Phoenix Footwear Reports Third Quarter 2015 Results
November 12, 2015 | By Business Wire News
CARLSBAD, Calif.
Phoenix Footwear Group, Inc. (OTCMarkets.com: PXFG) today reported results for the Third Quarter and First Nine months ended October 03, 2015.
Third Quarter and First Nine Months of Fiscal 2015
- Gross Sales for the third quarter decreased by 4%, wholly attributable to a reduction in sales of Trotters branded product as the Company reduced its footprint in a large national account. This realignment in distribution, combined with the Company’s earlier implementation of a MAP (Minimum Advertised Pricing) policy resulted in a decrease in Net sales of 8.4% for the current quarter compared to the third quarter of 2014.
- During the quarter, the Company continued to implement its occupational footwear strategy, delivering growth in excess of 85.0% for the third consecutive quarter and 107.1% growth year to date.
- Operating earnings for the third quarter decreased by $651,000 to $96,000, compared to the third quarter of 2014, as the Company made select investments to support its occupational expansion and incurred onetime charges related to its realignment in distribution.
- EBITDA totaled $162,000 for the period and $107,000 for the first nine months of 2015 compared to $549,000 and $1.06 million for the respective quarter and first nine months of 2014.
- As of October 3, 2015, the Company was not in compliance with its Fixed Coverage Ratio. On November 6, 2015, the Company received a waiver of covenant default from NewStar for the period ended October 3, 2015.
- The Company further strengthened its management team with the addition of Kevin Flanagan as Vice President of Marketing. Prior to joining Phoenix, Mr. Flanagan held senior marketing roles with both the Reef and Oakley brands. Additionally, Mr. Flanagan was a founder of The People’s Movement, an eco-friendly footwear brand.
THIRD QUARTER AND FIRST NINE MONTHS OF FISCAL 2015
For the quarter ended October 3, 2015, net sales decreased by $533,000, or 8.4%, to $5.82 million compared to $6.36 million for the third quarter of fiscal 2014. The decrease in net sales for the quarter was associated with a reduction of the Company’s presence in a large national retailer, along with an increase in the accrual for allowances and other discounts provided to this customer that was partly offset by an 85.5% increase in net sales of licensed occupational footwear sold primarily in the medical uniform channel.
Net sales for the first nine months of fiscal 2015 increased $209,000, or 1.3%, to $16.55 million compared to $16.35 million for the first nine months of fiscal 2014. The increase in net sales for the first nine months of fiscal 2015 was primarily driven by a 107.1% increase in sales of licensed footwear first introduced during fiscal 2014, together with increased sales to the Company’s internet, and catalog retail customers, that was partly reduced by an increase in allowances and discounts provided to a large national retailer, primarily as a result of the implementation of the Company’s minimum advertised pricing policy, combined with reduced sales in the independent channel of distribution.
Gross profit for the third quarter of fiscal 2015 decreased $500,000, or 20.5%, to $1.9 million from $2.4 million when compared to the third quarter of fiscal 2014. Gross profit as a percentage of net sales for the third quarter of fiscal 2015 decreased to 33.2% compared to 38.3% for the third quarter of fiscal 2014. The decrease in the gross profit as a percentage of net sales for the quarter consisted of an increase in allowances and discounts provided to large national retailer, primarily associated with the implementation of the Company’s minimum advertised pricing policy, together with an increase in air freight associated with the increased demand of lower margin licensed occupational footwear, and the clearance of phased-out and discontinued footwear during the period.
Gross profit decreased $506,000, or 8.5%, to $5.5 million in the first nine months of fiscal 2015 compared to $6.0 million for the first nine months of fiscal 2014. Gross profit as a percentage of net sales for the first nine months of fiscal 2015 decreased to 32.9% compared to 36.4% for the first nine months of fiscal 2014. Lower gross margins for the first nine months of fiscal 2015 consisted of an increase in allowances and discounts provided to large national retailer, primarily associated with the implementation of the Company’s minimum advertised pricing policy, together with an increase in air freight associated with the increased demand of lower margin licensed occupational footwear, and onetime increase in product development costs during the period.
SG&A for the third quarter of fiscal 2015 increased to $1.8 million or 8.9% compared to $1.7 million for the third quarter of fiscal 2014. SG&A as a percentage of net sales increased to 31.6% for the third quarter of fiscal 2015 from 26.6% when compared to the same period of fiscal 2015. The increase in SG&A for the quarter was primarily associated with planned increases in sales, sales support and distribution personnel, and planned increase in selling and other marketing activities during the period.
SG&A for the first nine months of fiscal 2015 increased to $5.6 million or 10.3% compared to $5.0 million for the first nine months of fiscal 2014. SG&A as a percentage of net sales increased to 33.6% from 30.8% when compared to the same period of fiscal 2014. The increase in SG&A for the quarter was primarily associated with planned increases in sales, sales support and distribution personnel, and planned increase in selling and other marketing activities during the period, together with onetime increase in temporary labor in the Company’s warehouse and distribution center and non-cash vesting of employee performance stock options in the first quarter.
The Company reported a net loss from continuing operations of $45,000 or $0.00 per share for the third quarter, compared to a net operating income from continuing operations of $548,000 or $0.07 per share during the third quarter of fiscal 2014.
For the first nine months of fiscal 2015, the Company reported a net loss from continuing operations of $735,000 or $0.07 per share, compared to net income from continuing operations of $353,000 or $0.04 per share for the first nine months of fiscal 2014.
Earnings before interest, taxes, depreciation and amortization (or “EBITDA”) from continuing operations for the first nine months of fiscal 2015 was $107,000 compared to $1.06 million for the first nine months of fiscal 2014.
About Phoenix Footwear Group, Inc.
Phoenix Footwear Group, Inc., headquartered in Carlsbad, California, specializes in quality comfort women’s and men’s footwear with a design focus on fitting features. Phoenix Footwear designs, develops, markets and sells footwear in a wide range of sizes and widths under the brands Trotters® and SoftWalk®, These brands are primarily sold through department stores, leading specialty and independent retail stores, mail order catalogues and internet retailers and are carried by approximately 856 customers in over 1,663 retail locations throughout the U.S. Phoenix Footwear has been engaged in the manufacture or importation and sale of quality footwear since 1882.
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 Phoenix Footwear’s ability to repay its bank debt in a timely manner, future growth and performance of its individual brands, expected financial performance and condition for fiscal 2015 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. 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 speak only as of the date of this press release and 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 expressly disclaims any obligation to release publicly any update or revision to any forward-looking statement contained herein if there are changes in Phoenix Footwear’s expectations or if any events, conditions or circumstances on which any such forward-looking statement is based.
| Phoenix Footwear Group, Inc. | |||||||||||
| Condensed Consolidated Balance Sheets | |||||||||||
| (In thousands) | |||||||||||
| (Unaudited) | |||||||||||
| October 3, 2015 | January 3, 2015 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 232 | $ | 328 | |||||||
| Accounts receivable, net | 3,610 | 2,449 | |||||||||
| Inventories, net | 10,000 | 8,150 | |||||||||
| Other current assets | 528 | 514 | |||||||||
| Total current assets | 14,370 | 11,441 | |||||||||
| Property, plant and equipment, net | 61 | 71 | |||||||||
| Capital leased asset | 660 | 527 | |||||||||
| Other assets | 50 | 50 | |||||||||
| TOTAL ASSETS | $ | 15,141 | $ | 12,089 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Notes payable, current | $ | 5,951 | $ | 3,831 | |||||||
| Accounts payable | 2,263 | 2,601 | |||||||||
| Accrued expenses | 842 | 1,137 | |||||||||
| Current portion of long term debt | 446 | 534 | |||||||||
| Total current liabilities | 9,502 | 8,103 | |||||||||
| Convertible notes payable | 1,350 | 1,350 | |||||||||
| Term notes payable | 538 | 124 | |||||||||
| Capital lease obligation | 521 | 543 | |||||||||
| Other non-current liabilities | 213 | 230 | |||||||||
| Total liabilities | 12,124 | 10,350 | |||||||||
| Stockholders’ equity | 3,017 | 1,739 | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 15,141 | $ | 12,089 | |||||||
| Phoenix Footwear Group, Inc. | ||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||
| (In thousands, except per share data) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| October 3, 2015 | September 27, 2014 | |||||||||||
| Net sales | $ | 5,824 | 100 | % | $ | 6,357 | 100 | % | ||||
| Cost of goods sold | 3,889 | 67 | % | 3,922 | 62 | % | ||||||
| Gross profit | 1,935 | 33.2 | % | 2,435 | 38.3 | % | ||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative expenses | 1,839 | 32 | % | 1,688 | 27 | % | ||||||
| Goodwill and intangible impairment charges | – | – | % | – | 0 | % | ||||||
| Total operating expenses | 1,839 | 32 | % | 1,688 | 27 | % | ||||||
| Operating income | 96 | 2 | % | 747 | 12 | % | ||||||
| Interest expense, net | 141 | 2 | % | 199 | 3 | % | ||||||
| (Loss) earnings before income taxes | (45 | ) | -1 | % | 548 | 9 | % | |||||
| Income tax (benefit) expense | – | 0 | % | – | – | % | ||||||
| Net (Loss) earnings | $ | (45 | ) | -1 | % | $ | 548 | 9 | % | |||
| Earnings per share: | ||||||||||||
| Basic | ||||||||||||
| Continuing operations | $ | – | $ | 0.07 | ||||||||
| Discontinued operations | – | – | ||||||||||
| Net Earnings | $ | – | $ | 0.07 | ||||||||
| Diluted | ||||||||||||
| Continuing operations | $ | – | $ | 0.04 | ||||||||
| Discontinued operations | – | – | ||||||||||
| Net Earnings | $ | – | $ | 0.04 | ||||||||
| Weighted-average shares outstanding: | ||||||||||||
| Basic | 11,085 | 8,358 | ||||||||||
| Diluted | 11,085 | 14,717 | ||||||||||
| Phoenix Footwear Group, Inc. | ||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||
| (In thousands, except per share data) | ||||||||||||||
| (Unaudited) | ||||||||||||||
| Nine Months Ended | ||||||||||||||
| October 3, 2015 | September 27, 2014 | |||||||||||||
| Net sales | $ | 16,554 | 100 | % | $ | 16,345 | 100 | % | ||||||
| Cost of goods sold | 11,106 | 67 | % | 10,391 | 64 | % | ||||||||
| Gross profit | 5,448 | 33 | % | 5,954 | 36 | % | ||||||||
| Operating expenses: | ||||||||||||||
| Selling, general and administrative expenses | 5,563 | 34 | % | 5,044 | 31 | % | ||||||||
| Total operating expenses | 5,563 | 34 | % | 5,044 | 31 | % | ||||||||
| Operating lncome | (115 | ) | -1 | % | 910 | 6 | % | |||||||
| Interest expense, net | 620 | 4 | % | 557 | 3 | % | ||||||||
| (Loss) earnings before income taxes and discontinued operations | (735 | ) | -4 | % | 353 | 2 | % | |||||||
| Income tax (benefit) expense | – | 0 | % | – | – | % | ||||||||
| (Loss) earnings from continuing operations | (735 | ) | -4 | % | 353 | 2 | % | |||||||
| Loss from discontinued operations, net of tax | – | 0 | % | (9 | ) | 0 | % | |||||||
| Net (Loss) earnings | $ | (735 | ) | -4 | % | $ | 344 | 2 | % | |||||
| (Loss) earnings per share: | ||||||||||||||
| Basic and diluted | ||||||||||||||
| Continuing operations | $ | (0.07 | ) | $ | 0.04 | |||||||||
| Discontinued operations | – | – | ||||||||||||
| Net (Loss) earnings | $ | (0.07 | ) | $ | 0.04 | |||||||||
| Diluted | ||||||||||||||
| Continuing operations | $ | (0.07 | ) | $ | 0.02 | |||||||||
| Discontinued operations | – | – | ||||||||||||
| Net (Loss) earnings | $ | (0.07 | ) | $ | 0.02 | |||||||||
| Weighted-average shares outstanding: | ||||||||||||||
| Basic | 11,158 | 8,332 | ||||||||||||
| Diluted |
11,158 |
14,961 |
||||||||||||
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Phoenix Footwear Group, Inc.
Greg W. Slack
Chief Financial Officer
(760) 602-9688
