11-7-13 3:30 PM EST | Email Article

Phoenix Footwear Group, Inc. (OTCMarkets.com: PXFG) today reported results for the Third quarter ended September 28, 2013.

Third Quarter and First Nine Months of 2013

  • Consolidated earnings from continuing operations for the third quarter improved to $362,000 or $0.04 per share compared to earnings of $240,000 or $0.03 per share during the third quarter of fiscal 2012.
  • Net sales from continuing operations for the third quarter increased $828,000 or 17.5% to $5.6 million compared to $4.7 million for the third quarter of fiscal 2012.
  • Consolidated earnings from continuing operations for the first nine months of fiscal 2013 improved to $272,000 or $0.03 per share compared to earnings of $31,000 or $0.01 per share for the first nine months of fiscal 2012.
  • Net sales from continuing operations for the first nine months increased $1.2 million or 8.9% to $14.8 million compared to $13.6 million for the first nine months of 2012.
  • Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the first nine months improved to $1.03 million compared to $913,400 for the first nine months of 2012. Excluding the reversal of $160,000 tax accrual during the third quarter of 2012, EBITDA for the first nine months of fiscal 2013 improved by 30.8%

Trotters Signature

During the third quarter, Phoenix launched a new collection of footwear under the Trotters Signature® label. Featuring unique leathers, ageless fashion and quality crafted footwear; this collection is now available in over 100 retail locations across the country including fine independent and department retail stores. Like Trotters, the Signature line is offered in a broad range of size and widths. Trotters Signature retails for $130 and was a significant contributor to the growth of Trotters in the Company’s most recent quarter.

Expanded Retail Distribution

During the third quarter, the Company continued to expand its network of Trotters® and SoftWalk® retail partners, including the addition of more than 120 new accounts carrying the Company’s new Grey’s Anatomy by SoftWalk® footwear line. The Grey’s Anatomy line will be available in retail for purchase in late December of 2013. Also during the quarter, the Company reestablished a retail presence at 20 Nordstrom retail locations with its Trotters brand. The Company believes the expansion of its retail distribution for its product offerings will continue to facilitate growth in future quarters.

Third Quarter and First Nine Months of Fiscal 2013

For the quarter ended September 28, 2013, net sales increased $828,000 or $17.5% to $5.6 million from $4.7 million when compared to the third quarter of fiscal 2012. Net sales for the first nine months of fiscal 2013 increased $1.2 million or 8.9% to $14.8 million compared to $13.6 million for the first nine months of fiscal 2012. The increase in net sales for the three and first nine months of fiscal 2013 was primarily driven by new product introductions designed to appeal to the broader customer demographic of the Company’s internet based accounts, the on-time delivery of spring and fall goods, together with an improvement in the in season customer reorder volume of the company's fall product offering.

Gross margin for the third quarter of 2013 decreased to 39.3% compared to 39.7% for the third quarter of fiscal 2012. For the first nine months of fiscal 2013, gross margin was 37.8% compared to 37.9% for the first nine months of fiscal 2012. The decrease in the gross margin percentage was affected by increased discounting of returned goods processed back into inventory at a cost below standard.

Selling, general and administrative expenses or SG&A, totaled $1.6 million and $4.7 million for the third quarter and first nine months of fiscal 2013, compared to $1.3 million and $4.4 million for the third quarter and first nine months of fiscal 2012. SG&A as a percentage of net sales for the third quarter and first nine months of fiscal 2013 was 28.9% and 32.0% compared to 26.6% and 32.3% for the third quarter and first nine months of fiscal 2012.

Included in SG&A for the third quarter of fiscal 2012 is a non-cash benefit of $160,000 arising from a reduction in the Company’s state sales tax accrual. Excluding this onetime benefit, SG&A for the third quarter and first nine months of fiscal 2012 was $1.4 million and $4.5 million, representing an increase in SG&A of $188,000 and $193,000 for the third quarter and first nine months of fiscal 2013 when compared to 2012.

The increase in SG&A is primarily associated with increases in commissions, sales and marketing expenses, including the addition of a sales consultant managing the Grey’s Anatomy rollout.

The Company reported earnings from continuing operations of $362,000 or $0.04 per share for the third quarter, compared to earnings from continuing operations of $240,000 or $0.03 per share for the same period of the prior year.

For the first nine months of fiscal 2013, the Company reported earnings from continuing operations of $272,000 or $0.03 per share, compared to net operating earnings from continuing operations of $31,000 or $0.01 per share for the first nine months of fiscal 2012.

Earnings before interest, taxes, depreciation and amortization (or “EBITDA”) from continuing operations for the first nine months of fiscal 2013 improved to $1.03 million compared to $913,400 for the first nine months of fiscal 2012. Excluding the non-cash adjustment of the sales tax accrual during the third quarter of fiscal 2012, EBITDA improved by 30.8%

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 512 customers in over 750 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 2013 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)
September 28, 2013 December 29, 2012
ASSETS
 
Current assets:
Cash and cash equivalents $ 194 $ 43
Accounts receivable, net 4,213 1,768
Inventories, net 7,646 6,974
Other current assets 732 1,039
Income taxes receivable   149     149
Total current assets 12,934 9,973
 
Property, plant and equipment, net 44 418
Capital leased assets 605 -
Other assets   (110 )   204
TOTAL ASSETS $ 13,473   $ 10,595
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Notes payable, current $ 5,943 $ 3,506
Accounts payable 2,242 2,574
Accrued expenses 853 592
Other current liabilities   177     208
Total current liabilities 9,215 6,880
 
Notes payable 640 936
Capital lease obligation 614 -
Convertible notes payable 1,350 1,350
Other non-current liabilities   164     164
Total liabilities 11,983 9,330
 
Stockholders' equity   1,490     1,265
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 13,473   $ 10,595
 
 
Phoenix Footwear Group, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
       
 
 
(Unaudited)
Three Months Ended
 
September 28, 2013 September 29, 2012
Net sales $ 5,563 100 % $ 4,735 100 %
Cost of goods sold   3,379   61 %   2,854 60 %
 
Gross profit 2,184 39 % 1,881 40 %
 
Operating expenses:
Selling, general and administrative expenses   1,610   29 %   1,262 27 %
Total operating expenses   1,610   29 %   1,262 27 %
 
Operating income 574 10 % 619 13 %
 
Interest expense, net   212   4 %   379 8 %
 
Earnings before income taxes and discontinued operations 362 7 % 240 5 %
 
Income tax (benefit) expense   -   0 %   - - %
 
Earnings from continuing operations 362 7 % 240 5 %
 
(Loss) earnings from discontinued operations, net of tax   (42 ) -1 %   27 1 %
 
Net earnings $ 320   6 % $ 267 6 %
 
 
Earnings per share:
 
Basic:
Continuing operations $ 0.04 $ 0.03
Discontinued operations   -     -
Net earnings $ 0.04   $ 0.03
 
Diluted:
Continuing operations $ 0.03 $ 0.02
Discontinued operations   -     -
Net earnings $ 0.03   $ 0.02
 
Weighted-average shares outstanding:
Basic 8,298 8,238
Diluted 14,168 13,601
 
 
Phoenix Footwear Group, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
       
 
 
(Unaudited)
Nine Months Ended
 
September 28, 2013 September 29, 2012
Net sales $ 14,800 100 % $ 13,590 100 %
Cost of goods sold   9,202   62 %   8,432 62 %
 
Gross profit 5,598 38 % 5,158 38 %
 
Operating expenses:
Selling, general and administrative expenses   4,739   32 %   4,386 32 %
Total operating expenses   4,739   32 %   4,386 32 %
 
Operating income 859 6 % 772 6 %
 
Interest expense, net   587   4 %   741 5 %
 
Earnings before income taxes and discontinued operations 272 2 % 31 0 %
 
Income tax (benefit) expense   -   0 %   - - %
 
Earnings from continuing operations 272 2 % 31 0 %
 
(Loss) earnings from discontinued operations, net of tax   (61 ) 0 %   26 0 %
 
Net earnings $ 211   1 % $ 57 0 %
 
Earnings (loss) per share:
 
Basic:
Continuing operations $ 0.03 $ 0.01
Discontinued operations   -     -
Net earnings $ 0.03   $ 0.01
 
Diluted:
Continuing operations $ 0.02 $ -
Discontinued operations   -     -
Net earnings $ 0.02   $ -
 
Weighted-average shares outstanding:
Basic 8,278 8,212
Diluted 14,148 12,898
 

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