Phoenix Footwear Reports Second Quarter 2014 Results

Company Generates 24.2% Revenue Growth for the Second Quarter

CARLSBAD, Calif.--()--Phoenix Footwear Group, Inc. (OTCMarkets.com: PXFG) today reported results for the Second Quarter and First Six months ended June 28, 2014.

Second Quarter and First Six Months of Fiscal 2014

  • Net sales from continuing operations for the second quarter increased $831,000 or 24.2% to $4.3 million compared to $3.4 million for the second quarter of fiscal 2013.
  • Consolidated net loss from continuing operations for the second quarter was $375,000 or $0.05 per share compared to a net loss of $359,000 or $0.05 per share during the second quarter of fiscal 2013.
  • Net sales from continuing operations for the first six months increased 8.1% to $10.0 million compared to $9.2 million for the first six months of fiscal 2013.
  • Consolidated net loss from continuing operations for the first six months of fiscal 2013 increased to $195,000 or $0.03 per share compared to a net loss of $91,000 or $0.02 per share for the first six months of fiscal 2013.
  • While the Company generated significant increases in revenue during the quarter, sales from sandals did not materialize as the Company had expected. As a result, the Company moved aggressively during the quarter to liquidate certain seasonal inventory which adversely impacted Gross Margins compared to the prior quarters.

SECOND QUARTER AND FIRST SIX MONTHS OF FISCAL 2014

For the quarter ended June 28, 2014, net sales increased by $831,000, or 24.2% to $4.3 million compared to $3.4 million for the second quarter of fiscal 2013. Net sales for the first six months of fiscal 2014 increased $752,000, or 8.1% to $10.2 million compared to $9.24 million for the first six months of fiscal 2013.

The increase in net sales for the quarter and first six months of fiscal 2014 was primarily driven by sales of licensed footwear introduced during Spring 2014, together with increased sales to the Company’s internet and national retail customers.

Gross margins for the second quarter of fiscal 2014 declined to 33.0% compared to 37.1% for the second quarter of fiscal 2013. Gross margin for the first six months of fiscal 2014 decreased to 35.2% compared to 37.0% for the first six months of fiscal 2013. Lower gross margins for the second quarter and first six months of fiscal 2014 were a resulted of an increase in sales of off-priced goods, and sales of lower margin licensed footwear.

SG&A for the second quarter of fiscal 2014 increased to $1.59 million or 9.4% compared to $1.45 million for the second quarter of fiscal 2013. SG&A as a percentage of net sales decreased to 37.2% for the second quarter of fiscal 2014 from 42.1% when compared to the same period of fiscal 2013. SG&A for the first six months of fiscal 2014 increased to $3.36 million compared to $3.13 million for the first six months of fiscal 2013. SG&A as a percentage of net sales decreased to 33.6% from 33.8% when compared to the same period of fiscal 2013.

The increase in SG&A for the second quarter and first six months of fiscal 2014 is attributable to the Company’s launch of Grey’s Anatomy footwear and expenses directly related to the increase in sales, including commissions and warehouse activity.

The Company reported a net operating loss from continuing operations of $366,000 or $0.05 per share for the second quarter, compared to a net operating loss from continuing operations of $359,000 or $0.05 per share for the same period of the prior year.

For the first six months of fiscal 2014, the Company reported a net operating loss from continuing operations of $195,000 or $0.03 per share, compared to a net operating loss from continuing operations of $91,000 or $0.02 per share for the first six months of fiscal 2013.

Earnings before interest, taxes, depreciation and amortization (or “EBITDA”) from continuing operations for the first six months of fiscal 2014 was $259,600 compared $397,100 for the first six months of fiscal 2013.

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 677 customers in over 905 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 2014 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)
June 28, 2014 December 28, 2013
ASSETS
 
Current assets:
Cash and cash equivalents $ 201 $ 141
Accounts receivable, net 2,180 2,671
Inventories, net 9,191 7,646
Other current assets 661 753
Income taxes receivable   32   30
Total current assets 12,265 11,241
 
Property, plant and equipment, net 69 73
Capital leased asset 569 589
Capital leased asset   -   75
TOTAL ASSETS $ 12,903 $ 11,978
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Notes payable, current $ 4,153 $ 4,169
Accounts payable 3,908 2,733
Accrued expenses 731 646
Current portion of long term debt   188   220
Total current liabilities 8,980 7,768
 
Convertible notes payable 1,350 1,350
Term notes payable 573 618
Capital lease obligation 563 577
Other non-current liabilities   262   286
Total liabilities 11,728 10,599
 
Stockholders' equity   1,175   1,379
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 12,903 $ 11,978
 
Phoenix Footwear Group, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
       
 
 
(Unaudited)
Three Months Ended
 
June 28, 2014 June 29, 2013
Net sales $ 4,271 100% $ 3,440 100%
Cost of goods sold   2,863   67%   2,163   63%
 
Gross profit 1,408 33.0% 1,277 37.1%
 
Operating expenses:
Selling, general and administrative expenses 1,587 37% 1,451 42%
Goodwill and intangible impairment charges   -   -%   -   0%
Total operating expenses   1,587   37%   1,451   42%
 
Operating loss (179 ) -4% (174 ) -5%
 
Interest expense, net   187   4%   185   5%
 
Loss before income taxes and discontinued operations (366 ) -9% (359 ) -10%
 
Income tax (benefit) expense   -   0%   -   -%
 
Loss from continuing operations (366 ) -9% (359 ) -10%
 
Loss from discontinued operations, net of tax   (9 ) 0%   (9 ) 0%
 
Net loss $ (375 ) -9% $ (368 ) -11%
 
Loss per share:
Basic
Continuing operations $ (0.05 ) $ (0.05 )
Discontinued operations   -     -  
$ (0.05 ) $ (0.05 )
Diluted
Continuing operations $ (0.05 ) $ (0.05 )
Discontinued operations   -     -  
Net loss $ (0.05 ) $ (0.05 )
 
Weighted-average shares outstanding:
Basic 8,338 8,298
Diluted 8,338 8,298
 
Phoenix Footwear Group, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
       
 
 
(Unaudited)
Six Months Ended
 
June 28, 2014 June 29, 2013
Net sales $ 9,989 100% $ 9,237 100%
Cost of goods sold   6,469   65%   5,822   63%
 
Gross profit 3,520 35% 3,415 37%
 
Operating expenses:
Selling, general and administrative expenses   3,357   34%   3,129   34%
Total operating expenses   3,357   34%   3,129   34%
 

Operating Income

163 2% 286 3%
 
Interest expense, net   358   4%   377   4%
 
Loss before income taxes and discontinued operations (195 ) -2% (91 ) -1%
 
Income tax (benefit) expense   -   0%   -   -%
 
Loss from continuing operations (195 ) -2% (91 ) -1%
 
Loss from discontinued operations, net of tax   (9 ) 0%   (18 ) 0%
 
Net loss $ (204 ) -2% $ (109 ) -1%
 
 
 
Loss per share:
 
Basic and diluted
Continuing operations $ (0.03 ) $ (0.02 )
Discontinued operations   -     -  
Net loss $ (0.03 ) $ (0.02 )
 
Weighted-average shares outstanding:
Basic and diluted 8,318 8,268

Contacts

Phoenix Footwear Group, Inc.
Greg W. Slack
Chief Financial Officer
760-602-9688

Contacts

Phoenix Footwear Group, Inc.
Greg W. Slack
Chief Financial Officer
760-602-9688