SMITHFIELD, R.I., July 29 RI-FGX-Intl-2Q-earns
SMITHFIELD, R.I., July 29 /PRNewswire-FirstCall/ -- FGX International
(Nasdaq: FGXI), a leading designer and marketer of non-prescription reading
glasses, sunglasses and costume jewelry, today announced financial results for
its second quarter and six months ended June 28, 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20071025/NETH104LOGO )
Highlights for the quarter include:
-- Net sales increased 14% to $71.6 million in the current quarter from
$62.6 million in the second quarter of 2007.
-- Net income increased 173% to $4.1 million in the current quarter from
$1.5 million in the second quarter of 2007.
-- Earnings per diluted share increased to $0.19 in the second quarter of
2008 from $0.10 in the second quarter of 2007, a 91% increase.
-- Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 22% to $13.1 million in the current quarter from $10.7 million in
the second quarter of 2007.
2nd2nd
Net Sales by Segment: QuarterQuarter $ Inc/ % Inc/
($ amounts in thousands) 2008 2007 (Dec)(Dec)
---------------------------------------
Non-prescription Reading Glasses$31,266$27,562 $3,704 13%
Sunglasses & Prescription Frames$25,675$19,670 $6,005 31%
Costume Jewelry $4,309 $5,062$(753)(15)%
International $10,315$10,320 $(5) --%
-------------- ------- ------
Total $71,565$62,614 $8,951 14%
CEO Alec Taylor commented, "We enjoyed excellent financial results during
the second quarter of 2008 and generated momentum which we are working hard to
sustain. Both our non-prescription reading glasses and sunglasses businesses
experienced double digit year over year growth in a very difficult retail
environment. We continued to add to our leadership position in both of these
categories through organic growth and the addition of new retail accounts,
behind our Foster Grant and Magnivision brands. We achieved these results
while maintaining strong margins and improving our working capital metrics."
Highlights for the first six months include:
-- Net sales increased 6% to $130.8 million in the first six months of
2008 from $123.8 million in the first six months of 2007.
-- Net income increased 84% to $6.3 million in the first six months of
2008 from $3.4 million in the first six months of 2007.
-- Earnings per diluted share increased to $0.29 in the first six months
of 2008 from $0.23 in the first six months of 2007, a 28% increase.
-- Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 2% to $23.6 million in the first six months of 2008 from $23.3
million in the first six months of 2007.
Net Sales by Segment: Six Months Six Months $ Inc/ % Inc/
($ amounts in thousands) 2008 2007 (Dec) (Dec)
----------------------------------------
Non-prescription Reading Glasses$58,553$55,137 $3,416 6%
Sunglasses & Prescription Frames$43,794$36,510 $7,284 20%
Costume Jewelry $7,704$11,035 $(3,331)(30)%
International $20,737$21,081$(344) (2)%
-------- -------- -------- -------
Total $130,788 $123,763 $7,025 6%
The increase in non-prescription reading glasses sales for both the second
quarter and first six months of 2008 was due to organic growth at existing
customers and the rollout of programs at two national retailers. The year-
over-year improvement was negatively impacted by a non-anniversaried rollout
at a major customer during the first quarter of 2007.
The increase in sales in the sunglasses and prescription frame segment for
both the quarter and six months was due to organic growth at existing
customers and higher sales related to a promotional program at a major
customer.
Sales in the Company's international segment were flat for the second
quarter and down slightly in the first six months, compared to the prior
period, as a result of a non-anniversaried reading glasses roll-out in the UK
in the first quarter of 2007 and lower than expected sunglasses sales in the
second quarter of 2008. These results were partially offset by higher sales
across all product lines in Canada for both the current quarter and the first
six months of 2008.
CEO Alec Taylor commented, "We are pleased to report such strong sales and
earnings for the first six months of 2008. The first quarter of 2008 was a
difficult comparison due to the Walgreens rollout a year ago, but the strength
of our second quarter results led to an outstanding first half of 2008. We
continued to build the value of our brands during the first half of 2008 while
delivering consistently strong sales and earnings supported by excellent gross
and operating profit margins."
A reconciliation of EBITDA and Free Cash Flow, which are non-GAAP
measures, are included in the Consolidated Statements of Income and Other
Selected Data, and related notes thereto, attached to this release. The
Company believes that non-GAAP measures are useful for an understanding of its
ongoing business.
Additional Results
The following additional results were experienced in the second quarter
and the first six months of 2008:
-- In the second quarter of 2008, gross margin as a percentage of net
sales was 52.5% versus 54.0% in the comparable period for the prior year. For
the first six months of 2008, gross margin as a percentage of net sales was
53.1% compared to 53.0% in the prior year period. The decrease in the quarter
was principally due to higher sales of lower margin sunglasses in the current
period versus the prior year period.
-- In the second quarter of 2008, operating income increased to $8.1
million from $5.9 million in the second quarter of 2007. For the first six
months of 2008, operating income decreased to $13.7 million from $14.0 million
in the comparable period for the prior year. The increase in operating income
for the second quarter of 2008 was driven by increased sales and a non-
anniversaried $1.9 million abandoned lease charge incurred during the second
quarter of 2007. This was partially offset by higher operating costs,
principally fixture depreciation expense, freight costs and costs associated
with being a public company.
-- Capital expenditures were $2.9 million in the second quarter of 2008
compared to $2.3 million in the second quarter of 2007 and $6.9 million in the
first six months of 2008 compared to $7.9 million during the first six months
of 2007. The increase during the quarter was related to the purchases of store
displays to support new business rollouts. The decrease in the first six
months of 2008 was the result of the capital investment made in the prior year
period to support the rollout of a new non-prescription reading glasses and
sunglasses program at a major customer.
-- Days sales outstanding improved to 60 days in the current quarter from
76 days in the second quarter of fiscal 2007 and improved to 74 days in the
first six months of 2008 from 80 days in the first six months of 2007. This
improvement was due to an increased focus on working capital management.
-- Inventory days on hand improved to 94 days in the current quarter from
128 days in the second quarter of fiscal 2007 and improved to 104 days in the
first six months of 2008 from 115 days in the first six months of 2007. This
improvement was due to better inventory management.
-- Stock compensation expense was $0.6 million, or $0.02 per diluted
share, in the current quarter compared to $0.2 million, or $0.01 per diluted
share, in the second quarter of 2007. Stock compensation expense was $1.1
million, or $0.03 per diluted share, in the first six months of 2008 compared
to $0.4 million, or $0.01 per diluted share, in the first six months of 2007.
-- During the second quarter of 2008, the Company repurchased an
additional 91,788 of its outstanding ordinary shares at an average price per
share of $10.64 under its stock buyback program. For the first six months of
2008, the Company repurchased a total of 133,788 of its outstanding ordinary
shares at an average price per share of $11.07 under its stock buyback
program. The Company has approximately $10.5 million of stock buyback
authorization remaining under the previously approved program.
Update of Key Accounts
-- During the second quarter, the Company shipped product related to the
previously announced reading glasses program at Borders bookstores.
-- During the month of July, the Company reached an agreement in principle
to replace a direct import, private label sunglasses program at Walgreens.
This program is in addition to the Foster Grant sunglasses program already
provided to Walgreens. Subject to signing a definitive agreement, the Company
expects to ship approximately $3 to $4 million of product in connection with
this program in the fourth quarter of 2008.
-- There has been no change from the previously announced intention of
Wal-Mart to begin the direct importing of the opening price point reading
glasses program formerly provided by the Company.
Outlook
For the third quarter of 2008, the Company currently expects net sales in
the range of $58 to $60 million, earnings per diluted share in the range of
$0.15 to $0.17 and EBITDA in a range of $11 and $13 million.
The Company anticipates stock compensation expense to be approximately
$0.6 million, or $0.02 per diluted share, in the third quarter of 2008.
Full year 2008 guidance remains unchanged from the full year 2008 outlook
given in the Company's February 20 earnings release: $256 to $262 million of
net sales, earnings per diluted share in the range of $0.72 to $0.80 and
EBITDA in the range of $54 to $59 million. Earnings per diluted share guidance
for the third quarter and full year 2008 are based upon weighted average
diluted shares of 21.5 million.
Conference Call Information
The Company will host a conference call on Wednesday, July 30, 2008 at
8:30AM ET to discuss its financial results. To access the conference call
information, please visit www.fgxi.com under the tab "Investors". To
participate by telephone please dial 888-680-0865. International callers
please dial 617-213-4853. The access code is 66702814. Investors are advised
to dial into the call at least ten minutes prior to the call.
A replay of the conference call will be available through Wednesday,
August 6, 2008. To access the replay by phone, the domestic dial-in number is
888-286-8010 and the international dial-in is 617-801-6888. The access code
for the replay is 62983494. To access the replay via webcast, please visit
www.fgxi.com under the tab "Investors".
About FGX International
FGX International Holdings Limited is a leading designer and marketer of
non-prescription reading glasses, sunglasses and costume jewelry with a
portfolio of established, highly recognized eyewear brands including Foster
Grant(R), Magnivision(R), Angel (TM), Gargoyles(R) and Anarchy(R) . The
Company does business through offices in Smithfield, Rhode Island,
Bentonville, Arkansas, New York City, Toronto, Canada, Mexico City, Mexico,
Stoke-on-Trent, United Kingdom and Shenzhen, China.
Forward-Looking Statements
Statements in this press release that are not statements of historical
fact or that express our confidence, expectations, objectives, intentions,
plans, or strategies or otherwise anticipate the future, including, without
limitation, statements regarding our future prospects, revenues, costs,
results of operations and profitability contained in the Outlook section of
this press release, are forward-looking statements. These forward-looking
statements are not guarantees of future performance, and they are subject to
risks and uncertainties that could cause actual results to differ materially
from those contemplated by the forward-looking statements. These risks and
uncertainties include, but are not limited to: the failure to execute, or the
timing of execution of, anticipated customer contracts, including the
Walgreens contract; the Company's ability to achieve its business plans; the
Company or others may discover that the Company's products must be recalled
because of defects; consumers, retailers, shareholders and/or others may bring
litigation or other claims against the Company related to recalled products
that may cause it to incur substantial costs to resolve; customer acceptance
of our existing or new products; interruptions of supply from our Asian
product manufacturers; lost production capacity, production errors and quality
control errors, political instability, or changing conditions in
transportation services; other risks associated with our international
operations, including foreign currency exchange rate fluctuations and the
impact of quotas, tariffs, or other restrictions on the importation or
exportation of our products; failure to maintain proper inventory levels;
material changes in customers' inventory and working capital policies; a
material reduction or cessation of purchases by any of our largest customers;
failure to comply with federal or state regulation of the distribution or sale
of our products; the uncertainty of the litigation process including the risk
of an unfavorable result in current or future litigation; depending upon
market conditions, the Company may not complete the stock buyback program;
interest rate fluctuations; the Company's credit insurance may not cover all
of our outstanding accounts receivable; and disruption due to weather, fire or
other unforeseen circumstances in our principal distribution center.
These and other risks and uncertainties that could cause our actual
results to differ from those contemplated by any forward-looking statement are
discussed in more detail in Part I, Item 1A - Risk Factors in our Form 10-K
for the year ended December 29, 2007, which we may update in Part II, Item 1A
- Risk Factors in Quarterly Reports on Form 10-Q we have filed or will file
thereafter. Forward-looking statements contained in this press release speak
only as of the date hereof. We undertake no obligation to update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise.
Contact Information:
Investor Relations: FGXI:
Idalia RodriguezAnthony Di Paola
ICR Inc.Chief Financial Officer
203-682-8264401-719-2253
FGX INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND OTHER SELECTED DATA
(Unaudited, in thousands, except per share data)
Three Months Ended
--------------------------------
June 28, 2008 June 30, 2007
--------------------------------
Net sales:
Non-prescription Reading Glasses $31,266$27,562
Sunglasses and Prescription Frames25,675 19,670
Costume Jewelry4,309 5,062
International 10,315 10,320
--------------
Total net sales 71,565 62,614
Cost of sales 34,018 28,813
--------------
Gross profit 37,547 33,801
Operating expenses:
Selling expenses 21,708 19,550
General and administrative expenses 6,439 4,898
Amortization of acquired intangibles1,296 1,543
Abandoned lease charge-1,865
--------------
Total operating expenses 29,443 27,856
Operating income 8,104 5,945
Interest expense, net 1,450 5,837
Other income (expense), net46 86
--------------
Income before income taxes and
minority interest 6,700194
Income tax expense (benefit)2,530 (1,402)
--------------
Income before minority interest4,170 1,596
Minority interest expense 80 97
--------------
Net income $4,090 $1,499
==============
EPS: Basic $0.19 $0.10
Diluted$0.19 $0.10
Weighted average shares outstanding:
Basic21,218 14,818
Diluted 21,358 14,915
Capital expenditures $2,912 $2,342
The table below reconciles EBITDA to net
income, the most directly comparable GAAP
measure.
Net income $4,090 $1,499
Income tax expense (benefit)2,530 (1,402)
Interest expense, net 1,450 5,837
Depreciation and amortization 5,058 4,794
--------------
EBITDA (1) $13,128$10,728
==============
EBITDA margin (EBITDA/net sales) 18.3% 17.1%
==============
The table below reconciles Free Cash
Flow to the EBITDA table above.
EBITDA$13,128$10,728
Less: Capital Expenditures (2,912)(2,342)
--------------
Free Cash Flow (1) $10,216 $8,386
==============
See accompanying Notes to Consolidated Statements of Income and Other
Selected Data.
FGX INTERNATIONAL HOLDINGS LIMITED
CONSOLIDATED STATEMENTS OF INCOME AND OTHER SELECTED DATA
(Unaudited, in thousands, except per share data)
Six Months Ended
-------------------------------
June 28, 2008 June 30, 2007
------------- -------------
Net sales:
Non-prescription Reading Glasses $58,553$55,137
Sunglasses and Prescription Frames43,794 36,510
Costume Jewelry7,704 11,035
International 20,737 21,081
-------- --------
Total net sales 130,788123,763
Cost of sales 61,363 58,125
-------- --------
Gross profit 69,425 65,638
Operating expenses:
Selling expenses 40,245 36,664
General and administrative expenses12,917 10,036
Amortization of acquired intangibles2,591 3,086
Abandoned lease charge-1,865
-------- --------
Total operating expenses 55,753 51,651
Operating income 13,672 13,987
Interest expense, net 3,222 11,335
Other income, net 54124
-------- --------
Income before income taxes and
minority interest10,504 2,776
Income tax expense (benefit)3,960 (866)
-------- --------
Income before minority interest 6,544 3,642
Minority interest expense 267225
-------- --------
Net income $6,277 $3,417
======== ========
EPS: Basic $0.30 $0.23
Diluted$0.29 $0.23
Weighted average shares outstanding:
Basic21,254 14,827
Diluted 21,404 14,926
Capital expenditures $6,902 $7,938
The table below reconciles EBITDA to net
income, the most directly comparable GAAP
measure.
Net income $6,277 $3,417
Income tax expense (benefit)3,960 (866)
Interest expense, net 3,222 11,335
-------- --------
Depreciation and amortization 10,189 9,368
EBITDA (1) $23,648$23,254
======== ========
EBITDA margin (EBITDA / net sales) 18.1% 18.8%
======== ========
The table below reconciles Free Cash Flow
to the EBITDA table above.
EBITDA$23,648$23,254
Less: Capital Expenditures (6,902)(7,938)
-------- --------
Free Cash Flow (1) $16,746$15,316
======== ========
See accompanying Notes to Consolidated Statements of Income and Other
Selected Data.
1. EBITDA represents net income before interest, income taxes,
depreciation and amortization. We believe that EBITDA and Free Cash
Flow are performance measures that provide securities analysts,
investors and other interested parties with a measure of operating
results unaffected by differences in capital structures, capital
investment cycles and ages of related assets among otherwise comparable
companies in our industry. We further believe that EBITDA is
frequently used by securities analysts, investors and other interested
parties in their evaluation of companies, many of which present an
EBITDA measure when reporting their results.
We believe EBITDA facilitates company to company operating performance
comparisons by adjusting for potential differences caused by variations
in capital structures (affecting net interest expense), taxation (such
as the impact of differences in effective tax rates or net operating
losses) and the age and book depreciation of facilities and equipment
(affecting relative depreciation expense), which may vary for different
companies for reasons unrelated to operating performance.
EBITDA has limitations, including that it is not necessarily comparable
to other similarly titled financial measures of other companies due to
the potential inconsistencies in the method of calculation. It should
not be considered either in isolation or as a substitute for analysis
of our results as reported under U.S. GAAP. Because of these
limitations, EBITDA should not be considered as a measure of
discretionary cash available to us to invest in the growth of our
business. We compensate for these limitations by relying primarily on
our results presented in accordance with U.S. GAAP and using EBITDA
only supplementally.
FGX INTERNATIONAL HOLDINGS LIMITED
SELECTED BALANCE SHEET DATA
(Unaudited, in thousands)
As of As of
June 28, 2008 December 29, 2007
------------- -----------------
Cash and cash equivalents $3,992$4,567
Accounts receivable, net 53,86153,001
Inventories36,88133,226
Accounts payable 35,70527,363
Revolving line of credit 11,50020,000
Current maturities of long-term obligations 9,483 7,661
Long-term obligations less current maturities 89,03092,778
Shareholders' equity 24,09617,333
SOURCE FGX International
