- Tommy Bahama sales grow 12% to $2.5 million - Gross margin increases 40 basis points to 34.1% year-over-year
CARLSBAD, Calif., Aug. 12 /PRNewswire-FirstCall/ -- Phoenix Footwear
Group, Inc. (Amex: PXG), a multi-brand footwear and accessories company,
announced today consolidated results for the second quarter and six months
ended June 28, 2008.
Jim Riedman, Phoenix Footwear's Chairman, commented, "In spite of the very
challenging economic headwinds our company faced, we were able to expand gross
margins and achieved flat operating loss compared to a year ago. The
substantial progress we have made is underscored by our new revolving credit
facility with Wells Fargo Bank. We ended the quarter with an improved balance
sheet, as reflected by much lower debt and inventory levels. We have
significantly strengthened our portfolio of brands, attracted an experienced
management team, renewed our focus on managing costs and solidified our
capital structure. These steps position us well for further financial and
operational improvement. While we are very encouraged by our accomplishments
over the past twelve months, our board and management team are intensely
committed to translating these into improved equity value for our
shareholders."
Second Quarter 2008 Results
-- Net sales from continuing operations decreased 10% to $17.9 million,
compared to $19.8 million for the second quarter of fiscal 2007. The
Company's footwear brands were down 4% for the quarter while the
Company's accessories business declined 14%, reflecting the
challenging retail environment, particularly within the mass channel.
-- Gross margin expanded 40 basis points to 34.1%, compared to 33.7% for
the second quarter of 2007. The increase was due to improved margins
on sales to mass merchant customers by the Company's accessories
segment, which was offset by sales incentives and allowances in the
footwear and premium footwear segments, as well as additional royalty
fees associated with the Tommy Bahama Footwear brand.
-- Operating expenses decreased 8% to $7.5 million, or 42% of net sales,
compared to $8.1 million, or 41% of net sales, for the second quarter
of fiscal 2007. The decrease in operating expenses is primarily
attributable to expense reimbursements received under the Transition
Services Agreement entered into concurrently with the Company's
divestiture of Altama Delta Corporation.
-- Operating loss was flat at $1.4 million.
-- Net loss from continuing operations was $2.2 million, or $0.27 per
share, on 8.2 million weighted-average shares outstanding, compared to
net loss of $1.0 million, or $0.13 per share, from continuing
operations a year ago. The 2008 net loss included the non-cash
write-off of $622,000 in debt issuance costs previously capitalized
under the Company's previous credit facility, which was replaced
during the second quarter of fiscal 2008.
"Our second quarter results were negatively impacted by the challenging
economic environment and extraordinary softness at retail. In spite of this
hurdle Tommy Bahama maintained strong double digit growth and we were pleased
with the sell through rates of products within our other brands. As our
retail partners focused on inventory reduction however, reorders came in well
below our expectations, resulting in lower sales overall," commented Cathy
Taylor, Phoenix Footwear's Chief Executive Officer. "To best manage our
business through this more uncertain environment, we continued to carefully
review each of our brands with a particular focus on product quality, customer
deliveries and achieving our primary goal of profitable growth. The positive
response to our new product initiatives we received at the recent WSA show
from our customers validates our ongoing investments in our brands and our
ability to quickly react to changing demands in the market place. We believe
we have the right foundation in place and are very excited to see momentum
building across all of our divisions, and believe we will return to
profitability and positive organic growth during the second half of 2008."
Recent Operating Highlights by Brand
-- Tommy Bahama - Further door and product expansion is anticipated
within Nordstrom, Macy's and Lord & Taylor. Additionally, the line has
been further expanded to capture key product and price categories. In
the wake of WSA and our current open orders, we expect Tommy Bahama to
return to a more robust growth rate during the fourth quarter.
-- H.S. Trask - The Company has re-entered the market for late Fall 2008
with a more sophisticated look that speaks and returns to the core
H.S. Trask customer. This re-launch of the brand has been well
received thus far. The Company is currently focusing on opening new
doors for the product and expects to begin shipping the new series in
the fall of this year.
-- Trotters - The Company continued to evolve its Trotters brand by
improved innovation in its designs, expanding categories and
positioning product at new key price points in an effort to speak to a
broader consumer base. Since WSA, Trotters has enjoyed a growing
order book and the Company expects Trotters to post improved results
during the second half of the year.
-- SoftWalk - Similarly the Company has focused on improved styling
within its SoftWalk line. The Company is currently experiencing an
expanding order book with this brand and expects it to deliver growth
for both the second half and year.
-- Chambers - Appointed Russell Hall as President of the division and
continued to expand its presence at Wal-Mart. The business is
presently pursuing additional license opportunities in an effort to
further expand its distribution. Additionally, a number of process
improvements have begun to yield improved margins within this business
even with the current softness. We expect these initiatives will
produce further improvements over the remainder of the year.
First Six Months of 2008 Results
-- Net sales from continuing operations decreased 3% to $39.9 million,
compared to $41.1 million for the first six months of fiscal 2007. The
net sales decrease was a result of growth in the Company's footwear
brands of 4% offset by a 9% decrease in its accessories business.
-- Gross margin was 35.1%, compared to 36.5% for first six months of
2007. The decrease in gross margin was primarily attributable to an
increase in sales incentives and allowances during the first quarter
of 2008.
-- Operating expenses decreased 11% to $15.3 million, or 38% of net
sales, compared to $17.2 million, or 42% of net sales, for the first
six months of fiscal 2007. The decrease was attributable to headcount
reductions and decreased spending on brand expenses, as well as
expense reimbursements received under the Transition Services
Agreement entered into concurrently with the Company's divestiture of
Altama Delta Corporation.
-- Operating loss narrowed to $1.3 million, compared to $2.2 million a
year ago.
-- Net loss from continuing operations was $2.5 million, or $0.31 per
share, on 8.1 million weighted-average shares outstanding. This
compares to net loss of $2.0 million, or $0.25 per share, from
continuing operations for the first six months of fiscal 2007. The
2008 net loss included the write-off of $622,000 in debt issuance
costs previously capitalized under the Company's old credit facility,
which was replaced during the second quarter of fiscal 2008.
Balance Sheet and Liquidity
As of June 28, 2008, tangible net worth totaled $17.7 million, or $2.17
per share. The Company's bank debt, net of cash, totaled $7.0 million. As of
June 28, 2008, the Company had $16.2 million in working capital, an increase
of $24.7 million from one year ago.
During the second quarter, the Company entered into a new $17 million
revolving credit facility with Wells Fargo Bank. The facility replaces the
Company's previous facility with Manufacturers and Traders Trust Company which
has been retired. The new facility is expandable to $20 million with the
consent of the lender. The new credit facility provides for interest at prime
minus 0.25% or, LIBOR plus 2.4%.
Financial Guidance
Ms. Taylor concluded, "In light of the unusual softness at retail this
summer we are behind our original projections and do not anticipate that we
will be able to close the gap sufficiently to meet our previously issued
guidance of sales and operating income. Nonetheless, we expect to achieve
sales growth of approximately 5-10% for fiscal 2008, to return to
profitability during the fourth quarter and to be approximately break-even for
the whole year on an operating basis."
The preceding statements regarding Phoenix Footwear's expected financial
performance and condition are based on current information and expectations,
and actual results may differ materially. Phoenix Footwear can give no
assurances that such expectations will prove correct. These statements do not
include the potential impact of any future mergers, acquisitions or other
business combinations or divestitures that may be completed. Phoenix Footwear
makes these statements as of today and undertakes no obligation to update this
information based on actual results during the period or changes in
assumptions or estimates or other changes in the period. While it is currently
expected that this guidance will not be updated prior to the release of
Phoenix Footwear's fiscal 2008 earnings announcement, Phoenix Footwear
reserves the right to update its financial guidance for any reason during the
year, including the occurrence of material events.
Second Quarter 2008 Conference Call
Phoenix Footwear will host a conference call to discuss the first quarter
results today at 4:30 p.m. Eastern Time. To participate in the conference
call, investors should dial 800-762-8795 ten minutes prior to the scheduled
start time. International callers should dial 480-629-9031. If you are unable
to participate in the live call, a replay will be available beginning Tuesday,
August 12, at 7:30 p.m. Eastern Time, through Tuesday, August 19, at midnight
Eastern Time. To access the replay, dial 800-406-7325 (passcode: 3908629).
International callers should dial 303-590-3030 and use the same passcode. The
call will also be broadcast live over the Internet and can be accessed on the
Investor section of Phoenix Footwear's website at
http://www.phoenixfootwear.com. For those unable to participate during the
live broadcast, the webcast will be archived.
About Phoenix Footwear Group, Inc.
Phoenix Footwear Group, Inc., headquartered in Carlsbad, California,
designs, develops and markets a diversified selection of men's and women's
dress and casual footwear, belts, and other accessories. Phoenix Footwear's
brands and licenses include Tommy Bahama Footwear and Accessories(R),
Trotters(R), SoftWalk(R), H.S. Trask(R), Chambers Belts(R) and Wrangler.
Emphasizing quality, fit and traditional and authentic designs, these brands
are primarily sold through department stores, specialty retailers, mass
merchants and catalogs. Phoenix Footwear Group, Inc. is traded on the American
Stock Exchange under the symbol PXG.
Forward-Looking Statements
This press release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to
be covered by the safe harbors created thereby. These forward-looking
statements include, but are not limited to, statements regarding future growth
and performance of individual brands, Phoenix Footwear's expected financial
performance and condition for fiscal 2008 and beyond and/or statements
preceded by, followed by or that include the words "believes," "could,"
"expects," "anticipates," "estimates," "intends," "plans," "projects,"
"seeks," "exploring, " or similar expressions. Investors are cautioned that
all forward-looking statements involve risks and uncertainties that could
cause actual results to differ materially from those in the forward-looking
statements. Many of these risks and uncertainties are discussed in Phoenix
Footwear's Annual Report on Form 10-K for the fiscal year ended December 29,
2007 filed with the Securities and Exchange Commission (the "SEC"), and in any
subsequent reports filed with the SEC, all of which are available at the SEC's
website at http://www.sec.gov. These include without limitation: Phoenix
Footwear's ability to comply with the financial covenants under its new
revolving credit facility; risk associated with claims arising from past
divestitures, including indemnification claims; risks associated with future
acquisitions, including potential dilution and integration issues; the
concentration of Phoenix Footwear's sales to a relatively small group of
customers; changing consumer preferences and fashion trends; Phoenix's ability
to execute on its growth strategies; competition from other companies in
Phoenix Footwear's markets; the potential financial instability of Phoenix
Footwear's customers and the risk of loss of future and pending orders;
Phoenix Footwear's ability to protect its intellectual property rights; the
risk of losing third party trademark licenses; Phoenix Footwear's ability to
manage inventory levels; fluctuations in its financial results as a result of
the seasonality in its business; the risks of doing business in international
markets; Phoenix Footwear's reliance on independent manufacturers; disruptions
in Phoenix Footwear's manufacturing system; the loss of one or more senior
executives; fluctuations in the price, availability and quality of raw
materials; a decline in general economic conditions; and, the possibility of
impairment charges resulting from future adjustments to the value of goodwill
recorded in connection with past or future acquisitions. Although Phoenix
Footwear believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements included in this press release will prove to be accurate. In light
of the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as a
representation by Phoenix Footwear or any other person that the objectives and
plans of Phoenix Footwear will be achieved. All forward-looking statements
included in this press release are based on Phoenix Footwear's current
expectations and projections about future events, based on information
available at the time of the release, and Phoenix Footwear assumes no
obligation to update any forward-looking statements.
Phoenix Footwear Group, Inc.
Consolidated Condensed Statement of Operations
(In thousands)
For the Three Months Ended
(Unaudited)
June 28 June 30
2008 2007
Net sales $17,924 100.0% $19,815 100.0%
Cost of goods sold 11,811 65.9% 13,146 66.3%
Gross profit6,113 34.1%6,669 33.7%
Operating expenses:
Selling and administrative expenses 8,027 44.8%7,723 39.0%
Non cash 401k stock grant
compensation430.2% 1330.7%
Amortization1530.9% 2251.1%
Other (income) expense, net(750) -%- -%
Total operating expenses7,473 41.7%8,081 40.8%
Operating Loss (1,360) -7.6% (1,412) -7.1%
Interest expense, net 859 319
Loss before income taxes and
discontinued operations (2,219) -12.4% (1,731) -8.7%
Income tax provision (benefit) 21 (685)
Loss before discontinued operations(2,240) -12.5% (1,046) -5.3%
Earnings from discontinued
operations, net of tax810.5% 1170.6%
Net Loss $(2,159) -12.0%$(929) -4.7%
Loss per common share:
Basic
Continuing operations $(0.27) $(0.13)
Discontinued operations 0.01 0.01
Net loss $(0.26) $(0.12)
Diluted
Continuing operations $(0.27) $(0.13)
Discontinued operations 0.01 0.01
Net loss $(0.26) $(0.12)
Weighted-average shares
outstanding:
Basic8,166,191 8,044,871
Diluted 8,166,191 8,044,871
For the Six Months Ended
(Unaudited)
June 28 June 30
2008 2007
Net sales $39,922 100.0% $41,143 100.0%
Cost of goods sold 25,918 64.9% 26,140 63.5%
Gross profit 14,004 35.1% 15,003 36.5%
Operating expenses:
Selling and administrative expenses 16,372 41.0% 16,469 40.0%
Non cash 401k stock grant
compensation860.2% 2670.6%
Amortization3050.8% 4491.1%
Other (income) expense, net (1,500) -% 2 -%
Total operating expenses 15,263 38.2% 17,187 41.8%
Operating Loss (1,259) -3.2% (2,184) -5.3%
Interest expense, net 1,223 666
Loss before income taxes and
discontinued operations (2,482) -6.2% (2,850) -6.9%
Income tax provision (benefit) 38 (824)
Loss before discontinued operations(2,520) -6.3% (2,026) -4.9%
Earnings from discontinued
operations, net of tax810.2%1,5113.7%
Net Loss $(2,439) -6.1%$(515) -1.3%
Loss per common share:
Basic
Continuing operations $(0.31) $(0.25)
Discontinued operations 0.01 0.19
Net loss $(0.30) $(0.06)
Diluted
Continuing operations $(0.31) $(0.25)
Discontinued operations 0.01 0.19
Net loss $(0.30) $(0.06)
Weighted-average shares
outstanding:
Basic 8,120,8638,016,207
Diluted 8,120,8638,016,207
Phoenix Footwear Group, Inc.
Consolidated Condensed Balance Sheets
(In thousands)
As of As of As of
June 28, December 29, June 30,
ASSETS 20082007 2007
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents$1,085 $2,355 $963
Restricted cash 3,000 --
Accounts receivable, net 13,888 14,323 14,643
Inventories, net 17,679 19,874 20,233
Notes receivable - 13,303-
Other current assets 1,619 1,6612,909
Income taxes receivable 542 2,6572,865
Deferred income tax asset - -1,591
Current assets of discontinued
operations - - 15,358
Total current assets 37,813 54,173 58,562
Property, plant & equipment, net2,258 1,9962,153
Goodwill & unamortizable intangibles6,190 6,190 11,064
Intangible assets, net 4,963 5,2686,885
Other assets 113 50 50
Deferred income tax asset - - 540
Long term assets of discontinued
operations - - 25,856
$51,337 $67,677 $105,110
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - Line of Credit $11,071 $22,666 $51,166
Accounts payable 6,372 7,0325,989
Accrued expenses 3,090 3,8334,061
Other liabilities 1,090 1,4671,066
Income taxes payable 10 444 215
Current liabilities of
discontinued operations - -4,607
Total current liabilities 21,633 35,442 67,104
Other long term liabilities 835 1,1271,381
Deferred income tax liability 21 21-
Long term liabilities of
discontinued operations- -4,699
Total liabilities 22,489 36,590 73,184
Stockholders' equity 28,848 31,087 31,926
$51,337 $67,677 $105,110
SOURCE Phoenix Footwear Group, Inc.
