscal Year Ending: 2020 250 2021 250 Thereafter — Total $ 500 |
SHARE BASED COMPENSATION (Table
SHARE BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
SHARE BASED COMPENSATION | |
Summary of weighted average assumptions used for stock options granted | For the Nine For the Nine Months Ended Months Ended September 26, 2020 September 28, 2019 Expected life (in years) 4.7 5.0 Risk-free interest rate 0.3 % 2.3 % Volatility 98.9 % 64.2 % Dividend yield 0 % 0 % Forfeiture rate 26.5 % 24.2 % |
WEIGHTED AVERAGE COMMON SHARES
WEIGHTED AVERAGE COMMON SHARES (Tables) | 9 Months Ended |
Sep. 26, 2020 | |
WEIGHTED AVERAGE COMMON SHARES | |
Schedule of reconciliation of basic and diluted net income (loss) attributable to common stockholders | A reconciliation of basic and diluted net income (loss) attributable to common stockholders is as follows: For the Three For the Three Months Ended Months Ended Calculation of Basic and Diluted EPS September 26, 2020 September 28, 2019 Weighted-average common shares outstanding - basic 2,126,497 2,104,207 Dilutive effect of restricted shares 8,672 — Dilutive effect of stock options 20,622 — Weighted-average common shares outstanding – diluted 2,155,791 2,104,207 Earnings (loss) per share - basic $ 1.04 $ (0.79) Earnings (loss) per share - diluted $ 1.03 $ (0.79) For the Nine For the Nine Months Ended Months Ended Calculation of Basic and Diluted EPS September 26, 2020 September 28, 2019 Weighted-average common shares outstanding - basic 2,115,694 2,098,886 Dilutive effect of restricted shares 1,956 — Dilutive effect of stock options 2,394 — Weighted-average common shares outstanding – diluted 2,120,044 2,098,886 Earnings (loss) per share - basic $ 1.08 $ (1.56) Earnings (loss) per share - diluted $ 1.08 $ (1.56) |
BASIS OF PRESENTATION AND SUM_4
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) | Aug. 03, 2020USD ($) | Aug. 31, 2020USD ($) | Mar. 31, 2020 | Sep. 26, 2020USD ($)segment | Sep. 28, 2019USD ($) |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||
Reverse stock split | 0.1111 | ||||
Tax benefit recognized related to increase in interest deduction from tax law changes | $ 624,000 | ||||
Revenue Recognition | |||||
Number of reportable segments | segment | 1 | ||||
Days in accounts receivable | P60D | ||||
Changes in the allowance for doubtful accounts | |||||
Allowance for doubtful accounts, beginning of period | $ 542,000 | $ 304,000 | |||
(Reversals of) charges to costs and expenses, net | (14,000) | 21,000 | |||
Account write-offs | (222,000) | ||||
Allowance for doubtful accounts, end of period | 306,000 | $ 325,000 | |||
2020 Plan and COVID-19 Pandemic | |||||
Proceeds from issuance of loan | $ 1,956,000 | ||||
PPP Loan | |||||
2020 Plan and COVID-19 Pandemic | |||||
Proceeds from issuance of loan | $ 1,956,000 | $ 1,956 |
REVENUE RECOGNITION (Details)
REVENUE RECOGNITION (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Net sales by geographical area | ||||
Net sales | $ 40,704 | $ 41,523 | $ 119,256 | $ 130,486 |
United States | ||||
Net sales by geographical area | ||||
Net sales | 35,729 | 35,833 | 107,307 | 111,133 |
All Other | ||||
Net sales by geographical area | ||||
Net sales | $ 4,975 | $ 5,690 | $ 11,949 | $ 19,353 |
DEBT - Credit Facilities, Term
DEBT - Credit Facilities, Term Loan Agreement and PPP Loan (Details) - USD ($) | Aug. 03, 2020 | Jun. 28, 2018 | Aug. 31, 2020 | Mar. 31, 2020 | Mar. 28, 2020 | Sep. 26, 2020 |
DEBT | ||||||
Write off of unamortized deferred financing costs | $ 266,000 | |||||
Proceeds from issuance of loan | 1,956,000 | |||||
Term Loan | ||||||
DEBT | ||||||
Quarterly basis installment amount | $ 219,000 | |||||
Adjusted EBITDA | $ 12,000,000 | |||||
Cash interest rate | 9.75% | |||||
PIK interest rate (as a percent) | 4.00% | 4.00% | 4.00% | |||
Amount outstanding | $ 16,406,000 | |||||
Accrued PIK interest amount | $ 366,000 | |||||
Term Loan | Minimum | ||||||
DEBT | ||||||
Fixed charge coverage ratio at the end of each fiscal month | 1 | |||||
Term Loan | LIBOR | ||||||
DEBT | ||||||
Interest rate basis | LIBOR | |||||
Applicable margin (as a percent) | 9.00% | |||||
Restated Bank of America Agreement | Credit Facility | ||||||
DEBT | ||||||
Amount outstanding on credit facility | $ 16,255,000 | |||||
Borrowing availability | $ 15,924,000 | |||||
Write off of unamortized deferred financing costs | $ 266,000 | |||||
Restated Bank of America Agreement | Credit Facility | Base rate | ||||||
DEBT | ||||||
Interest rate during the period | 5.75% | |||||
Restated Bank of America Agreement | Credit Facility | LIBOR | ||||||
DEBT | ||||||
Interest rate during the period | 4.25% | |||||
Restated Bank of America Agreement | Credit Facility | Financial Covenant | Minimum | ||||||
DEBT | ||||||
Fixed charge coverage ratio at the end of each fiscal month | 1 | |||||
Restated Bank of America Agreement | Credit Facility | Financial Covenant | LIBOR | ||||||
DEBT | ||||||
Interest rate basis | LIBOR | |||||
Reference rate floor (as a percentage) | 0.75% | |||||
Restated Bank of America Agreement | Revolving Facility | ||||||
DEBT | ||||||
Maximum borrowing capacity | $ 48,000,000 | |||||
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% | |||||
Term Loan and Security Agreement | Term Loan | ||||||
DEBT | ||||||
Face amount of loan | $ 17,500,000 | |||||
Percentage of ownership interests of domestic subsidiaries pledged | 100.00% | |||||
Percentage of ownership interests of foreign subsidiaries pledged | 65.00% | |||||
Term Loan and Security Agreement | Term Loan | Financial Covenant | LIBOR | ||||||
DEBT | ||||||
Interest rate basis | LIBOR | |||||
Reference rate floor (as a percentage) | 0.75% | |||||
PPP Loan | ||||||
DEBT | ||||||
Proceeds from issuance of loan | $ 1,956,000 | $ 1,956 |
DEBT - Aggregate maturities (De
DEBT - Aggregate maturities (Details) - USD ($) $ in Thousands | Sep. 26, 2020 | Dec. 28, 2019 |
Aggregate maturities related to the Restated BofA Agreement and the Term Loan Agreement | ||
2020 | $ 0 | |
2021 | 875 | |
2022 | 875 | |
2023 and thereafter | 31,277 | |
Total | 33,027 | |
Unamortized debt issuance costs | $ 2,197 | $ 2,398 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Dec. 28, 2019 | |
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | $ 39,844 | $ 43,598 | |
Less: accumulated depreciation | 34,639 | 34,810 | |
Property and equipment, net | 5,205 | 8,788 | |
Total depreciation expense | 2,197 | $ 2,254 | |
Computer-related | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | $ 4,532 | 4,511 | |
Depreciation/Amortization Period | 5 years | ||
Tools, dies, prototypes, and molds | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | $ 27,662 | 27,457 | |
Tools, dies, prototypes, and molds | Minimum | |||
PROPERTY AND EQUIPMENT | |||
Depreciation/Amortization Period | 1 year | ||
Tools, dies, prototypes, and molds | Maximum | |||
PROPERTY AND EQUIPMENT | |||
Depreciation/Amortization Period | 5 years | ||
Building | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | 4,156 | ||
Depreciation/Amortization Period | 30 years | ||
Other | |||
PROPERTY AND EQUIPMENT | |||
Property and equipment, gross | $ 7,650 | 7,474 | |
Other | Minimum | |||
PROPERTY AND EQUIPMENT | |||
Depreciation/Amortization Period | 1 year | ||
Other | Maximum | |||
PROPERTY AND EQUIPMENT | |||
Depreciation/Amortization Period | 15 years | ||
Property and equipment acquired under capital leases | |||
PROPERTY AND EQUIPMENT | |||
Less: accumulated depreciation | $ 189 | 115 | |
Property and equipment, net | $ 589 | $ 589 |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Dec. 28, 2019 | |
INTANGIBLE ASSETS | |||
Intangible assets, gross | $ 24,831 | $ 24,748 | |
Less: Accumulated amortization | (12,218) | (11,852) | |
Intangible assets, net | 12,613 | 12,896 | |
Amortization expense | 366 | $ 554 | |
Intangibles not subject to amortization | $ 8,400 | $ 8,400 | |
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 | $ 4,184 | 4,101 | |
Customer relationships | |||
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 | $ 11,819 | $ 11,819 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Leases (Details) $ in Thousands | 1 Months Ended | 9 Months Ended | |||
May 31, 2020USD ($)item | Apr. 30, 2020 | Sep. 26, 2020USD ($)item | Sep. 28, 2019USD ($) | Dec. 28, 2019USD ($) | |
Leases | |||||
Cash incentives from the landlord | $ 0 | ||||
Derecognition of a building sale-leaseback financial obligation | 2,390 | ||||
Derecognition of a building sale-leaseback fixed asset, net of depreciation | 2,357 | ||||
ROU asset | 4,225 | $ 4,578 | |||
Lease liability | $ 4,506 | ||||
Term of secured borrowings used to estimate incremental borrowing rate (in years) | 5 years | ||||
Cash paid for amounts included in the measurement of the Company's lease liabilities | $ 2,145 | $ 1,946 | |||
Components of lease expense | |||||
Operating lease cost | 1,999 | 1,867 | |||
Variable lease cost | 785 | 890 | |||
Less: sublease income | (500) | ||||
Total lease expense | $ 2,284 | $ 2,757 | |||
Weighted-average remaining lease term (in years) | 1 year | ||||
Weighted-average discount rate | 5.00% | ||||
Minimum | |||||
Leases | |||||
Remaining lease term (in years) | 1 year | ||||
Maximum | |||||
Leases | |||||
Remaining lease term (in years) | 4 years 9 months | ||||
Woonsocket, RI | |||||
Leases | |||||
Number of options to extend | item | 2 | ||||
Extension term (in years) | 5 years | ||||
Derecognition of a building sale-leaseback financial obligation | $ 2,390 | ||||
Derecognition of a building sale-leaseback fixed asset, net of depreciation | 2,357 | ||||
ROU asset | 1,457 | ||||
Lease liability | $ 1,457 | ||||
Riverside, CA | |||||
Leases | |||||
Sublease term | 12 months | ||||
Canada | |||||
Leases | |||||
Number of options to extend | item | 1 | ||||
Extension term (in years) | 5 years | ||||
Lease Amendment | Woonsocket, RI | |||||
Leases | |||||
Number of options to extend | item | 2 | ||||
Extension term (in years) | 5 years |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Maturities of the operating lease liabilities (Details) $ in Thousands | Sep. 26, 2020USD ($) |
Maturities of the operating lease liabilities | |
2020 | $ 757 |
2021 | 2,448 |
2022 | 618 |
2023 | 465 |
2024 | 325 |
Thereafter | 164 |
Less imputed interest | (271) |
Total | $ 4,506 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES - Future fixed sublease receipts (Details) $ in Thousands | Sep. 26, 2020USD ($) |
Future fixed sublease receipts under non-cancelable operating lease agreements | |
2020 | $ 250 |
2021 | 250 |
Total | $ 500 |
SHARE BASED COMPENSATION (Detai
SHARE BASED COMPENSATION (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 26, 2020 | Sep. 28, 2019 | |
SHARE BASED COMPENSATION | ||
Stock options granted during the period (in shares) | 21,433 | |
Restricted stock granted during the period (in shares) | 25,202 | |
Stock Options | ||
Weighted average assumptions | ||
Expected life (in years) | 4 years 8 months 12 days | 5 years |
Risk-free interest rate | 0.30% | 2.30% |
Volatility | 98.90% | 64.20% |
Dividend yield | 0.00% | 0.00% |
Forfeiture rate | 26.50% | 24.20% |
2012 Plan | ||
SHARE BASED COMPENSATION | ||
Number of shares authorized under the plan | 188,889 | |
Shares available to grant | 58,851 | |
2012 Plan | General and Administrative Expense | ||
SHARE BASED COMPENSATION | ||
Share-based compensation expense | $ 136 | $ 224 |
2012 Plan | Stock Options | ||
SHARE BASED COMPENSATION | ||
Stock options outstanding (in shares) | 65,170 | |
2012 Plan | Restricted Stock Awards | ||
SHARE BASED COMPENSATION | ||
Unvested restricted shares outstanding | 17,680 |
WEIGHTED AVERAGE COMMON SHARE_2
WEIGHTED AVERAGE COMMON SHARES - Reconciliation of Basic and Diluted Net Income (Loss) Attributable to Common Stockholders (Details) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Calculation of Basic and Diluted EPS | ||||
Weighted-average common shares outstanding - basic | 2,126,497 | 2,104,207 | 2,115,694 | 2,098,886 |
Dilutive effect of restricted shares | 8,672 | 1,956 | ||
Dilutive effect of stock options | 20,622 | 2,394 | ||
Weighted-average common shares outstanding - diluted | 2,155,791 | 2,104,207 | 2,120,044 | 2,098,886 |
Earnings (loss) per share - basic | $ 1.04 | $ (0.79) | $ 1.08 | $ (1.56) |
Earnings (loss) per share - diluted | $ 1.03 | $ (0.79) | $ 1.08 | $ (1.56) |
WEIGHTED AVERAGE COMMON SHARE_3
WEIGHTED AVERAGE COMMON SHARES (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 26, 2020 | Sep. 28, 2019 | Sep. 26, 2020 | Sep. 28, 2019 | |
Stock Options | ||||
WEIGHTED AVERAGE COMMON SHARES | ||||
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares) | 44,548 | 112,292 | 62,776 | |
Restricted Stock Awards | ||||
WEIGHTED AVERAGE COMMON SHARES | ||||
Anti-dilutive securities excluded from the computation of diluted earnings per share (in shares) | 9,008 | 15,724 | 31,142 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent events - Third Restated BofA Agreement $ in Thousands | Oct. 15, 2020USD ($) |
Subsequent Event [Line Items] | |
Fixed charge coverage ratio | 1 |
Threshold availability to maintain minimum fixed charge coverage ratio | $ 5,000 |
Revolving Facility | |
Subsequent Event [Line Items] | |
Maximum borrowing capacity | $ 40,000 |
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% |
Revolving Facility | Base rate | |
Subsequent Event [Line Items] | |
Applicable margin (as a percent) | 1.25% |
Revolving Facility | LIBOR | |
Subsequent Event [Line Items] | |
Applicable margin (as a percent) | 2.25% |
Letter of credit sub-line facility | |
Subsequent Event [Line Items] | |
Maximum borrowing capacity | $ 5,000 |
Term Loan Facility | |
Subsequent Event [Line Items] | |
Maximum borrowing capacity | 7,500 |
Quarterly basis installment amount | $ 375 |
Term Loan Facility | Base rate | |
Subsequent Event [Line Items] | |
Applicable margin (as a percent) | 2.50% |
Term Loan Facility | LIBOR | |
Subsequent Event [Line Items] | |
Applicable margin (as a percent) | 3.50% |
FILO Facility | |
Subsequent Event [Line Items] | |
Maximum borrowing capacity | $ 2,500 |
FILO Facility | Base rate | |
Subsequent Event [Line Items] | |
Applicable margin (as a percent) | 2.25% |
FILO Facility | LIBOR | |
Subsequent Event [Line Items] | |
Applicable margin (as a percent) | 3.25% |